what happened a few decades ago has been mostly undone. the local papers got bought by the big ones that merged them into their mainline production networks. small papers couldn't compete with that. but, in recent years, the big papers have shut down most of these small papers, even laying off the staff. the staff is ready to go in relaunching in a market that no longer has big papers operating, so the small papers would have no competition at all if they started back up. they should.
some start-up funding by the federal government might help but might not be necessary.