Existed for several hundred years. The structure in which they existed is today called "the feudal system."
How did it work out? The agencies were continually fighting each other. Quite often, the way they fought was to try to kill as many of the clients of another agency as possible, so as to convince them that the agency they were with was terrible. But it was difficult to get the clients to defect, as often their own defense agency held them as virtual slaves (called "serfs"). The violence was so brutal and widespread that it led to the Peace of God movement.
So, let's try that again!
UPDATE: By the way, I understand: The competing defense agencies in your imagination don't behave anything like those nasty real ones did! Why, the imaginary ones, for instance, would never dream of enslaving their own clients, because... because, well, they'd look in The Ethics of Liberty, and it wouldn't be in there!
I have been reassured similarly by many Marxists that the Marxist utopias in their imaginations are nothing like the USSR.
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