Tennessee is suing the FCC over the commission's decision last month to preempt state laws that have stalled the deployment of municipal broadband. The FCC's action came in response to a petition from the Electric Power Board (EPB) of Chattanooga, Tennessee, which found itself handcuffed by state regulations and barred from offering municipal broadband outside areas where it was already providing electric service.

But with its 3-2 vote last month, the FCC gave EPB in Chattanooga (and another muni broadband network in Wilson, North Carolina) the go-ahead to expand their service areas. The FCC said its move was justified under Section 706 of the Telecommunications Act, which authorizes the agency to "remove barriers to broadband investment and competition." Both Tennessee and North Carolina passed laws that "erect barriers to expansion of service into surrounding communities, including unserved and underserved areas."

Tennessee says the FCC has overstepped its authority

The decision affects only those two cases, but instantly established an important precedent for the future. "There is a clear conflict, the Order finds, between Section 706 of the Telecommunications Act of 1996, which directs the FCC to take action to remove barriers to broadband investment and competition, and provisions of the Tennessee and North Carolina law that erect barriers to expansion of service into surrounding communities, including unserved and underserved areas," the FCC said.

Tennessee strongly disagrees, and is suing the FCC for overstepping its bounds and wrongly interfering with state affairs. "The FCC has unlawfully inserted itself between the State of Tennessee and the State’s own political subdivisions," Attorney General Herbert Slatery wrote to the US Court of Appeals. "The State of Tennessee, as a sovereign and a party to the proceeding below, is aggrieved and seeks relief on the grounds that the Order: (1) is contrary to the United States Constitution; (2) is in excess of the Commission’s authority; (3) is arbitrary, capricious, and an abuse of discretion within the meaning of the Administrative Procedure Act; and (4) is otherwise contrary to law."

North Carolina hasn't yet issued a similar legal challenge, but it's clear that the FCC will have to defend its important vote if towns and cities across the US are to have an easier time making municipal broadband a realistic alternative to entrenched ISPs. AT&T in particular has recently urged Tennessee employees to voice their opposition to city-run broadband, saying "Government should not compete against the private sector."