The State of Tennessee is fighting for its right to enforce a law that prevents municipal broadband networks from providing Internet service to other cities and towns.

Tennessee filed a lawsuit Friday against the Federal Communications Commission, which last month voted to preempt state laws in Tennessee and North Carolina that prevent municipal broadband providers from expanding outside their territories. The FCC cited its authority granted in 1996 by Section 706 of the Telecommunications Act, which requires the FCC to encourage the deployment of broadband to all Americans by using "measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment." (Emphasis ours.)

In Tennessee, the Electric Power Board (EPB) of Chattanooga offers Internet and video service to residents, but state law prevented it from expanding outside its electric service area to adjacent towns that have poor Internet service. Tennessee is one of about 20 states that impose some type of restriction on municipal broadband networks, helping protect private Internet service providers from competition.

Tennessee isn't going to give up its restriction on municipal broadband without a fight. "[T]he FCC has unlawfully inserted itself between the State of Tennessee and the State’s own political subdivisions," Tennessee Attorney General Herbert Slatery wrote in the state's petition to the US Court of Appeals for the Sixth Circuit. "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."

It's no surprise that the FCC is facing a lawsuit over its decision, as this is the first time the commission has tested its Section 706 authority by preempting state laws restricting municipal broadband.

Despite Tennessee's lawsuit, there are members of the state legislature who want to get rid of the restrictions on municipal broadband. Legislation in the state Senate and House would eliminate the provisions of state law that prevent municipal electric utilities from offering broadband and video service outside their electric service footprint. The legislation is scheduled for markups today, but AT&T and other telecom companies are lobbying against it, Communications Daily reported.

One of Tennessee's representatives in Congress, US Rep. Marsha Blackburn (R-TN), introduced legislation to overturn the FCC's municipal broadband decision.

The Tennessee restriction dates to 1999, when the legislature authorized municipal electric systems to provide Internet access and cable TV, but only within their electric service areas.

Partly because of a previous case involving a municipal telecommunications ban in Missouri, the FCC's order removing the geographic restrictions in Tennessee and North Carolina "would allow preemption only in cases of underlying authorization." In other words, if a state completely banned municipal broadband, precedent prevents the FCC from taking action. In that Missouri case, the FCC sided with the state and the Supreme Court upheld its decision in 2004. The FCC's conclusion in this latest proceeding was that it can intervene in states that allow cities and towns to offer broadband but impose restrictions on their ability to do so.

The Missouri case also involved a different statute, Section 253 from Title II of the Communications Act, which lets the FCC remove state laws that restrict telecommunications. In Missouri, "the Court upheld a Commission ruling that section 253(a) of the Act did not preempt a state-law flat ban on municipal telecommunications, i.e., phone service," the FCC wrote.

The FCC decided in the Tennessee and North Carolina decision that Section 706 is different because it "addresses barriers to advanced telecommunications," i.e. broadband Internet rather than phone service. "Because section 706 specifically addresses barriers to advanced telecommunications, which are the services at issue in these petitions, we conclude that section 706 is available as a source of authority, regardless of whether section 253 would or would not also apply here," the FCC wrote.

"[H]ere we contemplate preemption under section 706 where a state has allowed municipalities to enter the broadband market but has also imposed regulations to affect the state’s communications policy preferences," the FCC further wrote. "Where we preempt those state regulations that apply to municipal providers, the municipal providers are still authorized under the separate delegation of authority. Unlike in Nixon [vs. Missouri Municipal League], the municipality is not 'powerless to enter the... business.'"

The FCC could face a separate lawsuit over its North Carolina decision. Even if unsuccessful, lawsuits could delay expansion of municipal broadband. "We’ll have to understand any ramifications of anticipated legal challenges before we move forward," EPB communications VP Danna Bailey told Ars last month.

But if the FCC successfully defends its decision, municipalities in many more states could ask for the right to expand broadband networks.

An FCC spokesperson told Ars the commission is confident in the legality of its ruling. “We are confident that our decision to pre-empt laws in two states that prevented community broadband providers from meeting the needs and demands of local consumers will withstand judicial scrutiny," the FCC said.

Unlike the FCC's net neutrality order, which will become effective 60 days after publication in the Federal Register, the community broadband order became "effective on release because it was an adjudicatory matter," the FCC said. That means the Tennessee lawsuit won't face a challenge for being filed too early, whereas the lawsuits filed yesterday over the FCC's net neutrality plan could be dismissed for being premature.