Tennessee, which imposes controversial restrictions on local broadband networks, may change its laws to let electric cooperatives offer Internet service. But even with the proposed expansion, Tennessee would still prevent cities and towns from offering retail broadband services outside their borders.

Tennessee Gov. Bill Haslam, a Republican, last week announced legislation that would let private, non-profit electric cooperatives provide broadband. The state has 23 electric co-ops that provide energy to 2.5 million residents, about 37 percent of the Tennessee population.

"Electric cooperatives, currently restricted from providing retail broadband services, are uniquely situated to assist in bridging the broadband accessibility gap with experience serving areas with lower population densities and providing universal service throughout their territories," a bill summary says. The bill would still "prevent electric cooperatives from using electric system assets to subsidize broadband services."

The bill, which is pending approval in the state legislature, also would not fully lift a restriction that was the subject of a court case and a Federal Communications Commission proceeding. Under current law, Tennessee municipalities that own electric utilities may provide telecom services, but only within their electric service areas. The Electric Power Board (EPB) of Chattanooga, Tennessee offers broadband locally but hasn't been able to expand to nearby towns that requested service. The EPB asked the FCC to preempt the state law, and the FCC did so in 2015, but a federal appeals court later ruled that the FCC can't preempt the state law. That ruling kept Tennessee's law and similar restrictions in North Carolina in place.

Haslam's plan to let private electric co-ops offer service would expand the number of electric providers that are allowed to offer Internet access. But city-owned utilities like EPB still wouldn't be able to offer retail service outside their electric territories.

The "Chattanooga-owned EPB... for years has sought unsuccessfully in the General Assembly against opposition from AT&T, Comcast and others to expand its super-speed Internet outside its current boundaries," according to the Chattanooga Times Free Press.

Haslam explained that he'd prefer to "have private providers rather than government subsidized entities have the first crack at getting that done."

The proposal would allow one indirect method of expanding broadband outside municipal borders. Cities or towns could sell broadband on a wholesale basis to cooperatives, which could then "provide retail broadband service to individual customers who may be outside a municipality," according to The Tennessean of Nashville.

The Tennessee Electric Cooperative Association praised Haslam's proposal, saying that "Co-ops serve areas with the greatest need for expanded broadband access."

Haslam's proposal would also provide $45 million over three years in grants and tax credits to private providers to expand in unserved areas.