Chattanooga, Tennessee, is the unlikely talk of the broadband world these days, largely because its 1-gigabit-per-second internet service is a heck of a lot faster than most of the world can dream of having.

And at $70 per month, it’s way cheaper than slower internet access in most cities.

The super-high-speed service isn’t Google’s doing, nor is it Comcast’s or Verizon’s—the city’s municipal broadband gets the credit for that. Now Chattanooga would like to extend that service to more people, but there’s a problem: That plan runs counter to a Tennessee state law that prohibits cities from pushing their municipal internet networks beyond the limits of the electrical service they offer.

At the moment, Chattanooga and the similarly wired Wilson, North Carolina, which is subject to a similar restriction under state law, are petitioning the Federal Communications Commission (FCC) to preempt those laws and allow extension of municipal broadband networks. Twenty states currently have statutes limiting the reach of high-speed municipal broadband.

States are well within their rights to impose these restrictions, given the potential impact on taxpayers if public projects are not carefully planned and weighed against existing private investment.

The cities see municipal broadband access as a way to gain  a regional leg-up. But the telecom industry sees it differently: It wants the FCC to stay out of the debate, arguing that the commission has no authority on an issue that’s properly a matter for state law.

“States are well within their rights to impose these restrictions, given the potential impact on taxpayers if public projects are not carefully planned and weighed against existing private investment,” USTelecom, a trade group, recently stated in a blog post.

The National Governors Association supported that stance last week in comments on the petitions, saying the FCC “should honor the longstanding partnership between states and the federal government by rejecting the pending petitions and avoid triggering unintended consequences through federal preemption of state authority.”

A mixed record

Plans for municipal broadband services have had their share of setbacks. Seattle, for example, had to squash a contract with Gigabit Squared after the provider failed to hold up its end of the deal. And it took San Francisco nearly a decade to implement municipal wireless access after a series of failed efforts.

But unlike those big-city failures, mid-sized Chattanooga managed to build its project, known as “the Gig,” without too much trouble. And the city is already making a profit that’s paying back the costs of building the project in the first place, according to city officials.

In fact, Chattanooga Mayor Andy Berke says, the high-speed internet service is causing business to boom in the region, with venture capitalists and entrepreneurs seeing the city as a budding hot spot.

“You don’t see many mid-sized cities that have the kind of activity that we have right now in Chattanooga,” Berke told The Guardian. “What the Gig did was change the idea of what our city could be. Mid-sized southern cities are not generally seen as being ahead of the technological curve. The Gig changed that. We now have people coming in looking to us as a leader.”

Chattanooga and Wilson have some backers: Tech-friendly and local groups such as Public Knowledge and the Institute for Local Self-Reliance signed on to comments filed with the FCC holding up the two cities as examples of how community-run broadband can work.

“Wilson and Chattanooga are two clear examples of how local governments can expand access to fast, affordable, and reliable internet access,” the comment states [PDF]. “State laws restricting local authority to decide whether a public investment or partnership will improve internet access have delayed and inhibited the deployment of fiber optic networks.”

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