In recent years, some cities have created broadband networks to provide Internet in communities — especially rural ones — where commercial services aren’t willing to set up shop. Those so-called “municipal broadband networks” just got slapped down by the U.S. Court of Appeals for the Sixth Circuit, which upheld laws in North Carolina and Tennessee halting their growth. For now, the ruling only impacts networks in those two states, but other cities that have created municipal networks have taken note.

The New York Times notes that the move to create city-based networks has been supported by the FCC, as an effort to diminish the digital divide. “In siding with the states, the court hobbled the boldest effort by federal officials to support municipal broadband networks.”

The court made its decision based on the idea that the FCC can’t pre-empt state laws, “like those in about 20 states that curb municipal broadband efforts and favor traditional cable and telecom firms.”

City officials are worried that cable and telecom companies will see the ruling as an opening to create more restrictions. “This is about more than North Carolina and Tennessee,” said Next Century Cities executive director Deb Socia, whose non-profit coalition of cities “explores broadband projects.” “We had all looked to the FCC and its attempt to pre-empt those state laws as a way to get affordable and higher-quality broadband to places across the nation that are fighting to serve residents and solve the digital divide.”

The cable/telecom industry pushed for the North Carolina legislature to adopt a law in 2011 that would stop cities from providing broadband to customers outside of their county. The genesis of that law was when the town of Wilson, where cable/telecom companies didn’t upgrade old networks, started its own, providing speeds of one gigabit per second. The broadband network served additional counties, where the city also provided electricity, but the 2011 law put an end to that.

In the wake of the court decision, Wilson city manager Grant Goings questioned, “how we can bridge the digital divide and create economies of the future when there are corporate interests standing in the way?”

Opponents of municipal broadband networks include Republican U.S. Senator Thom Tillis, who said the court decision “affirms the fact that unelected bureaucrats at the FCC completely overstepped their authority by attempting to deny states like North Carolina from setting their own laws to protect hardworking taxpayers and maintain the fairness of the free market.”

CenturyLink executive Rondi Furgason added: “if local governments choose to compete with private Internet service providers, there needs to be a level playing field.”

FCC spokesman Mark Wigfield said the agency does not plan to appeal the federal court’s decision. Similar broadband restrictions are in place in Colorado and Washington. Los Angeles and San Francisco are “in the early stages of exploring municipal broadband networks, which they view as crucial to serving low-income families who cannot afford service from cable and telecom companies.”