A federal court had high praise for municipal broadband networks in Chattanooga, Tennessee, and Wilson, North Carolina. But that didn’t stop the Sixth District Court of Appeals from siding with the state governments and major telecommunications companies that wanted to restrict the networks’ growth.

Last week the court sided with North Carolina and Tennessee, where state laws restricted the growth of publicly managed broadband providers beyond a utility district service area in Chattanooga and the city limits in Wilson.

Last year the FCC said states couldn’t enact such restrictions because they countermanded the goals of the Telecommunications Act to promote competition and expand broadband service. The court said Congress had not granted the FCC any specific authority to invalidate the state laws, so the regulators had overstepped their authority.

The case was an important bellwether in efforts to expand broadband access for communities that say major telecommunications companies aren’t responding to community needs for faster speed and more affordable prices.

The FCC may appeal the decision, but it’s uncertain whether it will do so. FCC Chairman Tom Wheeler is winding down his term, and Fortune speculates that he and other members of the commission might not make any decision before the presidential election in November.

But just because the court sided with laws that limit the reach of municipal broadband networks, that didn’t stop the three judges from including laudatory passages about the Internet service providers in their decision. (The entire ruling is available online, with highlights underlined by Fortune’s Jeff John Roberts.)

Chattanooga’s well known network, capable of delivering speeds up to a gigabit, has “received uniform praise,” the court said. “It has led to job growth and attracted businesses to the area.” The court also seemed to agree that the fiber network had caused commercial providers to lower their monthly fees to consumers. And the network played a role in the city’s upgrading to a higher bond rating, the court said.

In North Carolina, Wilson’s Greenlight gigabit network has offered cheaper Internet, phone, and cable packages than commercial providers. And the network also offers free wi-fi for the downtown.

The complimentary passages were lifted from arguments provided by Chattanooga, Wilson, and the FCC.

Creative Commons License

Republish our articles for free, online or in print, under a Creative Commons license.