U.S. Markets open in 1 hr 34 mins

How Big Telecom came to fear one Tennessee town

A Tennessee city with fewer than 200,000 residents has arguably become private cable companies' worst nightmare. How? The city of Chattanooga's public electric utility provides super-fast broadband Internet service to residents at competitive prices. Now, the utility -- the EPB -- is trying to expand its reach beyond city limits. Private sector telecom companies are fighting this effort and appear worried other cities will follow Chattanooga's lead.

Related: 3 industries that make it entirely too difficult for customers to call it quits

To expand to more residents in a state where one in five are without Internet access, the EPB needs the Federal Communications Commission to preempt a statute that prohibits the utility from competing with private telecom companies outside its current market. David Sirota, senior writer at International Business Times, tells us in the video above telecom companies are trying to get the FCC to not to preempt this law.

As for why this issue exists, Sirota argues "private cable companies don't like publicly-owned municipalities to compete with them," and so have successfully lobbied for passage of laws in 20 states that ban or restrict local governments from offering Internet service.

Check out the video to see how Chattanooga, known as "Gig City," has been able to offer what analysts say is the fastest Internet in the country -- 50 times the average speed for homes in the rest of the U.S. -- for $70 a month.

Meanwhile, hundreds of municipalities are reportedly laying their own fiber networks, and more than 100 have started offering Internet access already. Sirota thinks cities and towns will use what limited power they have to continue doing this, saying the "fight will be can they move this from successful model places like Chattanooga outwards." Sirota anticipates a renewed round of lobbying from big telecom companies.

Related: Comcast / Time Warner merger would create customer service nightmare

Chattanooga may be held up as a success story of a public Internet project backed by taxpayers, but there have also been failures including Provo, Utah, which sold its public network to Google (GOOG) for $1. Some cities have reportedly had trouble monetizing the fiber service. So why should more cities follow Chattanooga's lead? Sirota asserts it should come down to whether utilities are properly positioned to flip a switch and have this technology deployed, pointing out that Chattanooga didn't build this fiber infrastructure out to be out to be a consumer network, but to deal with the EPB's energy mandate.

More from Yahoo Finance

Dick's Sporting Goods fires 400 PGA Pros as golf interest wanes

Why a Facebook earnings miss could be “devastating"

Dow poised to drop 3,000 points