The Federal Communications Commission cannot pre-empt state laws that restrict the deployment of city-owned broadband networks, a federal court ruled Wednesday.

In effect, the decision restricts most municipal broadband services to their home city, and prevents them from offering service in neighboring areas. It's a win for private broadband providers like Comcast and Time Warner, who won't have to compete with the sometimes-cheaper offerings from public utilities.

The FCC moved to exempt city-owned networks from territory restrictions in 2015. It approved two petitions filed by officials from Tennessee and North Carolina, who wanted to expand municipal networks in Chattanooga and Wilson, respectively.

North Carolina's Greenlight service provides gigabit Internet, voice, and video to residents and free Wi-Fi in downtown areas. Greenlight wanted to expand to the surrounding five counties, but state law imposes various restrictions, including a ban on providing service at a lower fee than major ISPs.

The FCC ruled that a state can reject a city's request to provide broadband service. But once they are approved to enter the market, the state cannot impose regulatory burdens that would prevent the expansion of a city network.

The FCC said it is reviewing today's decision, which it criticized as limiting Americans' access to affordable broadband service. While Chairman Tom Wheeler said in a statement that the agency would "consider all our legal and policy options to remove barriers to broadband deployment," he did not specifically indicate whether the agency would seek to overturn the decision.

"While we continue to review the decision, it appears to halt the promise of jobs, investment, and opportunity that community broadband has provided in Tennessee and North Carolina," Wheeler said.