(Telecompaper) A US federal appeals court has overturned a Federal Communications Commission ruling allowing city-owned broadband services to expand into areas overlooked by commercial providers, AP reports. The court said the FCC overstepped its authority and could not pre-empt state or local laws. The decision comes as part of a dispute between the FCC and the two states Tennessee and North Carolina. Both states had passed laws preventing local providers in their respective cities of Chattanooga and Wilson to expand broadband services to surrounding areas. The FCC last year voted to override those laws, prompting the court appeal from the states. State lawmakers have argued that private broadband providers will have difficulty competing with service subsidised by local governments. Attorneys for Tennessee and North Carolina had argued the issue is one of state sovereignty.