FCC Chairman Tom Wheeler. (Alex Wong/Getty Images)

Regulators may have to wage an uphill legal battle if they want to use federal powers to nurture small, city-run broadband projects.

The Justice Department said Friday that it won't be helping the Federal Communications Commission fight a couple of key lawsuits on municipal broadband, in a possible indication of trouble ahead for the FCC.

The government's lawyers said they wouldn't be taking a position on the cases, which target a controversial decision by the FCC to strike down state limits on public Internet service in two states, Tennessee and North Carolina.

[The FCC rules against state limits on city-run Internet]

Public utilities that want to offer cheap, fast broadband asked the FCC to intervene on their behalf earlier this year, arguing that the state laws deliberately made it harder for them to compete against large, established Internet providers. Chattanooga's electric utility, for instance, said that state regulations prohibited them from offering ultra-fast gigabit broadband to homes that were not already connected to its electricity service.

For newcomers to the debate, municipal broadband can generally be found in smaller cities and towns that say they are unserved or underserved by larger Internet providers. Although opponents say letting the government get involved in building publicly owned Internet networks is too costly, consumers can benefit from faster speeds and lower prices when it works. Chattanooga residents can buy gigabit download speeds for $70 a month, and 10 Gbps speeds for $300 (which lets you download an HD movie in under a second).

It's not unheard of for the Justice Department to bow out of a case involving a federal agency. But its decision this time is unusual, many policy analysts say. The Obama administration has vocally supported city-run Internet initiatives, and urged the FCC to take action on the matter. And the Justice Department is already supporting the FCC in another high-profile lawsuit on Internet policy involving net neutrality.

[The FCC is moving to preempt state broadband limits]

"We don't know for sure, but my best guess is that the DOJ, quite rightly, is concerned about the lawfulness of the FCC's preemption action," said Randolph May, president of the conservative-leaning Free State Foundation and a former FCC lawyer.

Others said that the FCC's decision to preempt those state laws falls outside the Justice Department's traditional area of expertise, which could explain its decision to bow out this time.

Still, if the Justice Department believes the FCC has a weak case for overturning the state restrictions, it could have wide-ranging implications for the future of city-run Internet projects.

The FCC and DOJ declined to comment.