Both houses of Congress have passed the Community Broadband Act of 2007. The bill fixes a defect in the 1996 Telecom act that says "any entity" may offer telecom services. The meaning of "any" was challenged repeatedly in state level lawsuits, and some misguided state legislatures went even farther and made it illegal for local governments to start telecom service offerings.
In general, I think it is better for communities to invest in "digital road systems" and let the private sector use those digital roads to sell telecom services directly to customers. This creates a public/private partnership that does not put local government in direct competition with the private sector. But communities should still have the option of offering retail telecom services if they think that is the best way to proceed. In some areas, that may be required for certain services, like TV programming, because of market size.