One section of the complex law says cities and townships "may not provide to the public" any broadband or wireless services if a fee is charged.
But when signing the legislation late Tuesday, Democratic Gov. Ed Rendell said that a last-minute compromise would allow Philadelphia's ambitious mesh network to proceed as planned.
"We will work with other municipalities on projects that they have established or propose to establish in order to ensure that, to the extent that they are now viable, they will also have the opportunity to succeed," Rendell said.
The Republican-authored bill is designed to prevent local governments from using their muscle to elbow aside private companies that otherwise would invest in broadband and wireless services. It was backed by Verizon Communications, the largest telephone company in Pennsylvania.
Details of the remain sketchy. Barbara Grant, director of communications for the Philadelphia mayor's office, said Wednesday that "we have reached an agreement with Verizon, although we're waiting for all the documents to be signed before we go into details."
Verizon spokeswoman Sharon Shaffer said, "Both parties agreed that they would not disclose details nor make a copy (of the agreement) available."
But the governor's office said that Verizon and Philadelphia have reached a deal permitting the citywide project--which is intended to turn 135 square miles of downtown into one huge 802.11b hot spot--to proceed.
Under the new law, municipal governments are permitted to go ahead with their projects if the local government "has submitted a written request" to the local telephone company, and if that company declines to offer the service. One Philadelphia government official said Verizon agreed to waive its right of first refusal and let the city project proceed.
Philadelphia may be one of the largest cities to undertake a municipal broadband project, but it's hardly alone. Other municipalities testing the waters include Manassas, Va., Kutztown, Penn., and St. Cloud, Fla.
The concept has drawn criticism from skeptics who say it's not a good use of municipal budgets because taxpayers typically end up picking up the tab. A study published in October by the Chicago-based Heartland Institute says "it is no secret or surprise that public provision of services tends to be less efficient in the long run than private provision."