That's not the way I read the bill; I think it would simply prohibit any municipal competition; the company (phone or cable or wireless or any telecom "service") wouldn't need to get involved even to the extent of vetoing a project-merely existing and selling "similar" services would protect it from competition. It's worth noticing that this bill is suggested at a moment the role of the federal government in suppressing competition is at a modern high. The FCC is allowing the phone companies to reclaim monopoly control of their lines and administrative and judicial resistance to competition-sapping mergers is at an all-time low. Of course the Feds have long forbidden the states to regulate cable companies on the grounds that it should be a federal matter--and then turn around and decline to regulate cable themselves.
U.S. Representative Pete Sessions of Dallas has just introduced federal legislation to outlaw muni networks nationally. HR 2726 (the ludicrously misnamed "Preserving Innovation in Telecom Act of 2005") would give the phone company veto power over any municipal projects they don't like.
The feds have even less reason to interfere with municipal decision making than does our state (don't forget the anti-Lafayette Broome bill). This is certainly a decision that really shouldn't be made in Washington. What, aside from campaign donations, justifies Washington substituting their judgment for ours? (Preserving innovation? BellSouth? Cox? Surely you jest. No, this is a preserving monopoly bill.)