A federal appeals court ruled that the FCC lacks the authority to impose many of the network neutrality rules it set down to guide the behavior of broadband providers, thereby invalidating those rules.

According to the U.S. Court of Appeals for the District of Columbia Circuit, the Federal Communications Commission could, however, go back and devise a better argument for its authority to restore the negated rules. 

The Court ruled that the Federal Communications Commission has explicit statutory authority to promote broadband services. The FCC also has explicit authority to regulate common carrier services.

However, the Commission years ago ruled that broadband does not qualify as a common carrier service. The appeals court found that since the FCC failed to classify it as such, it does not have the authority to regulate it.

According to the decision written by Circuit Judge David Tatel, “Given that the commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the commission from nonetheless regulating them as such.”

To that end, the Court negated FCC rules regarding anti-blocking and anti-discrimination, two of the major tenets of the FCC’s network neutrality policy.

The suit that challenged the FCC’s authority was brought by Verizon.

The court made it explicit what could come next. It said it is up to the FCC to reconsider its position, which includes the possibility of devising a stronger argument for assuming the necessary authority to restore some version of the vacated regulations.

Judge Tatel noted that any decision the FCC makes would have to depend on a detailed analysis of the market and a disciplined evaluation of the market power of various market participants.

Congress could reclassify broadband as a carrier service, or otherwise grant the FCC the authority to regulate broadband. Verizon and other ISPs remain virulently anti-regulatory, however, and so, for the most part, is Congress.

Meanwhile, many smaller competitors and several huge and powerful non-traditional companies (e.g. Google, Sony, Apple) in the broadband space have legitimate interests in restoring the network neutrality rules that were just negated. Consumers have a similar interest in seeing these rules re-adopted, for whatever that is worth.

The new FCC chairman Tom Wheeler appears philosophically inclined toward fewer regulations, but also recently argued he has the authority to police Internet service providers on an individual basis if their behavior is anticompetitive or prevents consumers from accessing the Web.

The NCTA pledged that the cable industry would behave itself even should the absence of regulations persist. NCTA president & CEO Michael Powell wrote, “The cable industry has always embraced the principles of an open Internet and the Court decision will not change that. Consumers have always been entitled to enjoy the legal web content of their choosing and they will continue to do so.  An open Internet is good for our customers, and good for our business.

“Today’s historic Court decision means that the FCC has been granted jurisdiction over the Internet.  While we fully expect some to rush to judgment about the fate of the open Internet, we should remember neither the adoption of the Open Internet Order, nor its partial repeal, has led or will lead to significant changes in how ISPs manage their networks.”

 “The cable industry has always made it clear that it does not – and will not – block our customer’s ability to access lawful Internet content, applications or services.  We look forward to working with Chairman Wheeler and the FCC on ensuring that American consumers will continue to enjoy a fast, robust and open Internet experience.”

The American Library Association president Barbara Stripling, spelled it what the organization believes are the stakes ahead:

“The court’s decision gives commercial companies the astounding legal authority to block Internet traffic, give preferential treatment to certain Internet services or applications, and steer users to or away from certain web sites based on their own commercial interests. This ruling, if it stands, will adversely affect the daily lives of Americans and fundamentally change the open nature of the Internet, where uncensored access to information has been a hallmark of the communication medium since its inception.