FCC dealt significant blow in net neutrality ruling favoring Comcast

A federal appeals court on Tuesday dealt a significant blow to the Obama administration and net neutrality advocates, ruling that the Federal Communications Commission has no authority to regulate how Web providers manage their network traffic.

The decision overturns the FCC's order in 2008 that Comcast cease blocking subscribers' peer-to-peer file sharing applications, including BitTorrent, which the company said had over-burdened its strapped broadband network and slowed users' connections.

The ruling is a setback for lawmakers -- including Sens. Byron Dorgan (D-N.D.) and Olympia Snowe (R-Maine) as well as Reps. Rick Boucher (D-Va.), Henry Waxman (D-Calif.) and Edward MarkeyEd MarkeyDem senator criticizes Facebook, Instagram for gun sales Apple, Google enlisted for FCC robocall effort Airlines brace for boost in travel volumes over Labor Day MORE (D-Mass.)  -- who have tried to legislate net neutrality under the assumption that the FCC has the authority to codify such rules. It is also a major defeat for President Barack ObamaBarack ObamaScarborough calls Clinton camp defense of foundation 'pathetic' Barack Obama is the founder of Donald Trump Acting Democratic Party chief: Trump’s ‘delusional’ on blacks MORE, who advocated for net neutrality rules in the early days of the 2008 campaign.

The court's decision further spells bad news for Google, Skype, Amazon.com and other Internet firms that have been huge proponents of rules that would mandate open Internet. Google has led the charge for "open" platforms that prevent ISPs and wireless companies from discriminating against certain applications and devices.

But Tuesday's news amounts to a victory for the big telecom companies that provide the bulk of U.S. broadband services. AT&T and Verizon are on Comcast's side in this debate and have forcefully pushed back against net neutrality. They have also promised to take the FCC back to court if it tries alternative routes for net neutrality regulation.

The FCC had argued that a smattering of federal laws, policy statements and court cases endowed the agency with the implicit authority to regulate Internet service providers' (ISP) Web practices. It invoked that authority in late 2008, when it ordered Comcast to stop blocking or "throttling" traffic to BitTorrent.

But the U.S. Court of Appeals for the D.C. Circuit on Tuesday disagreed with the agency's assessment and subsequently ruled on a 3-0 vote to toss out the FCC's landmark order. 

According to the court, "The Commission may exercise this 'ancillary' authority only if it demonstrates that its action — here barring Comcast from interfering with its customers’ use of peer-to-peer networking applications — is 'reasonably ancillary to the ... effective performance of its statutorily mandated responsibilities.'"

However, the judges noted, "The Commission has failed to make that showing. It relies principally on several Congressional statements of policy, but under Supreme Court and D.C. Circuit case law statements of policy, by themselves, do not create 'statutorily mandated responsibilities.'"

The court's move ultimately doubles as a major roadblock for the FCC, which drafted its comprehensive National Broadband Plan this year under the assumption that it possesses regulatory power over the Internet and the companies that provide users' access to it. Many of its provisions also include clarion calls for net neutrality, which the agency may no longer have the authority to institute and enforce on its own.

Fearing this, FCC Chairman Juilus Genachowski had previously indicated he would try to reclassify broadband as a Title II service in the communications statute, which would allow the FCC to enact net neutrality. Currently, broadband is classified as a Title I service, which, according to the court, does not give the FCC the necessary authority.

The FCC hinted on Tuesday it still planned to take that route, stressing the agency is "firmly committed to promoting an open Internet and to policies that will bring the enormous benefits of broadband to all Americans."

“Today’s court decision invalidated the prior Commission’s approach to preserving an open Internet," spokeswoman Jen Howard said in a statement. "But the Court in no way disagreed with the importance of preserving a free and open Internet; nor did it close the door to other methods for achieving this important end.”

Such a change may already have early support in Congress.

Markey, a senior member of the House Energy & Commerce Committee and co-author of net neutrality legislation, told the FCC to "take any actions necessary to ensure that consumers and competition are protected on the Internet."

"I will also continue to work with my colleagues in Congress to provide the Commission any additional authority it may need to ensure the openness of the Internet for consumers, innovators and investors," he said.  

"Clearly, the Court’s decision must not be the final word on this vitally important matter, and I intend to work vigorously to ensure an open Internet for generations to come."

Sen. Kay Bailey Hutchison (R-Texas), ranking member of the Senate Commerce Committee, said she is pleased with the court's decision.

“This decision highlights what many already believed, the FCC does not have authority to act in this area,”  Hutchison said.  “It would be wrong to double down on excessive and burdensome regulations, and I hope the FCC Chairman will now reconsider his decision to pursue expanded commission authority over broadband services in current proceedings before the agency."

Hutchison threatened to block the FCC from enacting net neutrality rules when FCC Chairman Julius Genachowski proposed them in October. 

This story was posted at 10:55 a.m. and updated at 1:38 p.m.