A federal court is currently considering a case that could determine how much power the Federal Communications Commission has over the primary communications tool of the 21st century: the Internet.

Liberals and consumer advocates fear that if the FCC loses, it will become a neutered and outdated agency, unable to protect consumers in the modern marketplace.

But conservatives claim that if the FCC wins, the agency will be emboldened to adopt more invasive and burdensome regulations of the Internet.

In a recent speech at the conservative Phoenix Center, Republican FCC Commissioner Ajit Pai predicted that 2013 will be a watershed year for Internet policy.

“And the most important action probably will not occur either at the FCC or on Capitol Hill. Instead, it will take place in the federal courthouse about a mile away on Constitution Avenue,” Pai said.

{mosads}The case, which is before the Court of Appeals for the D.C. Circuit, is Verizon’s challenge to the FCC’s controversial net neutrality rules. The regulations, adopted by the commission in late 2010, prohibit Internet service providers from slowing down or speeding up access to websites. Cellphone carriers are barred from blocking apps that compete with their own services.

Supporters of the net neutrality order say it is crucial for ensuring an open and vibrant Internet, but critics argue it is an illegal power grab that burdens businesses.

Verizon’s lawsuit claims that the FCC overstepped its legal authority with the rules. Broadband Internet is classified as an “information service,” which the FCC has only limited authority to regulate.

Verizon also claimed that by dictating the traffic that it must carry over its network, the rules violate its First Amendment right to free speech.

In his speech, Pai warned that if the court sides with the FCC, it will lead to more harmful Internet regulations.

“With a court victory under the Commission’s belt, I believe that the net neutrality order would be the first step, not the last, on our regulatory path,” he said.

Pai predicted that if the court upholds the net-neutrality rules, the FCC will look into the network management practices of cellphone carriers and will consider regulating the use of data caps. He also said a victory would lead to more complaints under the existing net-neutrality rules and more aggressive enforcement.

But John Bergmayer, a staff attorney for consumer advocacy group Public Knowledge and a supporter of net neutrality, said that if the court overturns the rules, the FCC will be “almost powerless” to protect consumers in the modern communications landscape.

He explained that consumers are gradually abandoning old communications services, such as telephones and cable television, in favor of broadband Internet.

“If the FCC loses, then you have an agency that doesn’t have clear authority over the basic communications technology of today,” he said. “I don’t think that’s a tenable situation.”

Bergmayer warned that services like Skype and Netflix might have to pay fees to Internet providers to reach the public, and consumers would have fewer online services to choose from.

But the FCC does have a backup plan if it loses in court. The FCC could reclassify broadband Internet as a “telecommunications service,” which it has broad legal authority to regulate.

Although that move would put the rules on firmer legal ground, it would likely prompt a political backlash. Republican lawmakers have warned the FCC that they would fight any attempt to reclassify broadband as a telecommunications service.

“I am convinced that grafting creaky, burdensome common carrier regulations onto the Internet would dramatically slow broadband deployment, reduce infrastructure investment, frustrate innovation, hamper job creation, and diminish economic growth,” Pai said in his speech.

Berin Szoka, the president of libertarian think tank TechFreedom, said that if the FCC reclassifies broadband, it could allow for invasive government micromanaging of Internet access, like tariffs and price controls.

Szoka said he believes that instead of reclassifying broadband, the FCC might try to get Congress to pass a law authorizing net neutrality regulations. But with Republicans controlling the House and enough seats for a filibuster in the Senate, the prospects for a net neutrality law seem dim. 

Bergmayer said that if the court strikes down the net neutrality regulations, the commission’s best hope would be reclassification. 

“It really comes down to the leadership of whoever is [the chairman],” Bergmayer said. 

Julius Genachowski, the chairman of the FCC who pushed through the current net neutrality rules, is widely rumored to be planning to leave the agency sometime next year.