Appeals court overturns FCC rule on net neutrality

In a case with wide-ranging ramifications for how Americans use the Internet, an appeals court Tuesday struck down a federal rule that required broadband providers to keep their networks open -- even to bandwidth hogs.

The decision appears to give telecommunications companies a free hand to limit or block people from watching videos or accessing other online content that they have become increasingly accustomed to downloading with ease. It could also allow Internet service providers to charge a premium to websites for fast delivery of their content.

And it calls into question the ability of the Federal Communications Commission to enact key parts of a wide-ranging, multibillion-dollar initiative unveiled last month to expand access to high-speed Internet service.

“Companies selling Internet access are free to play favorites with content on their networks, to throttle certain applications or simply to block others,” said Gigi Sohn, president of Public Knowledge, a digital rights group.

As an example, she and others point to the FCC decision that the U.S. Court of Appeals for the District of Columbia overturned Tuesday. It involved instances in which Comcast Corp., the nation’s largest provider of high-speed Internet service, blocked some of its customers from using the popular BitTorrent Inc. technology that allows users to more easily download videos.

The FCC has not said whether it would appeal the court’s ruling.

In 2008, the commission ruled that Comcast improperly discriminated against that Internet content. But a three-judge panel of the court unanimously found that the FCC overstepped its bounds because it lacked direct authority from Congress to regulate Internet traffic.

In handing down the ruling, the court reignited a long-simmering debate over whether telecommunications companies could discriminate against content flowing through their networks, potentially charging websites to load their pages faster or slowing those of competitors.

Some in Congress have renewed their push for legislation on the issue, known as network neutrality, that would prevent Internet providers from curbing or charging higher prices for use of selected applications or websites. It has pitted Democrats and Internet giants such as Google Inc., which generally support network neutrality, against Republicans and telecom behemoths such as Verizon Communications Inc.

President Obama supported previous efforts to enact such legislation and FCC Chairman Julius Genachowski, a Democrat who took over in early 2009, has made network neutrality a top priority.

“The commission must have the authority to enforce the principles of network openness,” said Rep. Rick Boucher (D-Va.), chairman of the House subcommittee that deals with telecommunications. He promised to work to get telecommunications companies, major Web companies and others to agree on legislation that would grant the FCC direct legal authority over Internet services.

But it could take months, if not years, for a bitterly divided Congress to act.

In the meantime, the FCC might take a more controversial tack -- reclassifying high-speed Internet service under existing law so it would be subject to the some of the same regulations as telephone service, reversing actions by the commission during the George W. Bush administration.

That move is adamantly opposed by telecommunications companies and could result in tougher federal oversight of the Internet -- and another major court case challenging the FCC’s authority.

“It would clearly be a significant U-turn in regulation,” said Andrew Lipman, a partner at law firm Bingham McCutchen in Washington. “The FCC would face a lot of head wind from the providers, who would undoubtedly resist that kind of regulatory intrusion.”

FCC spokeswoman Jen Howard said officials at the agency were still reviewing the court’s decision, but the commission remained “firmly committed to promoting an open Internet and to policies that will bring the enormous benefits of broadband to all Americans.”

The FCC could appeal the ruling, seek legislation or vote to reclassify high-speed Internet service so it falls under tough existing phone regulations. Genachowski also might need new power to enact parts of the recently released broadband plan, such as requirements that Internet providers disclose the actual speed of service that customers receive.

Both Republicans on the five-member panel, Robert M. McDowell and Meredith Attwell Baker, said they would oppose any attempt to reregulate Internet service. Opponents of such regulation have said it would stifle investment needed to lay new wires to increase Internet speeds and expand access.

Comcast cheered the court decision, while at the same time vowing to “preserve an open and vibrant Internet.”

“Our primary goal was always to clear our name and reputation,” said Sena Fitzmaurice, the cable service’s vice president of government communications.

The 2008 FCC ruling, which came on a 3-2 vote, said that Comcast failed to tell subscribers it was blocking their access to the BitTorrent file-sharing technology, lied about the practice when confronted about it by the FCC and had intended to cripple online video sites that competed with Comcast’s on-demand service.

Major Internet service providers said Tuesday’s decision would not lead them to block content and that no new regulations were needed.

“Consumers are in the driver’s seat in today’s market-driven Internet ecosystem, and their interests remain fully protected,” Verizon general counsel Randal S. Milch said.

Rebecca Arbogast, a telecom analyst at brokerage Stifel, Nicolaus & Co., said there were strong competitive pressures on Internet providers not to block or limit access to Web content. But she said that for the time being, with the FCC stripped of its authority, those appear to be all that’s stopping companies from doing so.