US appeals court strikes down FCC net neutrality rules

WASHINGTON — An American appeals court on Tuesday rejected federal rules that required internet providers to treat all web traffic equally, a decision that could allow mobile carriers and other broadband providers to charge content providers for faster access to websites and products.

The Federal Communications Commission's open internet rules, also known as net neutrality rules, required internet service providers to give consumers equal access to all lawful content without restrictions or varying charges.

But the United States Court of Appeals for the District of Columbia Circuit struck down the regulation, which was passed in late 2010 and challenged in court by Verizon Communications Inc.

Two judges, with partial support from a third, said the FCC did have authority to regulate broadband access, but the agency failed to show that it had authority to impose the anti-discrimination rules on broadband providers.

The ruling is a victory for Verizon and other broadband providers, who saw the FCC rules as government overreach into how they operate their networks. The largest providers on Tuesday pledged that they would not restrict how customers use the web, but consumer advocacy groups said they worried that providers may begin charging content companies such as Netflix, Facebook or ESPN for faster Internet speeds.

The FCC had classified broadband providers as information service providers as opposed to telecommunications service providers, like telephone companies, and that distinction created a legal hurdle for the FCC's authority over them.

This was the second time the court struck down the FCC's net neutrality rules.

The FCC now could appeal the ruling to the full appeals court or to the U.S. Supreme Court, something FCC Chairman Tom Wheeler said he is considering as he looked at "all available options" to ensure Internet networks remained free and open.

The regulators could also try to reclassify broadband providers so they fall in the same category as traditional phone companies, a step that would give the FCC more oversight power. Public interest groups have urged the FCC to do so, but the move would face staunch opposition from Republicans and broadband providers.

"Unless Congress acts, we should stay our hand and refrain from any further attempt to micromanage how broadband providers run their networks," Republican FCC Commissioner Ajit Pai said.

Democratic leaders in Congress on Tuesday urged the FCC to take advantage of the oversight power the court did recognize over broadband and offered support in rewriting the rules. Republicans urged the FCC to stay hands-off.

Wheeler recently has also suggested he could use existing FCC power to go after particular Internet service providers who violate the open Internet principles on a case-by-case basis.

Former FCC Chairman Julius Genachowski, who oversaw the adoption of the open Internet order in late 2010 and is now at investment firm Carlyle Group, declined comment on Tuesday.

PLEDGE TO OPEN INTERNET

Supporters of the FCC rules worry that now Internet providers such as Verizon or Comcast Corp would begin to charge content providers for faster access or slow down or even block access to particular sites.

"That's just not the way the Internet has worked until now," Matt Wood, policy director at public interest group Free Press, told Reuters.

But opponents say the rules inhibit investments and are not necessary to ensure open access to Internet content.

"Today's decision will not change consumers' ability to access and use the Internet as they do now," Randal Milch, Verizon's general counsel and executive vice president for public policy, said in a statement.

"Verizon has been and remains committed to the open Internet which provides consumers with competitive choices and unblocked access to lawful websites and content when, where, and how they want. This will not change in light of the court's decision," Milch said.

In the case against the FCC, Verizon had argued the open Internet order violated the company's right to free speech and stripped control of what its networks transmit and how.

Prominent Internet providers Comcast and Time Warner Cable Inc also issued reassurances of their commitment to open Internet principles on Tuesday, as did the Broadband for America coalition representing various Internet service providers and CTIA, the wireless industry association.

But content providers remained uneasy.

"Trust but verify," said Michael Beckerman, president and CEO of the Internet Association that represents content providers including Netflix Inc, Google Inc, Facebook Inc and Amazon.com Inc.

"With the Internet and our member companies growing and changing and startups constantly popping up, protections do need to be placed for consumers."

(Reporting by David Ingram and Alina Selyukh; Additional reporting by Lisa Richwine in Los Angeles, Alexei Oreskovic and Edwin Chan in San Francisco, Liana Baker and Sinead Carew in New York; Editing by Will Dunham, Sofina Mirza-Reid and Cynthia Osterman)