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Matt Rourke  /  AP
 The FCC hopes to establish the legal underpinning for its push to write so-called "network neutrality" regulations — which are intended to prevent phone and cable companies from abusing their control over the market for high-speed Internet access — in a closely watched court battle between the agency and the nation's biggest cable operator.
updated 1/8/2010 10:26:06 AM ET 2010-01-08T15:26:06

The Federal Communications Commission ran into a potential setback Friday in its push to draft rules that would require Internet providers to give equal treatment to all data flowing over their networks.

In hearing a legal dispute between the agency and Comcast Corp., a three-judge federal appeals court panel questioned the commission's authority to impose so-called "net neutrality" obligations on the nation's largest cable TV and Internet operator. Those rules are intended to prevent broadband providers from abusing their control over the market for high-speed Internet access.

A decision that goes against the FCC could undermine its ability to impose such rules on all broadband companies — not just Comcast.

Friday's oral arguments centered on Comcast's challenge of a 2008 FCC order banning the company from blocking its broadband subscribers from using an online file-sharing technology known as BitTorrent. The commission, at the time headed by Republican Kevin Martin, based its order on a set of net-neutrality principles it adopted in 2005 to prevent broadband providers from favoring or discriminating against certain types of Internet traffic. Those principles have guided the FCC's enforcement of communications laws on a case-by-case basis.

Formally adopting those guidelines as binding regulations is a top priority for the FCC's new Democratic chairman, Julius Genachowski. The agency voted in October to launch a proceeding to write the rules.

The policy dispute over network neutrality has pitted some of the country's leading Internet companies, including Internet search provider Google Inc. and the Internet calling service Skype, against the big phone and cable operators.

The Internet companies say that without such rules, broadband providers could become online gatekeepers and prioritize traffic for those who can pay extra, while degrading or blocking cheaper Internet calling services or online video sites that compete with their core businesses.

Indeed, BitTorrent, the online file-sharing technology blocked by Comcast, can be used to transfer large files such as online video, something that threatens Comcast's core cable TV business.

But broadband providers such as Comcast, AT&T Inc. and Verizon Communications Inc. argue that after pouring billions of dollars into their networks, they should be able to offer premium services to differentiate themselves from competitors and earn a healthy return on their investments.

They also insist they need flexibility to manage their systems so high-bandwidth applications such as BitTorrent don't hog too much capacity and slow down the network for everyone else.

For its part, Comcast wants to keep its challenge to the FCC order narrow. It argues that the order is illegal because the agency was seeking to enforce mere policy principles, which don't have the force of regulations or law.

As a result, the Philadelphia-based cable company says, it never had clear rules to follow and was never given fair notice of what conduct was prohibited. In fact, Comcast insists, the FCC proceeding to adopt the 2005 principles as formal regulations underscores its point.

Comcast also maintains that because that proceeding is still in the early stages, it remains unclear whether the agency even has legal authority to mandate net neutrality obligations. This larger question, however, should be left for another day, Comcast says.

Yet that is exactly the question that the FCC hopes the court will address. The commission argues that a 2005 Supreme Court ruling upholding its move to deregulate Internet service gives it the jurisdiction it needs.

The high court upheld the FCC's decision to define broadband as a lightly regulated information service, which is not subject to the obligations traditional telecommunications services have to share their networks with competitors. But a 1996 federal telecommunications law still gives the agency authority to set rules for information services — including, the FCC now argues, net neutrality rules.

An appeals court ruling that accepts this argument would "strengthen the agency's hand ... and provide validation" in its broader net neutrality proceeding, said Ben Scott, policy director for Free Press, a leading advocate for net neutrality rules. Free Press brought Comcast's actions to the FCC's attention after The Associated Press ran tests and reported that the cable company was interfering with attempts by some subscribers to share files online.

But even if the court concludes that the FCC lacks authority to adopt such regulations, it would not necessarily be a devastating setback — just a delay — for the commission.

That's because Congress, with a number of key Democrats in support of net neutrality, would likely step in to give the FCC the necessary powers.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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