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Appeals Court Upholds FCC’s Net Neutrality Rules

A federal appellate court upheld the FCC's rules of the road for the internet, a blow to cable and telecom efforts to stall the agency's net neutrality regulations.

A three judge panel of the D.C. Circuit Court of Appeals ruled 2-1 in favor of the FCC's approach, with Judge Stephen F. Williams issuing a partial dissent.

Image: FILE: FCC To Vote On Net Neutrality Regulations
File photo of network cables plugged in a server room on November 10, 2014 in New York City. Michael Bocchieri / Getty Images

At the heart of the FCC's action was reclassifying the internet as a common carrier, akin to the designation given to a utility. In the 184-page opinion, the majority of the judges found that the agency followed proper procedure and was within its authority on imposing rules that require that internet providers treat all traffic equally.

"Today's ruling is a victory for consumers and innovators who deserve unfettered access to the entire web, and it ensures the internet remains a platform for unparalleled innovation, free expression and economic growth," FCC chairman Tom Wheeler said in a statement. "After a decade of debate and legal battles, today's ruling affirms the Commission's ability to enforce the strongest possible internet protections - both on fixed and mobile networks - that will ensure the internet remains open, now and in the future."

The rules were passed last year, with almost 4 million people filing public comments, setting a record for interest in an FCC proceeding.

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Although a major victory for the FCC, observers believe that it is likely to be appealed to the Supreme Court. And congressional Republicans remain opposed to the rules, arguing that it is regulatory overreach.

The National Cable and Telecommunications Assn., one of the leaders in the effort to overturn the rules in court, said in a statement that "though disappointed in today's result, we are particularly gratified by Judge Williams' recognition of the 'watery thin and self-contradictory' nature of the FCC arguments used to justify the imposition of common carriage laws on Internet networks."

"While this is unlikely the last step in this decade-long debate over internet regulation, we urge bipartisan leaders in Congress to renew their efforts to craft meaningful legislation that can end ongoing uncertainty, promote network investment, and protect consumers," the NCTA said.

The FCC twice has been thwarted by the D.C. Circuit in its effort to impose net neutrality rules. After its most stringent regulations were overturned in 2014, Wheeler sought to write new rules. That began a push for the FCC to reclassify the internet as a title II common carrier, a regulatory maneuver to give the agency the legal foundation to impose robust regulation.

That is what the FCC did in a 3-2 vote in February of 2015 in an order that prohibits internet providers from blocking or slowing traffic. The rules also prohibit ISPs from engaging in paid prioritization, or creating fast lanes and slow lanes online based on how much a content provider is willing to pay.

Public interest groups argued that without such rules, the internet risks consolidating into a tiered system, perhaps akin to the bundling among cable providers.

Internet providers challenged the FCC's action in a series of lawsuits, characterizing the move to reclassify the internet as heavy handed and stifling to innovation. They argued that Wheeler shifted course in favor of reclassification late in 2014 after earlier proposing rules with a lighter regulatory touch. That changed, however, after President Obama weighed in in favor of a stronger regulatory approach.

After oral arguments in December, there had been some prediction that the judges would uphold the FCC's rules for fixed broadband but set aside the regulations for mobile. But the court rejected those distinctions, ruling that the FCC "acted permissibly" in reclassifying that wireless service as well. The judges found that otherwise consumers would be faced with a different set of rules as they switched devices, finding that it was "counterintuitive" to "be subject to entirely different regulatory rules depending on how it happens to be connected to the internet at any particular moment."

The judges also rejected opponents' arguments that the rules violated the First Amendment. They also rejected a challenge to part of the net neutrality regulations that set a general conduct standard for providing internet service. The "general conduct" rule allows the agency to monitor, on a case-by-case basis, so-called "interconnection" agreements that allow content providers like Netflix to connect to an internet service provider's network.

At December's hearing, the FCC's counsel, Jonathan Sallet, faced a series of questions from Judge Williams over paid prioritization. Williams asked whether there was some other means of imposing rules that would prevent internet providers from creating fast lanes and slow lanes.

Sallet, however, said that the FCC's approach was "necessary to preserve the virtuous circle" of the internet, where smaller start-up companies can still be assured that their content can get to consumers.

At the hearing, there were some queries over interconnection, or the agreements by which internet providers agree to connect and carry traffic of content networks and providers like Netflix. The FCC did not extend the full weight of its rules to such arrangements, but did establish oversight on a case-by-case basis.

"The commission was being very careful here," Sallet said.

Judge David Tatel, an appointee of former President Bill Clinton, wrote two prior opinions that sidelined FCC net neutrality rules. But his 2014 majority opinion found fault with the legal grounds on which the agency imposed its rules, not that they were necessarily outside its scope of authority.

Read More: U.S. Appeals Court Hears Challenge to FCC's Net Neutrality