Earlier this month, the United States Court of Appeals for the District of Columbia Circuit vacated portions of the FCC's net neutrality mandate, holding that the Commission did not have statutory authority to regulate broadband providers by prohibiting them from blocking or prioritizing Internet traffic.   Verizon v. Federal Communications Commission, No. 11-1355 (D.C. Cir. Jan. 14, 2014).  The decision is the latest in the net neutrality debate which has been waging for several years and is a blow to major net neutrality advocates such as eBay and Amazon.

In 2010, the FCC issued an order which imposed disclosure, anti-blocking, and anti-discrimination requirements on broadband providers, known as the "Open Internet Order."  In essence, the Open Internet Order prohibited broadband providers from discriminating and prioritizing the flow of Internet traffic.  

Local access providers such as Verizon, oppose net neutrality regulations which prohibit those companies from providing higher speed Internet access to those who pay more for the service.  Verizon and other carriers would effectively prioritize Internet traffic and allow those who pay a premium to access the Internet "fast lane."  Proponents of net neutrality fear that prioritizing Internet traffic in this manner would prevent end-users from accessing “edge providers” such as eBay, Amazon, and YouTube or degrade the quality of end users' access to edge providers.  Consumer interest groups also caution that, without net neutrality regulations, consumers and edge providers may see increased costs.  

Ironically, the Court held that the FCC does in fact have authority to impose the regulations contained in the Open Internet Order, but because of a prior Commission ruling classifying broadband providers as information-service providers, rather than as common carriers, the FCC is expressly prohibited from imposing such regulations on broadband providers by the Communications Act of 1934.  Indeed, the Court held that Section 706 of the Telecommunications Act of 1996 vests the FCC with affirmative authority to regulate broadband providers, including the ability "to promulgate rules governing broadband providers' treatment of Internet traffic, and its justification for the specific rules at issue here."  Id. at 4.  The Court further explained however, that "[e]ven though section 706 grants the Commission authority to promote broadband deployment by regulating how broadband providers treat edge providers, the Commission may not, as it recognizes, utilize that power in a manner that contravenes any specific prohibition contained in the Communications Act."  Id. at 45.

The Telecommunications Act of 1996 classifies two categories of entities:  (1) telecommunications carriers (or common carriers), which provide basic services subject to regulation under Title II of the Communications Act of 1934; and (2) information-service providers, which provide enhanced services not subject to Title II regulation.  When determining how to regulate broadband service provided by cable companies, the FCC determined that cable broadband providers provide a "single, integrated information service" and thus, were classified as information-service providers exempt from Title II regulation.  

Therefore, the Court held that by imposing anti-discrimination and anti-blocking rules on broadband providers pursuant to Title II, the FCC was effectively treating an information-service provider as a telecommunications provider or common carrier.  The Court reasoned that because "the Commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the Commission from nonetheless regulating them as such."  Id. at 4.  Accordingly, the Court vacated the portions of the Open Internet Order prescribing anti-discrimination and anti-blocking for broadband providers.  The FCC has indicated that it intends to appeal the decision.