U.S. appeals court hears challenge to net neutrality rules

WASHINGTON (Reuters) - A U.S. appeals court heard arguments on Friday over the legality of the Federal Communications Commission’s net neutrality rules, in a case that may ultimately determine how consumers get access to content on the Internet.

The Federal Communications Commission (FCC) logo is seen before the FCC Net Neutrality hearing in Washington February 26, 2015. REUTERS/Yuri Gripas

The fight is the latest battle over Obama administration rules requiring broadband providers to treat all data equally, rather than giving or selling access to a so-called Web “fast lane.”

A three-judge panel, in a hearing that lasted over three hours, questioned lawyers for the FCC and broadband backers about whether the FCC properly extended the sweeping authority it has to regulate telecommunications to Internet service providers.

So-called net neutrality is a major issue for broadband providers like Verizon Communications Inc and Comcast Corp, which fear the rules may make it harder to manage Internet traffic and make investment to provide additional capacity less likely. It is also a big concern for content providers like Netflix Inc and Yelp Inc, worried that access to customers could be limited without net neutrality.

The U.S. Court of Appeals for the District of Columbia Circuit has ruled twice against the FCC since 2010 and Judge David Tatel, who wrote both opinions, is on the panel that heard the case.

The issue, Tatel said, is whether the FCC had authority to reclassify the Internet as a more heavy-regulated telecommunications service rather than an information service.

Lawyers for the Internet service providers argued that because they exercise some control over functions like cached pages they met the burden as an information service provider, which would limit how extensively the FCC could impose net neutrality rules.

But the FCC said broadband providers were acting merely to transport data, not making content decisions.

An open Internet spurs innovation and helps improve broadband infrastructure, the FCC argued, saying network companies plowed $230 billion into the Web over 2011-2013, when open Internet rules were in effect.

Judge Tatel wrote the majority opinion in 2010 ruling against the FCC after it cited Comcast for slowing Internet traffic speeds to some customers who were downloading very large data files from peer-to-peer networks.

The FCC then issued new rules that blocked broadband providers from slowing or discriminating against Internet traffic and Tatel wrote the opinion that blocked those rules in 2014.

Congress has considered writing its own rules on net neutrality but has not voted on any proposals. The appeals court ruled in 2014 that the FCC had used the wrong legal reasoning to issue the rules, but said without net neutrality “broadband providers represent a threat to Internet openness.”

The net neutrality rules are backed by the American Civil Liberties Union, library groups and companies including Twitter Inc, Medium, Yelp, Reddit.

The case is U.S. Telecom Association, et al v. FCC, et al, U.S. Court of Appeals for the District of Columbia Circuit, No. 15-1063.

Reporting by David Shepardson; Editing by Christopher Cushing and Tom Brown