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A US federal appeals court has ruled that the Federal Communications Commission does not have the legal power to "regulate an Internet service provider's network management practices."

On Wednesday, a three-judge panel with the US Court of Appeals for the District of Columbia Circuit unanimously vacated the 2008 FCC order that famously barred cable giant Comcast from interfering with its users' peer-to-peer traffic.

The US Communications Act of 1934 gives the FCC the power to regulate common-carrier services - including "landline telephony, radio transmissions, cable services, and broadcast television" - but according to the court, it does not cover cable internet service. The FCC had argued that section 4 (i) of the Act supported its Comcast order because it authorizes the Commission to “perform any and all acts, make such rules and regulations, and issue such orders, inconsistent with this chapter, as may be necessary in the execution of its functions." But the court says otherwise.

"The Commission may exercise this 'ancillary' authority only if it demonstrates that its action - here barring Comcast from interfering with its customers’ use of peer-to-peer networking applications - is 'reasonably ancillary to the...effective performance of its statutorily mandated responsibilities,'" Judge David Tate writes as part of his 36-page decision. "The Commission has failed to make that showing."

The FCC based its authority on several Congressional "statements of policy." Existing case law, Tates continues, shows that such policy statements do not create "statutorily mandated responsibilities."

The decision is expected to move to the Supreme Court, but it's at least a temporary blow to FCC Chairman Julius Genachowski, who has proposed new net-neutrality rules that would prohibit internet service providers from discriminating against particular content or applications. The FCC's Comcast order was made under Genachowski's predecessor, George W. Bush appointee Kevin Martin.

Genachowski wants to create formal rules from the FCC's 2005 policy statement, while adding two extras. The four existing principles - taken together - say that ISPs cannot prevent netizens from accessing lawful internet content, applications, or services of their choice or attaching non-harmful devices to the network. A fifth rule would prohibit discrimination, and a sixth would require ISPs to be "transparent" about their network management practices.

In the wake of the appeals court's decision, the public advocate Center for Democracy & Technology called on Congress and the FCC to clarify the Commission's role vis-à-vis end-user internet services. "Either the FCC or Congress is going to have to go back to the drawing board and reconsider the authority that the agency can exercise over 'last mile' providers of Internet access," reads a statement from Leslie Harris, president and CEO of the Center for Democracy & Technology. "Otherwise, the legal landscape will remain murky and ultimately fail to protect open and unfettered Internet access."

In early 2007, independent networking guru Robb Topolski first noticed that Comcast was preventing users from "seeding" a portion of their P2P files on BitTorrent, and when word of his tests reached the tech press that August, Comcast denied the practice. But in October, the Associated Press confirmed that the ISP was using reset flags to break P2P connections.

Comcast always claimed that it was "managing" traffic - not blocking it. But before the FCC's order came down, it committed to new network management techniques that would be "protocol agnostic." And it obeyed the order, indeed ending its P2P blocking and disclosing details on how it worked - but before doing so, it filed suit with the US Court of Appeals, arguing that the order was unlawful.

In December, Comcast agreed to pay $16m to settle a class action suit brought against the company over its BitTorrent busting, claiming that the practice violated federal computer-fraud laws and user contracts. This, we would argue, was Comcast's biggest crime: it was fiddling with net connections without telling users it was doing so. But the point was lost amidst the ongoing religious war over net neutrality. ®

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