In a landmark ruling Tuesday, a federal appeals court has struck down key parts of the Federal Communications Commission's open-Internet rules, effectively ruling that the federal government cannot enforce net neutrality. Put more simply, it can't require that Internet service providers treat all traffic equally.

In a 2-1 decision, the U.S. Court of Appeals for the District of Columbia said the agency's rules had no basis in federal law. A key passage:

"Given that 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. Because the Commission has failed to establish that the anti-discrimination and anti-blocking rules do not impose per se common carrier obligations, we vacate those portions of the Open Internet Order."

Judges did, however, preserve the disclosure requirements that say while Verizon and other carriers can make some traffic run faster or block services, they have to tell subscribers they're doing it.

How did we get here? Let's refresh:

The Open Internet

Net neutrality is an idea that's governed the Internet since the beginning: that all Internet users deserve equal access to online information, no matter whether you use Verizon or Comcast. Internet service providers should be "neutral" to the content their customers consume.

As things are now, the FCC regulates net neutrality by "policing" an open Internet. Its chairman just this week doubled down on the importance of this role, too.

The current rules, passed in 2010, prevent broadband Internet service providers from blocking lawful content and other Internet services. Time magazine previously summed up the three rules:

"First, the order requires ISPs to be transparent about how they handle network congestion; second, the ISPs are prohibited from blocking traffic such as Skype or Netflix on wired networks; third, the order outlaws 'unreasonable' discrimination, meaning the ISPs can't put such services into an Internet 'slow lane' in order to benefit their own competing services."

Not Cool, Say Telecom Companies

But companies have challenged net neutrality again and again. Verizon went to court over it, leading to the ruling Tuesday. Here's my previous summary of the issue before judges:

"Communications companies aren't pleased with existing FCC regulations. Verizon filed suit in federal court to overturn the rules, arguing the FCC overstepped its regulatory authority and that the rules are unnecessary. Verizon points out that the FCC has documented only four examples in the past six years of ISPs' possibly blocking content.

"Verizon also said that net neutrality rules violate the First Amendment, since broadband companies transmit the speech of others. That gives the providers 'editorial discretion,' according to Verizon.

"The FCC argues that it has the authority to enforce net neutrality under provisions of the Telecommunications Act of 1996 and the Communications Act of 1934.

"Internet rights groups believe the open Internet is what lets companies like Twitter, Facebook and Skype flourish. Supporters say net neutrality prevented existing market players from slowing down or blocking the connections of Skype calls, for instance, to protect their businesses."

These issues are complicated by how large companies, like Comcast, are both distributors and content providers. Comcast would have an incentive to drive traffic to one of its partner sites, and it looks like the company is legally allowed to do it, with Tuesday's ruling. (See update)

What This Means

What you see depends on where you sit. Net neutrality advocates fear that if the federal government stops enforcing rules to keep the pipelines free and open, then certain companies will be able to get greater access to Internet users. That, they say, creates a system of haves and have-nots — the richest companies could get access to a wider swath of Internet users, for example, and that could prevent the next Google from getting off the ground. Judge David Tatel, who was part of the three-judge panel, said that striking down net neutrality could have negative effects on consumers.

"The commission has adequately supported and explained its conclusion that absent rules such as those set forth in the Open Internet Order, broadband providers represent a threat to Internet openness and could act in ways that would ultimately inhibit the speed and extent of future broadband deployment," he said, adding that broadband companies have "powerful incentives" to charge for prioritized access or to exclude services that competed with their own offerings.

What's Next?

So many questions abound now that this decision has come out. How will the FCC respond? Bloomberg reports the FCC may attempt to rewrite the regulations that bar companies from slowing or blocking some traffic. In a statement Tuesday morning, FCC Chairman Tom Wheeler said:

"I am committed to maintaining our networks as engines for economic growth, test beds for innovative services and products, and channels for all forms of speech protected by the First Amendment. We will consider all available options, including those for appeal, to ensure that these networks on which the Internet depends continue to provide a free and open platform for innovation and expression, and operate in the interest of all Americans."

On the consumer-facing front, AT&T would have likely faced regulators over its new "sponsored data" service, which will allow for websites and app makers to pay for broadband for users. Digital rights groups immediately challenged AT&T's plan on the grounds it violates net neutrality, but feds can't regulate the open Internet anymore.

Update at 2:58 p.m. ET: Comcast is one of the companies that will be playing by the Open Internet rules through 2018, despite Tuesday's ruling. The company made the agreement in order to get government approval for its acquisition of NBCUniversal "even if the rules were modified by the courts," according to a statement from David L. Cohen, Comcast's executive vice president.

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