BY NICOLE FLATOW ON JANUARY 14, 2014 | Think Progress

A federal appeals court dealt a major blow to open Internet access Tuesday, striking down a rule that required broadband providers to treat all Internet traffic the same regardless of the source. The U.S. Court of Appeals for the D.C. Circuit held that the Federal Communications Commission does not have the power to mandate so-called “net neutrality rules,” but that Internet providers must inform their subscribers if they are accelerating some traffic at the expense of others.

Net neutrality rules were issued by the FCC to prevent broadband providers from favoring some content over other content, potentially even their own. As the two-judge majority explains, “a broadband provider like Comcast might limit its end-user subscribers’ ability to access the New York Times website if it wanted to spike traffic to its own news website, or it might degrade the quality of the connection to a search website like Bing if a competitor like Google paid for prioritized access.”

Even as they struck down these rules Tuesday, the D.C. Circuit judges concede that this concern is real, writing, “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.” The problem, however, derives from an earlier FCC decision that even advocates of net neutrality like Free Press president Craig Aaron say was a failure of FCC leadership to “ground its Open Internet rules on solid legal footing.”

In 2010, the FCC issued several rules intended to promote openness and innovation on the Internet among what are known as Internet Service Providers, or ISPs. ISPs are the vehicles that provide individuals with access to the Internet. As the Nation puts it in a helpful explainer, ISPs like Comcast and Verizon are to the Internet what the water company is to water — they don’t own the water; they just provide the infrastructure to bring it to your home.

One rule issued by the FCC required transparency among broadband providers, mandating that they must “publicly disclose accurate information regarding the network management practices, performance, and commercial terms of [their] broadband Internet access services.” The second prohibited providers from “blocking lawful content” or “impairing or degrading particular content, applications, services, or non-harmful devices so as to render them effectively unusable.” The third prohibited broadband providers from treating internet traffic differently.

The court upheld the transparency requirements. But it concluded that federal law does not mandate non-discrimination, given how the FCC decided to classify Internet Service Providers (ISPs). The FCC characterized ISPs as “information providers” rather than “telecommunications providers”– a classification that was upheld by the U.S. Supreme Court in 2005. This decision meant ISPs were not subject to the same regulatory scheme that applies to “common carriers,” which the court concedes would have mandated non-discrimination of traffic. Advocates such as former FCC Commissioner Michael Copps said after the ruling that the FCC could still fix this problem by simply re-classifying ISPs. The FCC’s rules as now constructed also limit the agency’s ability to curb discrimination among mobile ISPs.

FCC Chairman Tom Wheeler said the commission might appeal the ruling, but no avenue for appeal is guaranteed from a federal appeals court. The FCC could request a rehearing of the ruling by the full “en banc” panel of the D.C. Circuit, or petition for certiorari to the U.S. Supreme Court, but both courts retain discretion to decline review.