A federal appeals court today upheld the Federal Communications Commission's repeal of net neutrality rules but said the FCC cannot preempt all state net neutrality laws.

"We uphold the 2018 Order, with two exceptions," the judges' ruling said. "First, the Court concludes that the Commission has not shown legal authority to issue its Preemption Directive, which would have barred states from imposing any rule or requirement that the Commission 'repealed or decided to refrain from imposing' in the Order or that is 'more stringent' than the Order." The FCC "ignored binding precedent" when making its preemption order, and "that failure is fatal" to the preemption, judges wrote.

The ruling does not prevent the FCC from trying to preempt state laws on a case-by-case basis. But the FCC can't preempt all state net neutrality laws in one fell swoop, judges ruled. Each preemption of a state law must involve "fact-intensive inquiries," so the FCC would have to conduct a preemption analysis of each one. "Without the facts of any alleged conflict [between state and federal rules] before us, we cannot begin to make a conflict-preemption assessment in this case, let alone a categorical determination that any and all forms of state regulation of intrastate broadband would inevitably conflict with the 2018 Order," judges wrote.

This is a win for California and other states that passed their own net neutrality laws after the FCC repeal. California agreed to delay enforcement of its net neutrality law until after litigation is fully resolved, so the state likely won't enforce the law just yet. But after appeals in the FCC case are exhausted, we could see California and other states enforcing net neutrality rules that prohibit Internet service providers from blocking or throttling lawful Internet traffic and from prioritizing traffic in exchange for payment.

In today's ruling, judges remanded portions of the repeal order to the FCC, saying that the agency has to do more justification of the net neutrality repeal. But importantly, judges remanded the repeal to the FCC without vacating it and said that the FCC's opponents' objections are "unconvincing for the most part." While judges vacated the FCC's preemption of state laws, the FCC decision to deregulate broadband at the federal level and eliminate net neutrality rules remains in effect.

The decision was made with a 2-1 vote by a three-judge panel at the US Court of Appeals for the District of Columbia Circuit. All three judges agreed that the FCC can repeal its own net neutrality rules, but Senior Circuit Judge Stephen Williams dissented from the decision to vacate the preemption of state laws. The decision could be appealed to the full Court of Appeals and eventually to the Supreme Court.

Pai celebrates

Pai issued a statement celebrating the order. "The court affirmed the FCC’s decision to repeal 1930s utility-style regulation of the Internet imposed by the prior Administration... We look forward to addressing on remand the narrow issues that the court identified," Pai said. Pai's statement did not address the court ruling against the preemption of state laws.

On remand, the FCC must address three problems with the net neutrality repeal. Specifically, judges wrote that the FCC "failed to examine the implications of its decisions for public safety" and failed to "sufficiently explain what reclassification will mean for regulation of pole attachments." The FCC also did not address opponents' concerns about the effect deregulation will have on the FCC's Lifeline program that subsidizes phone and Internet access for low-income Americans, judges wrote.

But judges did not dispute the FCC's decision to classify broadband as an information service instead of a telecommunications service. Classifying broadband as an information service essentially deregulated the industry and helped the FCC repeal the core net neutrality rules. Judges said that the FCC decision to reclassify broadband was "a reasonable policy choice."

Pai's FCC voted to reclassify broadband and eliminate net neutrality rules in December 2017, leading to the rules coming off the books in June 2018.

The FCC repeal was challenged in court by a coalition of state attorneys general, consumer advocacy groups, and tech companies such as Mozilla and Vimeo. Oral arguments were held in February 2019.

Mozilla said it may appeal today's ruling. "Our fight to preserve net neutrality as a fundamental digital right is far from over," Mozilla Chief Legal Officer Amy Keating said in a statement. "We are encouraged to see the Court free states to enact net neutrality rules that protect consumers. We are considering our next steps in the litigation around the FCC’s 2018 order.