Contrary to much of the hysteria on the Internet, net neutrality — the principle that Internet service providers may not play favorites with regard to the Internet content they deliver — did not end with today's (Jan. 14) court ruling.

Rather, the United States Court of Appeals for the District of Columbia Circuit (commonly known as the D.C. Circuit Court), partly struck down the Federal Communication Commission's 2010 Open Internet Order, which established net neutrality for wired broadband service, on the grounds that the FCC's justification for the order didn't make legal sense.

The ruling in the case, in which Verizon challenged the FCC, does not overturn net neutrality. It also rejects Verizon's argument that the FCC has no authority whatsoever to regulate broadband Internet access. (One justice dissented from the two others and accepted Verizon's argument.)

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"The Commission," the decision reads, "has reasonably interpreted section 706 [of the Telecommunication Act of 1996] to empower it to promulgate rules governing broadband providers' treatment of Internet traffic, and its justification for the specific rules at issue here — that they will preserve and facilitate the 'virtuous circle' of innovation that has driven the explosive growth of the Internet — is reasonable and supported by substantial evidence."

But the decision makes clear that the FCC will have to redefine how it classifies broadband Internet service providers (ISPs) before it can impose net neutrality on them — a move that may put the FCC on a collision course with Congress.

In a statement, current FCC Chairman Tom Wheeler, whose predecessor issued the contentious order, said that the commission "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."

Verizon's own statement reflected the mixed decision, and did not mention any appeal on the company's part.

"The court rejected Verizon's position that Congress did not give the FCC jurisdiction over broadband access," wrote Verizon General Counsel Randal Milch in a blog posting. "At the same time, the court found that the FCC could not impose last century's common-carriage requirements on the Internet, and struck down rules that limited the ability of broadband providers to offer new and innovative services to their customers."

How the FCC tried to have it both ways

A close reading of the appeals-court ruling indicates that two of the three deciding justices favor net neutrality in principle, but agree that the FCC's method of trying to enforce net neutrality in the Open Internet Order rested on very shaky legal ground.

Essentially, the court said, the FCC was trying to have it both ways with regard to broadband ISPs. The FCC was treating the ISPs as "common carriers" that cannot refuse service to anyone, while simultaneously insisting, in accordance with the Telecommunication Act of 1996, that ISPs were not common carriers at all.

"Even though the Commission has general authority to regulate in this arena, it may not impose requirements that contravene express statutory mandates," the decision states. "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."

Basic services versus enhanced services

For the past 20 years, the ruling explained, the FCC and Congress have treated Internet access and Internet content differently. Raw Internet access is a telecommunication service like regular telephone service, and is regulated as a common carrier, akin to a railroad or postal service that must provide service to all legitimate customers equally. In the language of today's ruling, it's a "basic service."

Internet content, however, is an information service, akin to cable TV, and not subject to such strict regulation. The distinction between the two forms of service was part of the Telecommunication Act of 1996, and further enshrined in FCC rulings through 2005. Today's ruling calls that an "enhanced service."

However, since 1996, the FCC has also made sure that broadband providers can't actually do whatever they want to do with regard to Internet content. The commission has been treating broadband ISPs as common carriers, even though the Telecommunication Act and the FCC's own rulings insist that they're not.

Cable TV operators such as Comcast or Time Warner Cable can pick and choose which cable channels to include in their lineups, and see no reason they shouldn't be able to do the same with the delivery of Google or Facebook content to their broadband customers.

They'd also like to be able to charge some Internet content providers more than others. For example, Netflix uses cable-company lines to deliver huge amounts of streaming video to customers who pay the cable companies only a flat monthly Internet connection fee, even as many of those customers cancel expensive cable-TV service in favor of cheap Netflix subscriptions.

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Back to you, FCC

Right now, the FCC won't let the ISPs do any of that. Verizon's lawsuit was an attempt to completely strip away the FCC's authority to regulate delivery of Internet content, and the justices rejected that argument.

But the justices also threw the ball back into the FCC's court, forcing the commission to either appeal to the Supreme Court, or to come up with a more solid legal justification for regulating the ISPs, which may necessitate congressional legislation.

In a Congress that's partly controlled by a Republican Party hostile to net neutrality, that could be a tough fight.

Follow Paul Wagenseil at @snd_wagenseil. Follow Tom's Guide at @tomsguide, on Facebook and on Google+.