A federal appeals court has struck down important segments of the FCC's Open Internet rules, determining that the agency doesn't have the power to require internet service providers to treat all traffic equally. The DC circuit court has ruled on Verizon v. FCC, a challenge to the net neutrality rules put in place in 2010, vacating the FCC's anti-discrimination and anti-blocking policies, though it preserved disclosure requirements that Verizon opposed — in other words, carriers can make some traffic run faster or block other services, but they have to tell subscribers.

The problem isn't that the court opposed the FCC's goals, it's that unlike older telecommunications providers, ISPs aren't classified as "common carriers" that must pass information through their networks without preference. By enforcing net neutrality, the court found, the agency was imposing rules that didn't apply to carriers. It's an issue that net neutrality supporters have been worried about for years: "The FCC — under the leadership of former Chairman Julius Genachowski — made a grave mistake when it failed to ground its Open Internet rules on solid legal footing," says Free Press president Craig Aaron. "Internet users will pay dearly for the previous chairman's lack of political will."

"We will consider all available options, including those for appeal."

Despite striking down parts of the rules, Judge David Tatel said that the FCC should have some authority to regulate service providers. The FCC justified its rules partly by saying that the Open Internet order promotes broadband development, an explicit agency goal. While opponents of net neutrality have said that there's little evidence these rules actually help, Tatel disagreed, saying that the idea was "both rational and supported by substantial evidence." Verizon also argued that Congress was responsible for passing regulations, but "although regulation of broadband Internet providers certainly involves decisions of great 'economic and political significance' ... we have little reason given this history to think that Congress could not have delegated some of these decisions to the Commission."

Notably, Tatel also agreed 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, saying that broadband companies have "powerful incentives" to charge for prioritized access or to exclude services that competed with their own offerings.

Without net neutrality, "broadband providers represent a threat to internet openness."

Unfortunately for the commission, the particular rules it tried to make — anti-blocking and anti-discrimination measures — were expressly allowed only for common carriers. Despite the FCC's arguments, Tatel didn't think that the Open Internet rules were more permissive than common carrier standards, nor did he think that internet service providers could be counted as something besides carriers, an argument that could have opened the door to more regulations.

FCC chair Tom Wheeler said that the agency would continue the fight, though it's not clear exactly how. "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."

Update: Verizon has responded to the decision, saying that the FCC could no longer "impose last century's common carriage requirements on the internet" and insisting that service will only get better.