Court Backs Comcast Over FCC .
APRIL 6, 2010, 11:22 P.M. ET.
By AMY SCHATZ
A U.S. appeals court ruled Tuesday that the Federal Communications Commission overstepped when it cited cable-giant Comcast Corp. for slowing some Internet traffic on its network, dealing a blow to big Web commerce companies and other proponents of "net neutrality."
In a unanimous decision, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit said the FCC exceeded its authority when it sanctioned Comcast in 2008 for deliberately preventing some subscribers from using peer-to-peer file-sharing services to download large files.
At stake is how far the FCC can go to dictate the way Internet providers like AT&T Inc. and Verizon Communications Inc. manage traffic on their multibillion-dollar networks. For the past decade or so, the FCC has maintained a mostly hands-off approach to Internet regulation. But that could soon change, likely setting off a prolonged, expensive lobbying battle pitting Web-content providers against Internet-service providers.
"The court in no way disagreed with the importance of preserving a free and open Internet, nor did it close the door to other methods for achieving this important end," said FCC spokeswoman Jen Howard.
For most consumers, the issue of net neutrality—tech-industry shorthand for the idea that Internet providers should treat all forms of Web traffic equally—is still largely abstract.
Big Internet providers say ordinary Web users have no reason to fear restrictions on legal content. But companies like Google Inc. and Amazon.com Inc. that want to profit from offering more Web video and other high-bandwidth services are concerned that some day the big telecommunications companies will use their power to restrict certain kinds of Web content or charge more to deliver it at high speeds.
The court's decision prompted calls Tuesday from Democrats and consumer groups for Congress to pass new legislation to give the FCC more authority to police Internet providers. "They may have won the battle only to face a larger war," said Rebecca Arbogast, a telecom analyst for Stifel, Nicolaus & Co. Inc.
Sen. John Kerry of Massachusetts was among the Democratic lawmakers saying Tuesday that Congress may need to act. "I know that Congress did not intend for cable and telephone broadband Internet service providers to fall outside the authority of the FCC to protect consumers," he said. Republican lawmakers have generally opposed net-neutrality rules.
Comcast and other Internet providers played down the victory, calling it a narrow decision that won't prevent the FCC from protecting consumers or prompt Internet providers to block sites.
Comcast was accused of deliberately slowing Web traffic to some customers who were downloading large files using peer-to-peer file-sharing services like BitTorrent. The FCC investigated and sanctioned the cable giant, demanding that the company stop slowing traffic and provide more information about its network-management policies. Comcast complied, but it challenged the FCC's decision.
"Our primary goal was always to clear our name and reputation," said Sena Fitzmaurice, a Comcast spokeswoman, adding that the company is "committed to the FCC's existing open Internet principles, and we will continue to work constructively with this FCC as it determines how best to increase broadband adoption and preserve an open and vibrant Internet."
AT&T said the FCC's current net-neutrality principles work and it will continue to abide by them.
Verizon said the decision "will have no impact on the experience of Internet users." But, speaking Tuesday at the Council on Foreign Relations about a plan to make Web access faster and more accessible, Verizon Chief Executive Ivan Seidenberg said, it isn't a "slam dunk" that net neutrality is the right policy. "We have to be careful that well-intentioned policies don't become burdensome rules."
Time Warner Cable Inc. said the decision doesn't change its commitment to providing the "high-quality, open Internet experience" its customers expect.
President Obama supports net-neutrality rules, and FCC Chairman Julius Genachowski proposed new, tougher rules last fall. It is not clear what will become of them now.
Consumer groups warned that the decision strips the FCC of authority to enforce net-neutrality rules and means that Comcast and other Internet providers can block Web sites anytime. They called for the FCC to take a tougher approach toward regulating Internet providers.
"In 2002, the FCC made a decision to no longer regulate broadband Internet service under the same regime they used for telephone service," said Gigi Sohn, co-founder of Public Knowledge, a Washington-based public-interest group. "The only thing that will not leave consumers in limbo now is if the FCC goes back and says they made a mistake in 2002."
Mr. Genachowski's aides are already considering whether to apply rules written for the old phone system to Internet providers, which the agency could use as a basis for policing net-neutrality violations.
But even the suggestion of reregulation of Internet lines is sparking fierce opposition, and phone and cable companies are already lobbying lawmakers and FCC officials to reject the idea.
—Brent Kendall contributed to this article.
Write to Amy Schatz at Amy.Schatz@wsj.com
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