If you thought the debate over net neutrality was over and done with, think again.

Net neutrality, in case you need a refresher, is the term used to describe the unrestricted flow of content over the Internet, and it's been advocated by everyone from legal luminaries including Harvard professor Lawrence Lessig to entrepreneurs such as Reddit co-founder Alexis Ohanian, and startups such as Etsy and Meetup, and countless others. Meanwhile, most broadband providers have suggested restricting access--among other things--and requiring companies pay a fee for faster connection speeds. This could add to the expenses of typically cash-strapped startups and, as a result, throttle innovation. 

Up until recently, many considered the case closed--that is, open Internet principles were largely preserved, after the Federal Communications Committee Chairman Tom Wheeler published a final ruling on the matter in March. That measure reclassified so-called Internet Service Providers (ISPs) as public utilities--essentially forbidding ISPs from establishing tiered levels of service. However, this week brings a new challenge to the embattled concept that stands to overturn the FCC's existing ruling.

On Friday, the FCC will defend its 3 to 2 decision this spring to reclassify ISPs before the U.S. Appeals Court for the D.C. Circuit. The case, which was first brought in April by USTelecom, a trade group representing broadband providers, has since been joined by AT&T, Centurylink, CTIA, the wireless phone industry association, and Wireless Internet Service Providers Association, who have asked for a partial stay of the decision. In a separate suit that argues against the FCC on similar grounds, Alamo Broadband, of Texas, has also challenged the ruling.

At issue is whether the FCC overstepped its authority to reclassify ISPs as utilities under Title II of the Telecommunications Act. That move essentially cast broadband providers as being more like telephone companies, which are considered common carriers that provide services to the general public, and are therefore subject to more rigorous regulations.

“Ultimately the issue here is whether the FCC had the authority to call [broadband carriers] common carriers, and subject them to the regulations on discrimination and open access,” says Gary Resnick, chairman of the FCC’s Intergovernmental Advisory Committee, and an attorney.

The matter is particularly important for startups that depend on unfettered access to broadband capacity to offer their products and services, but don't necessarily have the deep pockets to pay for expanded services, as more established competitors do. The order also forbids preferential treatment of traffic, which could occur if a broadband provider also offers content or services that compete with services offered by smaller companies.

USTelecom says it has no comment at this time. But Larry Downes, project director at the Georgetown Center for Business and Public Policy (GCBPP), an economic policy think tank, certainly thinks the case has merit. He says the court of appeals could indeed tell the FCC that it overstepped its authority in its rule making, and instruct the agency to make new rules.

Downes and the GCBPP filed an amicus brief this spring in support of USTelecom, saying the FCC had not done a sufficient analysis of the cost burden the rules would place on broadband carriers.

Downes says it’s anyone’s guess how the federal appeals court will rule. The hearing will be before a 3-person panel of judges. One of the judges, David Tatel has ruled against the FCC in the past. In 2010, for example, Tatel wrote a majority opinion overturning an FCC decision that prevented Comcast from blocking traffic flow over BitTorrent, which facilitates large file transfers and file synching over the Internet. He also led the decision in 2014, which handed a victory to Verizon, when it challenged a net neutrality decision by the FCC in 2010, in its Open Internet order.

“In 2014, Tatel gave [Wheeler] a road map for how to redo the 2010 rulemaking,” Downes says. That roadmap included using regulatory authority under the less-restrictive Section 706 of the Telecommunications Act, he says.

The appeals court is not expected to rule before the spring of 2016. Depending on the outcome, the FCC could call for the decision to be reviewed en banc, by the entire 9-person panel of judges. And that ruling could potentially wind up in front of the Supreme Court next year, Resnick says.

“In many cases, the Supreme Court has given deference to agency actions, but you never know,” Resnick says.

For more information about net neutrality, tune in to this Inc. Uncensored podcast:

Published on: Dec 1, 2015