A federal appeals court struck a blow against both small business and the Federal Communications Commission's wish to enforce Internet neutrality rules, saying the FCC must first get approval from Congress for such a massive expansion of its powers.

The United States Circuit Court for the District of Columbia handed down the 36-page decision in Comcast v. FCC Tuesday, specifically telling the FCC that its "ancillary authority" over the broadcast and cable industries "is not the equivalent of untrammelled freedom to regulate activities" on the Internet, too. The ruling makes the FCC powerless to stop Comcast from managing its broadband network exactly as it likes – in this case by in 2007 slowing down bandwith speed for bitTorrent users, who hogged the network to share huge files. The unanimous 3-0 decision was written by Judge David Tatel, a Clinton appointee who took his seat on the bench in 1994. .

Steve Westly – a cleantech venture capitalist who helped take eBay public – called the ruling a "tragedy" for small businesses, all of which use the Internet to do business.

"What certain companies like Comcast want to do is say, 'Pay extra, or you get the slow pipe.' This is like saying, 'You must commute to work, but you can't take the freeway, you have to take the slow road. It will cost you $300 to take the freeway,'" Westly told the Wall Street Journal.

The ruling will stifle job growth everywhere, he said. EBay, for example, enables some 750,000 people to make a living full-time through selling their wares on the Internet.

"These people are uploading pictures and selling products every day," Westly said. "Forcing thse people into the slow lane will stifle business, not just in Silicon Valley but all over the country.

Small business expert Anita Campbell pointed out that the Internet has been a major factor in freeing small businesses from the confines of their size.

"The low-cost, open Internet architecture has made possible all those startup Web 2.0 sites," wrote Campbell (who has contributed to Inc. on occasion.) Without net neutrality, small business is at a "distinct disadvantage," as there's not a "level playing field on which to compete with larger and better funded competition."

Use Skype? Free voice communication on the Internet could go the way of the telegraph with this ruling, with providers possibly able to block Skype traffic or just charge for it.

If certain providers also start favoring (or throttling) certain applications, that may also affect your choice of provider – and your ability to get work done.

"It'll be a mess," wrote ZDNet's David Gewirtz.

The FCC isn't giving up on net neutrality, saying in a statement that the court did not "close the door to other methods for achieving this important end."

Susan Crawford, a University of Michigan professor and net neutrality advocate, says the regulatory authority has a couple of options.

"It can try to persuade the court that it's trying to protect its other statutory authorities over telephone and cable. It faces a mountain of litigation if it does that," she told NPR. "Or it can try to change the legal classification of high-speed Internet providers so the FCC's power to speak to them is clear."