gavel

Comcast is challenging the FCC's net-neutrality stance in federal court.

The Federal Communications Commission (FCC) ran into a potential setback Jan. 8 in its push to draft rules that would require internet providers to give equal treatment to all data flowing over their networks.

In hearing a legal dispute between the agency and Comcast Corp., a three-judge federal appeals court panel questioned the commission’s authority to impose so-called “net neutrality” obligations on the nation’s largest cable TV and internet operator. Those rules are intended to prevent broadband providers from abusing their control over the market for high-speed internet access.

A decision that goes against the FCC could undermine its ability to impose such rules on all broadband companies—not just Comcast.

Oral arguments on Jan. 8 centered on Comcast’s challenge of a 2008 FCC order banning the company from blocking its broadband subscribers from using an online file-sharing technology known as BitTorrent. The commission, at the time headed by Republican Kevin Martin, based its order on a set of net-neutrality principles it adopted in 2005 to prevent broadband providers from favoring or discriminating against certain types of internet traffic. Those principles have guided the FCC’s enforcement of communications laws on a case-by-case basis.

Formally adopting those guidelines as binding regulations is a top priority for the FCC’s new Democratic chairman, Julius Genachowski. The agency voted in October to launch a proceeding to write the rules. (See “FCC moves closer to net neutrality.”)

But with Comcast appealing the FCC order, a key question for the U.S. Court of Appeals for the District of Columbia Circuit is whether the commission has the legal authority to impose such obligations. The three-judge panel, which is expected to issue a ruling this spring, appeared skeptical of that on Jan. 8.

Still, in a statement following the oral arguments, Genachowski said he is confident the commission possesses the legal authority it needs “to preserve the free and open internet.”

Comcast had no official comment on the proceedings.

The dispute over network neutrality has pitted some of the country’s leading internet companies, including Google Inc. and the calling service Skype, against the big phone and cable operators.

The internet companies say that without such rules, broadband providers could become online gatekeepers and prioritize traffic for those who can pay extra, while degrading or blocking cheaper internet calling services or online video sites that compete with their core businesses.

Indeed, BitTorrent, the online file-sharing technology blocked by Comcast, can be used to transfer large files such as online video, something that threatens Comcast’s cable TV business. Public interest groups brought Comcast’s actions to the FCC’s attention after the Associated Press ran tests and reported that the cable company was interfering with attempts by some subscribers to share files online.

But broadband providers such as Comcast, AT&T Inc., and Verizon Communications Inc. argue that after pouring billions of dollars into their networks, they should be able to offer premium services to differentiate themselves from competitors and earn a healthy return on their investments.