U.S. Court of Appeals Overturns Net Neutrality

In a ruling published Tuesday, a Washington D.C. court struck down portions of the Federal Communications Commission's rules.

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By Catherine Clifford

Opinions expressed by Entrepreneur contributors are their own.

A U.S. court has overturned portions of the Federal Communications Commission's contentious net neutrality rules, saying the FCC does not have the authority to dictate to wireless carriers what they can charge to whom and when.

The decision was handed down today by the U.S. Court of Appeals for Washington, D.C. The case was brought by Verizon, which claimed the FCC's "decision to impose the rules was arbitrary and capricious," the ruling says.

The idea of "net neutrality" is also called "open internet" because it argues that no government or company can regulate the flow of the internet. Advocates say that if left without regulation, large service providers will give preferential treatment to larger companies that can pay more. Meanwhile, smaller tech companies without deep, corporate pockets, will not be able to compete for premium service.

Related: Understanding Net Neutrality and Anti-Government Regulation

Chairman of the FCC Tom Wheeler says that the ruling could stifle innovation and that he will do what he can to keep the internet open and competitive.

"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," Wheeler said after the decision was announced Tuesday. "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."

Meanwhile, Craig Aaron, president and CEO of the net neutrality advocacy group Free Press also voiced dissatisfaction with the ruling, saying it allows phone and cable companies to "block and discriminate" against their customers' communications. "Now, just as Verizon promised it would in court, the biggest broadband providers will race to turn the open and vibrant Web into something that looks like cable TV. They'll establish fast lanes for the few giant companies that can afford to pay exorbitant tolls and reserve the slow lanes for everyone else."

Related: Privacy of Location-Based Services on FCC's Radar

A trade group known as The Internet Association, which counts Google, Facebook, Amazon and eBay among its members, said it would work with both the FCC and lawmakers on Capitol Hill to prevent "anticompetitive actions by gatekeepers."

"The internet creates new jobs, new technologies, and new ways of communicating around the globe. Its 'innovation without permission' ecosystem flows from a decentralized, open architecture that has few barriers to entry. Yet, the continued success of this amazing platform should not be taken for granted," the group said in a statement.

Meanwhile, Verizon maintains that the ruling does not change its own corporate commitment to an open internet. "One thing is for sure: today's decision will not change consumers' ability to access and use the internet as they do now. The court's decision will allow more room for innovation, and consumers will have more choices to determine for themselves how they access and experience the internet," Verizon's general counsel of public policy, law and security, Randal Milch, said after the ruling was handed down. Milch also said that Verizon would cooperate with both Congress and the FCC.

AT&T, pointing to a statement from the Broadband for America organization, also said that it continues to "believe passionately in the Open Internet" as laid out by the FCC in 2004, despite today's ruling from the Court. Also, the statement from the organization, which AT&T is a member of, says that over regulating the service providers has the potential to create "adverse impact" on consumer choice for services in the future.

Related: Tech Entrepreneurs Sign 'Declaration of Internet Freedom' Petition

Catherine Clifford

Senior Entrepreneurship Writer at CNBC

Catherine Clifford is senior entrepreneurship writer at CNBC. She was formerly a senior writer at Entrepreneur.com, the small business reporter at CNNMoney and an assistant in the New York bureau for CNN. Clifford attended Columbia University where she earned a bachelor's degree. She lives in Brooklyn, N.Y. You can follow her on Twitter at @CatClifford.

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