Appeals court to hear challenge to FCC's net neutrality rules

A three-judge U.S. appeals court panel on Friday will consider whether the Federal Communications Commission's (FCC) net neutrality rules are legal, hearing arguments from major cable and telecommunications trade associations and AT&T Inc.

The fight is the latest challenge to Obama administration rules requiring broadband providers to treat all data equally, rather than giving or selling access to a Web fast lane.

Such so-called net neutrality is a major issue for broadband providers like Verizon Communications Inc, Comcast Corp and others who fear the rules may make it harder to manage Internet traffic and make it less likely providers will invest to provide additional capacity. It is also a major issue for content providers like Netflix Inc to Yelp Inc who fear that they could see access to customers limited without net neutrality.

The appeals court has ruled twice against the FCC since 2010, and Judge David Tatel, who wrote both opinions, is on the panel sitting on Friday. He is joined by judges appointed by presidents Barack Obama and Ronald Reagan.

They will consider FCC rules set in February that bar "blocking, throttling, and paid prioritization" by broadband providers.

An open Internet spurs innovation and helps improve broadband infrastructure, the FCC argued, saying network companies ploughed $230 billion into the Web over 2011-2013, when open Internet rules were in effect.

But supporters of broadband providers in a legal brief called the rules "a naked effort by the agency to achieve its desired result." The FCC has classified the Internet as a utility, but broadband providers argue regulators "can't interpret the term 'land vehicles' to include 'boats.'"

Legal experts are divided about how the court may rule.

Former FCC Commissioner Robert McDowell, who served from 2006-2013, said the FCC "overreached" and argued the court was "highly likely" to overturn the FCC decision.

Cardozo law professor Michael Burstein, who filed briefs in support of the FCC, said the case won't hinge on whether net neutrality is a good or bad idea but on whether the agency had the authority to make the rules and if they violate the First Amendment.

Judge Tatel wrote the majority opinion in 2010 ruling against the FCC after it cited Comcast for slowing Internet traffic speeds to some customers who were downloading very large data files from peer-to-peer networks.

The FCC then issued new rules that blocked broadband providers from slowing or discriminating against Internet traffic and Tatel wrote the opinion that blocked those rules in 2014.

Congress has considered writing its own rules on net neutrality but hasn't voted on any proposals. The appeals court ruled in 2014 that the FCC had used the wrong legal reasoning to issue the rules, but said without net neutrality "broadband providers represent a threat to Internet openness."

The net neutrality rules are backed by the American Civil Liberties Union, library groups and companies including Twitter Inc, Medium, Yelp, Reddit. The companies filed a joint legal brief warning freedom of speech online "is at risk if broadband providers get to block or limit access to those voices they decide to disfavor - and that is exactly what petitioners are fighting for the right to do."

(Reporting by David Shepardson; Editing by Christopher Cushing)