A federal appeals court ruled that the FCC exceeded its authority in attempting to enforce “network neutrality” rules aimed at preventing Internet providers from favoring certain types of traffic over others.

The crux of the ruling is explained in this key passage from Tuesday’s decision by the U.S. Court of Appeals for the District of Columbia:

Even though the Commission has general authority to regulate in this arena, it may not impose requirements that contravene express statutory mandates. Given that the Commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the Commission from nonetheless regulating them as such. Because the Commission has failed to establish that the anti-discrimination and anti-blocking rules do not impose per se common carrier obligations, we vacate those portions of the Open Internet Order.

Net neutrality is a policy intended to support efficiency and freedom on the Internet requiring its backbone providers to move data packets across the network without favoritism, thereby making the Internet as a whole “neutral” in a sense.

By forcing governments and Internet service providers to treat all Internet data equally, net neutrality allowed consumers to access any Internet data via PC, phone, or tablet without restriction. Internet service providers couldn’t arbitrarily slow or block traffic data, which companies like AT&T have done in the past for the sake of managing traffic congestion or experimenting with new business models to increase demand.

In 2010, the FCC introduced the Open Internet Order, which officially attempted to regulate Internet service providers (ISPs) from preventing access to competitors or certain websites that required heavy bandwidth, thus preventing those telecom companies for charging more for faster access. A year later, the FCC released its final net neutrality rules for “Preserving a Free and Open Internet.”

Tuesday’s ruling was a response to Verizon’s challenge of the Open Internet Order—not the order itself, but the FCC’s “affirmative statutory authority to promulgate the rules.” In the end, the appeals court cited a variety of court cases including a 2002 decision in Ragsdale Vs. Wolverine World Wide, Inc., to support its decision that the FCC doesn’t have the jurisdiction or authority to enforce the Open Internet Order, thereby invalidating several key portions of the rules. Furthermore, the court said the FCC’s restrictions are unnecessary since consumers have a choice of ISPs.

“Regardless of how serious the problem an administrative agency seeks to address … it may not exercise its authority in a manner that is inconsistent with the administrative structure that Congress enacted into law,” the appeals court said.

The decision to invalidate the Open Internet Order, and thus, several key facets of net neutrality, has major implications for business. The decision is a major victory for telecom companies that have fought tooth and nail for years to overturn net neutrality restrictions.

The ruling may also impact the general freedom of the Internet and the way in which it’s used—to access information and entertainment, to innovate without meddlesome regulators, and to give a level playing field for all companies to compete equally. The court’s ruling doesn’t necessarily kill the concept of net neutrality—just the ability of the FCC to enact laws and policies that govern net neutrality. Which may be enough.

Top image courtesy of Shutterstock; lower image via Reuters