The Federal Communications Commission, a government agency with U.S. jurisdiction to regulate interstate and international communications, has no authority over how Internet service providers manage their bandwidth.

This is according to a Federal appeals court ruling issued today in a case that net neutrality proponents say will continue to take control of Internet content away from online users.

In Comcast v. FCC, the U.S. Court of Appeals of D.C. reigned in the agency for relying on an expansive view of a supplemental – or ancillary — section of the Communications Act of 1934 to exercise authority over the network management practices of Comcast and other ISP’s.

“The (FCC) maintains that congressional policy by itself creates ‘statutorily mandated responsibilities’ sufficient to support the exercise of…ancillary authority,” the court noted. “Not only is this argument flatly inconsistent with (other rulings), but if accepted it would virtually free the Commission from its Congressional tether.”

The court said the FCC had failed to sufficiently prove any legal authority to manage Comcast’s Internet service and struck down a 2008 Agency order.

In an April 6 statement, the FCC responded to the ruling by saying it wants to bring broadband access to all Americans and will continue to develop policies on a solid legal foundation.

“Today’s court decision invalidated the prior Commission’s approach to preserving an open Internet,” said FCC spokeswoman Jen Howard. “But the Court in no way disagreed with the importance of preserving a free and open Internet – nor did it close the door to other methods for achieving this important end.”

FCC Commissioner Michael J. Copps said the ruling is a blow not just to the agency, but to all Americans who rely on an open Internet that does not discriminate by users.

“The only way the Commission can make lemonade out of this lemon of a decision is to do now what should have been done years ago,” Copps acknowledged, “treat broadband as the telecommunications service that it is.”

The FCC said it will seek to clarify the broadband classification before the first day of summer, “in order to stand on solid legal ground in safeguarding the benefits of the Internet for American consumers.”

Comcast’s legal challenge resulted from a prior FCC order dealing with how the corporation was interfering with the use of peer-to-peer (P2P) networking applications by its subscribers.

In 2007, the Associated Press conducted nationwide tests and alleged that Comcast was engaging in “data discrimination” by interfering with high-speed Internet subscribers’ practice of sharing files online through P2P applications.

Comcast acknowledged that it did use “sophisticated” methods to manage its network, but did not block specific applications.

Two non-profit advocacy groups challenged Comcast’s network management practices in a complaint to the FCC, by claiming the actions violated the agency’s “Internet Policy Statement.”

The FCC ruled that Comcast had “significantly impeded consumers’ ability to access the content and use the applications of their choice,” and said the company’s actions had conflicted with federal policy designed to encourage net neutrality.

In the Appeals lawsuit, Comcast successfully argued the FCC did not have jurisdiction over how it managed bandwidth.

“Peer-to-peer programs allow users to share large files directly with one another without going through a central server,” the Appeals court ruling today observed. “Such programs also consume significant amounts of bandwidth.”

The court said while Congress had given the FCC broad powers to keep pace with rapidly evolving technologies, “the exercise of delegated powers is not the equivalent of untrammeled freedom to regulate activities over which the statute fails to confer…Commission authority.”

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