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UPDATE 2-U.S. appeals court strikes down FCC net neutrality rules

WASHINGTON, Jan 14 (Reuters) - A U.S. appeals court has struck down the government's latest effort to require internet providers to treat all web traffic equally, meaning mobile carriers and other broadband providers may reach agreements for faster access to specific content crossing their networks. The Federal Communications Commission's open Internet rules, passed in late 2010, require internet providers to treat all Web traffic equally and give consumers equal access to all lawful content, a principle known as net neutrality. But the FCC lacked legal authority to enact the regulations, the U.S. Court of Appeals for the District of Columbia Circuit ruled on Tuesday, siding with Verizon Communications Inc that challenged the rules. Verizon has argued the rules violated the company's right to free speech and stripped control of what its networks transmit and how. "Even though the commission has general authority to regulate in this arena, it may not impose requirements that contravene express statutory mandates," Judge David Tatel said. The FCC has classified broadband providers as information service providers as opposed to telecommunications service providers and that distinction created a legal hurdle for the FCC to impose the net neutrality rules. FCC Chairman Tom Wheeler on Tuesday said the agency was considering "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." The FCC could appeal the ruling to the full appeals court or to the U.S. Supreme Court. Or it could attempt to rewrite the regulations to clear up its authority over broadband providers - a move urged by consumer advocacy groups. Supporters of the rules worry that without FCC's rules, internet providers such as Verizon or Comcast Corp would be free to charge websites for faster access to their content or slow down or even block access to particular sites. "That's just not the way the internet has worked until now," Matt Wood, policy director at public interest group Free Press, told Reuters. But opponents say the rules inhibit investments, represent government meddling in free Internet and are not necessary to ensure open access to the Internet. "Today's decision will not change consumers' ability to access and use the Internet as they do now," Randal Milch, Verizon's general counsel and executive vice president for public policy, said in a statement. "Verizon has been and remains committed to the open Internet which provides consumers with competitive choices and unblocked access to lawful websites and content when, where, and how they want. This will not change in light of the court's decision," Milch said. Similarly, the Broadband for America coalition representing various internet service providers and CTIA, the wireless industry association, pledged commitments to an open Internet. Major content providers Netflix Inc and Google Inc who may face new hurdle referred inquiries to the Internet Association representing them. "The Internet Association supports enforceable rules that ensure an open Internet, free from government control or discriminatory, anticompetitive actions by gatekeepers," the group's President and CEO Michael Beckerman said. Facing strong resistance from Republicans, Democratic lawmakers on Tuesday pledged to help FCC redraft its rules to regain authority over broadband providers.

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