The U.S. Appeals Court for the D.C. District struck down the FCC's so-called Net Neutrality rules, siding with Verizon Communications that the commission overstepped its legal authority in a ruling Tuesday.

In the 81-page ruling, the court said the FCC did not have the legal authority to adopt the 2011 regulations. The court said that even though the commission has general authority to regulate broadband, "it may not impose requirements that contravene express statutory mandates."

The decision has broad implications for Internet businesses of all kinds, including Google, Yahoo, Netflix, Amazon.com, Apple and others. The ruling for now establishes that government regulators can't dictate how Internet service providers manage their networks and how they choose to prioritize data.

The FCC's Open Internet Order, adopted by the agency in December 2010, forbids Internet service providers from blocking or degrading traffic based on source. Verizon promptly filed a legal challenge to the rules, alleging the commission did not have authority to impose them -- and on Tuesday, the federal appeals court agreed.

In a statement, FCC chairman Tom Wheeler accentuated the parts of the ruling that were favorable to the commission. "The D.C. Circuit has correctly held that 'Section 706 (of the Communications Acts)... vests (the commission) with affirmative authority to enact measures encouraging the deployment of broadband infrastructure' and therefore may 'promulgate rules governing broadband providers' treatment of Internet traffic,'" he said.

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Wheeler continued, "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. 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."

The appeals court said that because the FCC has chosen to classify broadband providers in a way 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."

In 2010, the appeals court ruled against the FCC's previous broadband-management rules, in a challenge mounted by Comcast. In that case, the court said the commission had "failed to cite any statutory authority that would justify its order compelling a broadband provider to adhere to open network management practices."

Ted Johnson contributed to this report.

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