The Federal Communications Commission does not have the legal authority to slap net neutrality regulations on internet providers, a US federal appeals court has ruled.

A three-judge panel in Washington, DC unanimously tossed out the FCC's August 2008 cease and desist order against Comcast, which had taken measures to slow BitTorrent transfers and had voluntarily ended them earlier that year.

"We must decide whether the Federal Communications Commission has authority to regulate an Internet service provider's network management practices," wrote Judge David Tatel of the US Court of Appeals for the DC Circuit in his 36-page opinion.

"The Commission may exercise this 'ancillary' authority only if it demonstrates that its action – here barring Comcast from interfering with its customers' use of peer-to-peer networking applications – is 'reasonably ancillary to the...effective performance of its statutorily mandated responsibilities.'"

Because the FCC "has failed to tie its assertion" of regulatory authority to any actual law enacted by Congress, the agency does not have the authority to regulate an Internet provider's network management practices, wrote Judge David Tatel of the U.S. Court of Appeals for the D.C. Circuit.

This could be the end of any US-based initiative for a formal set of net neutrality rules. That initiative had yet to get off the ground as there was limited legislative support and some FCC commissioners, such Robert McDowell, a Republican, believed that the initial FCC's ruling was unlawful and the lack of legal authority "is sure to doom this order on appeal."

In 2006, the US Congress rejected five bills, backed by groups including Google, Amazon.com, Free Press, and Public Knowledge, intended to give the FCC the power to police net neutrality violations. However, the political leadership on both sides of the aisle has shown little interest those proposals.

Debate will now shift to whether or not Congress will choose to explicitly grant the FCC the authority to regulate companies' network management practices. It will also likely add fuel to lobbying coalitions that have been dormant for the last few years.