A Federal Appeals Court has ruled that the Federal Communications Commission (FCC) does not have the right to enforce network neutrality rules.
In a 3-0 ruling, the Court for the District of Columbia Circuit found that the FCC lacked the authority to force internet service providers (ISPs) to treat all internet traffic evenly.
The ruling means that ISPs such as Comcast can limit the speed of certain applications such as peer-to-peer.
"The FCC may exercise this 'ancillary' authority only if it demonstrates that its action is 'reasonably ancillary to the effective performance of its statutorily mandated responsibilities'. The FCC has failed to make that showing, " said the ruling.
The news is a huge blow for those wanting to see net neutrality enshrined in US telecoms practice. The FCC, and its new chairman Julius Genachowski, are pushing for net neutrality to be made a legal obligation, but the telecoms companies are fighting every step of the way.
"The FCC is firmly committed to promoting an open internet and to policies that will bring the enormous benefits of broadband to all Americans," said FCC spokeswoman Jen Howard.
"It will rest these policies, all of which will be designed to foster innovation and investment while protecting and empowering consumers, on a solid legal foundation.
"Today's court decision invalidated the FCC's approach to preserving an open internet. 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."
The ruling is likely to prompt more ISPs to throttle traffic, and will generate renewed calls for a legal right to open internet access.
"Today's Appeals Court decision means there are no protections in the law for consumers' broadband services," said Gigi Sohn, president of think-tank Public Knowledge.
"Companies selling internet access are free to play favourites with content on their networks, to throttle certain applications or simply to block others.
"The FCC should immediately start a proceeding bringing internet access service back under some common carrier regulation similar to that used for decades.
"No one is talking about 'regulating the internet'. We are talking about reapplying policies to a telecoms service that the FCC incorrectly abandoned."
Engineer calculates that Chengdu's plan to replace streetlights with artificial moonlight would cost $100bn
Dark matter holds the Universe together - and gravitational waves could help identify it
Addison Lee is working on autonomous taxis for commuting and pleasure
IBM and Technical University of Munich team demonstrate how Shor's algorithm, which can't be cracked by conventional computers, can be solved quickly with quantum computing