In a decision with enormous potential consequences, the U.S. Court of Appeals for the District of Columbia Circuit has ruled.that the Federal Communications Commission does not have authority to regulate broadband services.

The decision came after Comcast appealed the FCC’s censure of Comcast for traffic shaping of BitTorrent services in 2008. Comcast filed suit, arguing that the FCC does not have the authority to do so, and the federal appeals court agrees.

The ruling means that, in fact, the FCC does not have authority to regulate broadband access services. That victory for Comcast carriers enormous consequences, though. The FCC might not have any authority to pursue other broadband initiatives at all, including elements of its “National Broadband Plan” or imposition of any rules relating, in any way, to network neutrality.

The full text of the ruling is not yet available, but the decision potentially sets in motion a new direction in broadband regulation by the FCC, which now must either get new legislative authority from the Congress to regulate broadband services, or must take a potentially-divisive alternative approach: attempting to regulate broadband services as “common carrier” services.

The FCC has been aware for some time that it might lose the case, and has been looking for alternatives to the time-consuming and possibly unobtainable new legistlative authority from the Congress. It may try to re-regulate broadband access as a common carrier service, which will ignite a ferocious new war between regulators and private industry.

Up to this point, broadband access always has been regulated as a “Title I” data service, meaning the FCC has no authority to set rates or other rules such as terms of service. The FCC has been saying it would consider attempting to classify broadband access as a “Title II” common carrier service, which would allow the FCC to regulate rates and conditions and terms of service.

That would set off a nuclear war between the FCC and telecom and possibly cable companies, who would feel compelled to fight the change with every weapon at their disposal. Should the FCC ultimately prevail, the nation will face years of ruinous lawsuits, bringing new broadband investment to a grinding halt as private investment drys up.

The FCC can appeal the decision, but the big question now is whether it is willing to risk nuclear war with the telecom and cable industries.

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