A U.S. federal appeals court ruled Tuesday that the Federal Communications Commission (FCC) doesn't have the authority to enforce net neutrality rules on internet service providers.

Comcast, the largest cable company and home internet service provider in the U.S., had challenged the FCC's authority to impose the rules.

Comcast had challenged the FCC's authority to impose net neutrality rules on internet service providers. (Matt Rourke/Associated Press)

The FCC's net neutrality rules would require broadband internet providers in the U.S. to give equal treatment to all internet traffic over their networks.

The ruling by the U.S. Court of Appeals for the District of Columbia is a setback for the FCC, which views net neutrality as a cornerstone of its national broadband plan, released last month. The commission is seeking to expand broadband to poor and rural communities in the U.S.

FCC chairman Julius Genachowski said net neutrality rules are needed to keep internet service providers from using traffic shaping technology to favour some online content and service over others.

The decision overturns a 2008 FCC order that Comcast stop blocking its customers' access to the peer-to-peer file sharing technology BitTorrent.

The company argued that BitTorrent traffic was putting too much of a burden on its broadband network and was slowing other customers' connections.

The FCC had based its order on a set of net-neutrality rules it adopted in 2005 to prevent internet providers from deciding which parts of the internet their customers would be able to reach or from providing tiered service — in which some internet content could be downloaded faster than others.

Comcast argued that the net neutrality rules were policy principles that didn't have the force of law or of FCC regulations.

The FCC said net neutrality is needed to prevent internet service providers from blocking or limiting access to online service that could be at odds with their own business models, such as online video or file downloading in the case of cable companies, or voice over internet services in the case of phone companies.

Technology companies such as internet search leader Google, online retailer Amazon and voice over internet provider Skype have all come out in favour of net neutrality.

With files from The Associated Press