The central legal issue before the court is whether the FCC overstepped its regulatory authority in 2015 by reclassifying internet service providers, or ISPs, as "common carriers" under Title II of the Communications Act.
Some of the nation's largest broadband companies have challenged the FCC's policy, calling it "arbitrary, capricious, and an abuse of discretion" that "harms consumers, competition, and broadband deployment."
By changing the way it approaches ISPs, the FCC claimed the authority to apply utility-style regulations originally designed for phone companies to broadband providers in order to prohibit blocking, throttling, and paid prioritization deals, in which ISPs like Comcast, Verizon and AT&T favor certain content, effectively discriminating against rivals.
"Ultimately, what is at stake here is whether cable and broadband providers like Comcast are allowed to manipulate their customers' access to lawful content of their choice, fundamentally distorting the internet as we know it," Kate Forscey, associate counsel for government affairs at DC-based consumer rights group Public Knowledge, said in a statement after FCC and industry lawyers squared off in federal court.
If the FCC loses, it would be a humiliating blow for an agency that has twice seen its net neutrality policy thrown out twice before
Net neutrality, the principle that all content on the internet should be equally accessible, was once an obscure policy topic mostly of interest to tech policy wonks and telecom industry lawyers.
But as the internet has assumed a central role in the economy, spawning an entire generation of multi-billion dollar businesses like Google, Facebook and Twitter, the battle over how best to regulate broadband companies has emerged as an important national policy issue.
Some four million people filed comments with the FCC, most imploring the agency to take a strong hand in ensuring internet openness. The issue gained even greater prominence when President Obama publicly urged FCC Chairman Tom Wheeler to reclassify broadband companies as common carriers, infuriating the industry and its allies on Capitol Hill.
Even as the DC Circuit weighs the legality of the FCC's rules, Republicans in Congress are waging a multi-pronged campaign to undermine them. Last week, GOP lawmakers defied a veto threat from Obama to pass a bill that net neutrality supporters say would torpedo the FCC's rules.
Open internet advocates argue that without net neutrality, the emergence of the next Netflix or Skype might be threatened, because broadband providers could degrade such services or favor their own rival offerings.
In a legal brief filed with the court, Engine, a non-profit group that advocates on behalf of startups, wrote that without FCC rules prohibiting blocking, throttling and paid prioritization, "the internet, which has been an engine of growth, employment, and innovation in our country for the past two decades, would become a fractured and inhospitable environment for entrepreneurship and technological innovation."
Open internet advocates also say that the FCC's policy is necessary to maintain the internet as a vibrant platform for political speech, organizing and activism.
"The public interest in an open, neutral platform for the free exchange of ideas is a collective interest of the highest order," Sascha Meinrath, director of tech policy think tank X-Lab, and Zephyr Teachout, a Fordham law professor and longtime net neutrality advocate, wrote in a legal brief to the court.
"A neutral platform is particularly important for dissidents, those with unusual political ideas, groups who would challenge governmental choices, and activists who want to challenge concentrated private power."
Net neutrality opponents argue that the FCC's policy has stifled private broadband investment—open internet advocates dispute such claims—and amounts to a federal government "takeover" of the internet.
"Congress never envisioned entrusting the FCC with the extraordinary authority that the order purports to exercise or subjecting the internet to intrusive central-planner-style oversight," USTelecom, an industry trade group, wrote in a legal brief challenging the FCC's policy.
The court's ruling will not be the last word on net neutrality, which has been the subject of legal and regulatory wrangling for more than a decade.
If the FCC loses, it would be a humiliating blow for an agency that has twice before seen its net neutrality policy thrown out, and regulators would be forced back to the drawing board. If the FCC prevails, the broadband industry could appeal the decision to the Supreme Court, or increase pressure on Congress to pass legislation striking down the agency's policy.
Net neutrality advocates are optimistic that the court will rule in their favor, in part because the DC Circuit essentially provided the FCC with a roadmap to strong legal footing when it threw out earlier net neutrality rules in 2014, saying the agency lacked the authority to enforce them. In that case, the court said the FCC would be on firmer legal ground if it reclassified broadband companies as common carriers, which is exactly what the agency did.
"In the current case the agency got it right," Matt Wood, policy director at DC-based public interest group Free Press, said in a statement after oral arguments. "They returned to the solid foundation of the law in Title II, crafted strong safeguards built on that foundation, and restored protections for the open communications network that powers our democracy and our economy."
The court heard legal arguments in the case last December and is expected to issue a ruling as early as Tuesday.