By Marcy Gordon, Business Writer

WASHINGTON (AP) --

The Federal Communications Commission says it won't appeal a court decision that struck down rules it designed to ensure that the transmission of all Internet content be treated equally. The agency says it will fashion new rules.

The chairman of the FCC announced Wednesday that the agency will rewrite the anti-discrimination and anti-blocking rules following the ruling by a federal appeals court last month. The ruling said the FCC has the authority to regulate broadband providers' treatment of Internet traffic but the agency failed to establish that its regulations don't overreach.

The court's decision could affect the prices consumers pay to access entertainment, news and other online content.

FCC chairman Tom Wheeler said in a statement the agency will propose new rules to meet the court's requirements.

The FCC's "net neutrality" rules barred broadband providers from prioritizing some types of Internet traffic over others. The directives aligned with the Obama administration's goal of Internet openness. President Barack Obama has said that "net neutrality" is an issue he cares deeply about, partly because his campaign was powered by an Internet free of commercial barriers.

Proponents of net neutrality maintain it ensures a level playing field for big and small companies. They believe it protects consumers and competition, and fosters innovation.

Wheeler said that in writing the new rules, the FCC "will look for opportunities to enhance Internet access competition."

But two Republican commissioners on the five-member FCC panel object to the agency's new plan. Michael O'Rielly said in a separate statement he is "deeply concerned … that the FCC will begin considering new ways to regulate the Internet." O'Rielly's view is that the agency doesn't have legal authority in this area and there is no evidence that consumers are unable to get access to the content of their choice.

Commissioner Ajit Pai said that instead of proposing new rules, Wheeler should seek guidance from Congress. The Internet is free and open as it stands today and net neutrality "has always been a solution in search of a problem," Pai said in his statement.

Comcast Corp., the nation's No. 1 pay TV and Internet provider, praised Wheeler's decision. The FCC chairman "has taken a thoughtful approach which creates a path for enforceable rules," Sena Fitzmaurice, Comcast's vice president for government affairs, said in a statement.

USTelecom, a trade group that represents telephone companies, said it welcomed Wheeler's move but also urged the FCC to work carefully on the rules. The regulations "will have a direct impact on the nature of the Internet, the development of new service offerings, technological innovation and broadband investment," said USTelecom president Walter McCormick.

Verizon Communications Inc. "remains committed to an open Internet that provides consumers with competitive choices and unblocked access to lawful websites and content when, where, and how they want," spokesman Ed McFadden said Wednesday.

Verizon, one of the biggest telecom companies, sued in 2011 to overturn the FCC rules, arguing that the agency overstepped its authority.

The appeals court did affirm that the FCC has the authority to regulate broadband providers' treatment of Internet traffic. In its ruling, the three-judge panel of the appeals court acknowledged concerns that if it overturned the FCC rules, some broadband companies might act to undermine competition.

"For example, a broadband provider like Comcast might limit its end-user subscribers' ability to access the New York Times website if it wanted to spike traffic to its own news website, or it might degrade the quality of the connection to a search website like Bing if a competitor like Google paid for prioritized access," the court said.

The judges said the FCC's rules effectively treated all Internet service providers as common carriers — transporters of people or goods for the general public on regular routes at set rates. Examples of common carriers include airlines, railroads, trucking companies and utilities. At the same time, the judges said, the agency itself already had classified broadband providers as exempt from treatment as common carriers — setting up a legal contradiction. The FCC failed to establish that its rules do not impose common carrier obligations on the Internet companies, the judges ruled.

Some public advocacy groups insist that broadband must be reclassified as a common carrier in order to protect Internet competition.

The court's decision means that leading Internet providers can decide which Internet services — such as Netflix movies, YouTube videos, news stories and more — they allow to be transmitted to consumers over their networks.

In some cases, Internet providers such as Verizon, AT&T and cable companies can demand, for example, that Google pay them to ensure that YouTube videos are accessible to all their consumers, or Google could pay extra to ensure that YouTube videos are delivered faster.

"Pretending the FCC has authority won't actually help Internet users when websites are being blocked or services are being slowed down," said Craig Aaron, president of Free Press, a public-interest group that focuses on the media industry. "If the agency really wants to stop censorship, discrimination and website blocking, it must reclassify broadband as a telecommunications service," he said in a statement.

The revised rules to be proposed by the FCC, as outlined by Wheeler, "would enhance transparency for consumers so they know if and when their Internet service provider is slowing down or blocking online content," said Rep. Anna Eshoo of California, the senior Democrat on the House subcommittee that oversees the FCC.

Netflix Inc., one of the biggest users of Internet bandwidth in the U.S., reportedly is in a dispute with Verizon and other telecom companies over the cost of carrying Netflix's programming over their networks. Those service providers want Netflix to pay more to use their network, according to The Wall Street Journal and other news outlets. The dispute is said to have slowed Netflix's content flow over Verizon's fiber optic network, just as Netflix debuted the second season of its popular "House of Cards" dramatic series.

Comcast last week announced plans to buy Time Warner Cable, another of the biggest broadband companies, for $45.2 billion.

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