A US federal court ruled Tuesday that the Internet is effectively a public utility, upholding a hotly contested regulation requiring broadband firms to treat all online traffic equally.

The so-called "net neutrality" principle was upheld in a 2-1 decision by the US Appeals Court panel in Washington, a major ruling in a decade-long legal battle and the first court approval after two past efforts failed.

The ruling deals a setback to major broadband firms like Verizon and AT&T, which claimed the rules unfairly restrict providers and discourage investment.

Judge David Tatel, writing for the majority, said the Federal Communications Commission's decision last year to reclassify Internet firms as "common carriers" that can be regulated like phone companies "is a permissible exercise of its authority."

In a 115-page opinion, Tatel wrote that "the role of broadband providers is analogous to that of telephone companies: they act as neutral, indiscriminate platforms for transmission of speech of any and all users."

Backers of the rule say it is needed to ensure that Internet service providers avoid deals that could favor one service with faster access while throttling or blocking a rival.

Companies such as Netflix, Yelp and Twitter, for example, were backing the FCC rules.

"Now consumers will be assured the right to full access to the Internet without interference from gatekeepers," said Gene Kimmelman of the consumer group Public Knowledge.

- 'Open, fair, free' -

Ed Black of the Computer & Communications Industry Association, which represents various Internet and tech firms, also welcomed the ruling.

"This is a huge, historic victory for all Internet users," Black said.

"It means no company can act as a gatekeeper for Internet content. It ensures that smaller startups and service providers will be able to compete on equal terms for Internet traffic with established companies."

Netflix hailed the decision as "ensuring that providers like Netflix will be able to reach consumers without ISP interference."

President Barack Obama, who has been a backer of net neutrality, welcomed the ruling.

"Today's ruling is a victory for the open, fair, and free Internet as we know it today -- one that remains open to innovation and economic growth, without service providers serving as paid gatekeepers," a White House statement said.

The new rule also applies the concept to mobile Internet carriers, preventing them from blocking or throttling content for competitive reasons.

Two previous FCC rulemaking efforts were tossed out by the appellate court in Washington, but the agency last year tried again with a new twist, applying the 1934 law that regulates phone companies to categorize Internet firms as public utility providers.

In the dissent, Judge Stephen Williams said there was no evidence of monopoly power in broadband, and thus no need for new regulation.

"The ultimate irony of the Commission's unreasoned patchwork is that, refusing to inquire into competitive conditions, it shunts broadband service onto the legal track suited to natural monopolies," Williams wrote.

- More appeals likely -

Cable and Internet providers, which contend the regulation limits their ability to invest and innovate, were expected to appeal the ruling to the US Supreme Court.

"We have always expected this issue to be decided by the Supreme Court, and we look forward to participating in that appeal," said AT&T general counsel David McAtee in a statement.

Berin Szoka, president of the advocacy group TechFreedom, which joined the lawsuit, said the ruling only prolongs a "decade-long melodrama," and pledged to join an appeal to the full appeals court and Supreme Court.

Robert Atkinson, president of the Information Technology & Innovation Foundation, a think tank which opposed the rules, said the reclassification of broadband "was a mistake."

"Common carriage is simply a very poor fit for regulating the rapidly evolving technology that underpins today's broadband networks," Atkinson said in a statement.

Daniel Berninger, a communications architect who heads an activist group called "Tech Innovators," called the decision "a huge step backward" for the Internet.

Berninger, who joined in the appeal, said the opinion was based on "legal gymnastics" and "ignores the reality that the Internet prospered for 20 years without FCC policy intrusions."