The Federal Communications Commission has decided not to appeal a controversial court ruling last month that made it legal for Internet providers to slow or block Americans' Web traffic. Instead, federal regulators intend to write new rules on net neutrality based on an expanded reading of the agency's congressional authority.

By early summer, the commission expects to unveil a proposed rule that restores some of the basic ideas behind the FCC's ban on traffic discrimination, a senior agency official told reporters on a conference call Wednesday. The agency also expects to investigate how to reinstate some prescriptions regarding traffic blockages and to enforce existing requirements on carriers to be more transparent about their network practices.

"Innovators cannot be judged on their own merits if they are unfairly prevented from harnessing the full power of the Internet," said FCC chairman Tom Wheeler in a statement.

Last month, a federal court ruled against the FCC's net neutrality regulations, explaining that the commission had tried to impose its order by resorting to legal authority it didn't have. In the ruling, however, the D.C. Circuit court endorsed the spirit of the rules and gave the FCC a path toward implementing them in a way that didn't violate its charter.

Wheeler seems to have seized what he's called the court's "invitation" to act boldly under Section 706 of the Telecommunications Act, which gives the FCC authority to regulate broadband infrastructure deployment. Under the FCC's reading of that statute, the agency can make rules on Web traffic discrimination because of the relationship between the free flow of information and the expansion of new technologies and services.

As it considers rewriting the net neutrality rules to more explicitly rely on Section 706, the FCC will simultaneously keep open the possibility of "reclassifying" broadband providers. Such a step would allow the FCC to regulate ISPs just like it does phone companies, and policy watchers say reclassification would grant the FCC unambiguous authority to regulate broadband providers with a blanket ban on traffic discrimination. Keeping reclassification on the table effectively gives the FCC a nuclear option to use as a deterrent against companies that want to prioritize Internet traffic.

A senior FCC official also hinted Wednesday that the commission would be using its Section 706 authority to investigate state-level laws banning the rollout of city-built broadband networks. Many cities, such as Longmont, Colo., and Chattanooga, Tenn., have tried to construct their versions of Google Fiber and to run them like public utilities — much to the frustration of incumbent cable companies and other large Internet providers that view the upstarts as potential competitors.

Edward McFadden, a Verizon spokesperson, declined to comment on whether the company would be challenging the FCC's new proposed rule.

"Verizon 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," he said in an e-mail. "We have always focused on providing our customers with the services and experience they want, and this focus has not changed."