Before the FCC moves ahead with any net-neutrality proposal, it must establish its authority to regulate broadband.

Before the FCC moves ahead with any net-neutrality proposal, it must establish its authority to regulate broadband.

Verizon Communications and Google Inc. have crafted a joint policy proposal they hope can serve as a framework for Congress and the Federal Communications Commission in drafting so-called “net neutrality” rules to ensure that phone and cable providers cannot favor their own services or discriminate against certain kinds of internet traffic that compete with their core businesses. But several public-interest groups have decried the proposal, saying it would lead to a two-tiered system of internet use that favors large organizations over smaller competitors.

Phone and cable TV companies that provide internet access should be barred from slowing down, blocking, or charging to prioritize internet traffic flowing over their regular broadband lines, Verizon and Google said in a policy statement released Aug. 9. But the companies left room for broadband providers to charge extra to route traffic from premium services over dedicated networks that are separate from the public internet.

Although broadband providers such as Verizon and internet-content companies such as Google are at opposite ends in the increasingly bitter debate over such rules, the two companies have been in talks for months to try to identify common ground.

Their proposal comes just days after the FCC declared an impasse in negotiations to craft an industry-wide compromise on the thorny issue. FCC Chairman Julius Genachowski is seeking to adopt net-neutrality rules that would ensure that broadband subscribers could readily access all legal online content, applications, services, and devices.

The proposal from Google and Verizon would give the FCC authority to enforce those rules for wired networks by prohibiting broadband providers from discriminating against or favoring internet traffic. The proposal would allow the agency to impose a penalty of up to $2 million on companies that violate the rules. Wireless carriers, which have more capacity constraints, would not be subject to the restrictions, although they would have to disclose their network management practices.

In a conference call with reporters, Google CEO Eric Schmidt and Verizon CEO Ivan Seidenberg said their proposal would preserve the openness of the internet, but still give phone and cable TV companies room to experiment with “managed” services that could send online video, games, and other bandwidth-hungry applications over separate systems.

Jen Howard, a spokeswoman for Genachowski, had no comment about the companies’ proposal.

But several public-interest groups were quick to denounce it. In a statement, Free Press Political Adviser Joel Kelsey said the plan would “transform the free and open internet into a closed platform like cable television” and “lead to toll booths on the information superhighway.”

Gigi B. Sohn, president and co-founder of the group Public Knowledge, added that the proposal “sacrifices the future of the mobile wireless internet as this platform becomes more central to the lives of all Americans.”

Higher-education technology officials also have voiced concerns. IT decision makers at colleges and universities have said that charging more for so-called “premium” services–such as sending internet video over a separate network–could undermine major strides in providing educational content online, especially for smaller institutions (such as community colleges) without massive technology budgets.

Public-interest groups were particularly disappointed with Google, which has led the push in recent years for strict net-neutrality rules that would require broadband providers to give equal treatment to internet traffic.

Net-neutrality supporters argue that this encompasses more than just barring phone and cable companies from blocking or degrading traffic. They also insist that broadband providers should not be able to charge extra for priority access on their systems, because doing so would create a two-tiered internet with a fast lane for online companies that can pay more and a slow lane for everyone else. The proposal outlined by Verizon and Google, they say, violates this principle.

But Schmidt rejected this point, stressing that the proposal would not allow any paid prioritization of traffic over the public internet.

“Google cares a lot about the open internet,” he said. “The open internet made it possible for our two founders … to turn a very powerful idea into this phenomenal business that Google represents today.”

Verizon and other internet providers, meanwhile, maintain that onerous net-neutrality rules would discourage them from continuing to invest in their systems. After spending billions to upgrade their lines for broadband, they say, they should be able to operate those systems as they see fit and earn a healthy return by offering premium services.