Net neutrality was the Obama administration's top campaign pledge to the technology industry and a major priority of the current FCC chairman, Julius Genachowski.

Net neutrality was the Obama administration's top campaign pledge to the technology industry and a major priority of the current FCC chairman, Julius Genachowski.

In the latest development in the fight over so-called “net neutrality” regulations, House Democrats have shelved a last-ditch effort to broker a compromise between phone, cable, and internet companies on rules that would prohibit broadband providers from blocking or degrading online traffic flowing over their networks.

House Commerce Committee Chairman Henry Waxman, D-Calif., abandoned the effort late on Sept. 29 in the face of Republican opposition to his proposed net-neutrality rules. Those rules were intended to prevent broadband providers from becoming online gatekeepers by playing favorites with traffic.

The battle over net neutrality has pitted public interest groups and internet companies such as Google Inc. and Skype against the nation’s big phone and cable companies, including AT&T Inc., Verizon Communications Inc., and Comcast Corp.

Public interest groups and internet companies say regulations are needed to prevent phone and cable operators from slowing or blocking internet phone calls, online video, and other web services that compete with their core businesses. They also want rules to ensure that broadband companies cannot favor their own online traffic or the traffic of business partners that can pay for priority access.

Many higher-education technology officials also support net-neutrality rules to ensure that smaller institutions without massive technology budgets are on a level playing field with their larger counterparts in being able to deliver online content to students.

But the phone and cable companies insist they need flexibility to manage network traffic so that high-bandwidth applications don’t hog capacity and slow down their systems. They say this is particularly true for wireless networks, which have more bandwidth constraints than wired systems. The communications companies also argue that after spending billions to upgrade their networks for broadband, they need to be able earn a healthy return by offering premium services. Burdensome net-neutrality rules, they say, would discourage future investments.

Waxman’s proposal, the product of weeks of negotiations, attempted to carve out a middle ground by prohibiting internet traffic discrimination over wireline networks while giving broadband providers more leeway when it comes to managing traffic on wireless networks. The plan would have allowed the Federal Communications Commission to impose fines of up to $2 million for net-neutrality violations, but it would not have given the FCC the authority to make new rules regarding broadband providers.

If that sounds familiar, it should: It bears a strong resemblance to a compromise plan on net neutrality released by Google and Verizon in August, to great dismay from public interest groups.

For the broadband companies, Waxman’s retreat is a setback. They fear the issue could now go back to the FCC, which deadlocked over the matter in August. The commission could impose more restrictive rules on the industry than a House compromise would have.

“If Congress can’t act, the FCC must,” Waxman said in a statement. He added that “this development is a loss for consumers.”

Net neutrality was the Obama administration’s top campaign pledge to the technology industry and a major priority of the current FCC chairman, Julius Genachowski, a key architect of Obama’s technology platform. But frustration is growing—particularly among public interest groups—as the debate has dragged on over the past year without resolution either at the FCC or in Congress.

Waxman’s proposal, in part, fell victim to today’s political climate, with Republicans hoping to rack up gains in the upcoming midterm elections apparently unwilling to help Democrats make progress on such a contentious issue. With an anti-government, anti-regulation sentiment sweeping the nation—and boosting Tea Party candidates—Republicans also were reluctant to support a proposal that opponents equate to regulating the internet.

Yet, in what would have been a big victory for the phone and cable companies, Waxman’s proposal would have headed off an effort by Genachowski to redefine broadband as a telecommunications service subject to “common carrier” obligations to treat all traffic equally.