A Senate panel on Thursday took up legislation that aims at settling an intensifying debate between the corporations that own the lines that bring Internet service to millions of homes and offices and the companies that enable people to use those services.

The outcome could affect the pocketbook of virtually everyone who taps into the World Wide Web.

The debate comes down to two sides: Web content providers like Google, eBay, Microsoft and consumer advocacy groups who say the federal government needs to insure the Internet is equally available to everyone, and telecom firms like AT&T and Verizon, who want to set a system of fees to charge more to people who create or use the heaviest amount of content -- like streaming video products -- that take up the widest bandwidth on the Web.

Telecommunication firms "would have control over which bits flowed over their network to the consumer," said Consumer Federation of America research director Mark Cooper, who is seeking "net neutrality" regulations. "You will lose your freedom to choose service ... That will erode competition in the application and content market, [which include] the people who think about neat things to do on the Internet."

"The current system that's in place, the status quo ... it's not sustainable as the Internet evolves," said AT&T spokeswoman Claudia Jones, who argues an as-yet undefined payment system will create a more efficient Internet.

"I mean, it was fine maybe 10 years ago," but with government intervention "companies won't be able to manage their networks," she said.

New Era, New Ideas

The last major overhaul of the Communications Act was in 1996. Since then, the Internet has exploded, affecting every major industry and the way people lead their lives.

In September, the Federal Communications Commission adopted a set of principles that says consumers are entitled to access lawful Internet content and applications of their choice. They are also entitled to competition for Internet-related services. The principles don't carry the weight of full legislation, but the statement says the FCC will use them in weighing its policy decisions.

The House earlier this month defeated an amendment by Rep. Ed Markey, D-Mass., to the Communications Opportunity, Promotion and Enhancement Act of 2006. Among other things, the amendment would have created new rules defining "net neutrality" and prevented companies from picking and choosing who is charged for heavier Internet use.

On Thursday, the Senate Commerce, Science and Transportation Committee weighed a bill sponsored by Chairman Ted Stevens, R-Alaska, that tries to strike a balance between competing interests. A separate proposal by Sens. Olympia Snowe, R-Maine, and Byron Dorgan, D-N.D., that closely mirrors Markey's amendment has not yet been considered by the panel.

Telecoms executives steer clear of the words "net neutrality," calling them loaded. But they do say government intervention will hurt the ability to expand the Internet's potential, and the best way to foster the Internet's growth is to let the market decide the best business model to achieve that.

"We're not going for the dumb pipe scenario where you build this huge pipe that needs to be bigger and bigger and bigger" to serve everyone's needs, Jones said. "What we're going for is building a network that we'll call a smart network."

She said her firm is considering a system that would enable instances where a faster network would clearly benefit certain people. In addition to live streaming video, for instance, an emergency room patient might want to make his or her medical records available online.

"I'd rather have my medical files, if I need my medical files, delivered far faster in an emergency than [data requested by] a teenager downloading a music file," Jones said.

Economist Larry Darby, who was a civil servant in the FCC during the Ford and Carter administrations, said consumers actually would be hurt by tougher rules set by the government.

In a study Darby prepared, released this month by the American Consumer Institute, he estimates that consumers would be worse off by $24 billion to $32 billion if the government imposed net neutrality regulations because individuals would be picking up the tab for the heavy content providers.

"Nobody wants to foot the bill [but] we all want the benefits," Darby told reporters during a phone conference this week. He added that all the beneficiaries — not just the subscribers, but folks like Google and eBay — should share the cost of the Internet, which will encourage improvements to it faster than if only subscribers had to pay the bill.

Furthermore, he said government action would likely be ineffective.

"It is naive to suggest that the FCC can timely or sufficiently provide rates and set them," Darby said, adding that while free speech is a legitimate concern, "I frankly don't see the connection" between free speech concerns and net neutrality arguments.

American Consumer Institute President Stephen Posciak added that he thinks the plans being pushed by the telecoms could help foster free speech, rather than deter it, by giving subscribers price relief.

But net neutrality advocates say the public will end up on the short end of the stick without a heavier government hand to keep an eye on the telecoms. They argue that if broadband providers discriminate by price, those who can't afford the more expensive service could lose vital access to tools that so far has been available to everyone.

"They maximize their profits by rationing scarcity," Cooper, of the Consumer Federation of America, said of the telecoms. "There's not enough competition to protect the common interest of the consumer."

Cooper said if the AT&Ts of the world got their way, they'd be able to dictate who could access which sites, and would force everyone to negotiate with the telecoms if they want to provide high-speed content. That, he said, would be bad for consumers.

"The Internet is about speech, and ... speech requires a higher level of protection," Cooper said.

Furthermore, U.S. business interests would likely be hurt without net neutrality regulations, Google Vice President Vinton Cert told the Senate Judiciary Committee last week.

"Allowing the interests of network owners wielding market power to shackle the Internet with discriminatory and anti-competitive conduct could severely undercut our nation's ability to compete effectively in the global market," Cerf said.

Dan Hunter, an associate professor of legal studies at the University of Pennsylvania's Wharton School of Business, said people with less money will certainly be marginalized by a rate structure that provides better access to those who pay, but that may not matter.

"The question will be: Do we really care about that? Because it may be that the level of service they have in the slow lane might be fast enough for us. ... The onus is on the people who want to up-end this to say, 'This is going to be a better future,'" Hunter said.

He added that not enough data points one way or the other on whether net neutrality or graduated access would better benefit consumers, but his instinct would be to keep the current ways of the Internet.

"There's no, kind of like, obvious solution, and there's no obvious constituency that a congressperson can point to" that would either be harmed or helped by new laws, Hunter said. "My attitude in that kind of situation is: Let's go with the devil we know. ... We know net neutrality works."