In what one internet freedom campaigner called a "doomsday scenario" that will change the internet forever, the search engine pioneer is close to agreeing terms with the largest telecoms company in the US that would open the door to special "fast lanes" for favoured internet traffic.
Google denied that it will sign any deal to buy fast-lane access for its own traffic, which includes bandwidth-heavy videos from its loss-making YouTube site. It said: "We have not had any conversations with Verizon about paying for carriage of Google traffic and we remain as committed as we always have been to an open internet."
The bilateral agreement between Google and Verizon raises the spectre of big media corporations carving up the internet between them, and side-steps the Obama administration's attempts to ensure that all internet traffic is treated the same, regardless of whether it comes from the smallest blogger or the largest online video site.
Google, which has stood by its early motto of "Don't be evil" while growing into a $160bn (£100bn) media colossus, was hastily trying to shore up its reputation last night, as it faced a torrent of criticism from campaign groups and individuals venting their anger on Twitter and on blogs.
But the agreement between Google and Verizon is meant to lay ground rules for the treatment of internet traffic by the phone and cable companies over whose networks the data travels. Although the exact terms were shrouded in mystery, it was clear that the outline they have agreed introduces exemptions to the principle of net neutrality, including the opportunity for telecoms operators to offer "premium services" to some internet companies.
Eric Schmidt, Google's chief executive, told reporters yesterday that the company has been "talking to Verizon for a long time about trying to get an agreement on what the definition of net neutrality is". He said: "People get confused... What we mean is that if you have one data type, like video, you don't discriminate against one person's video in favour of another. It's OK to discriminate across different types."
Under the deal, Verizon will not block or slow internet traffic over land lines, but could do so to wireless devices, which are increasingly important ways for consumers to access the internet.
The two sides have not publicly announced their agreement, but last night the proposed deal killed off an attempt by the US telecoms regulator to patch together a broader pact, backed by the Obama administration, to safeguard net neutrality after a series of meetings lasting into the weekend were callled off. If the Google-Verizon deal is made public, the support of the most powerful players on either side of the debate could immediately make it the de facto standard for managing internet traffic in the future, and is likely to win enough backing on Capitol Hill to be signed into law. It would also have resonance across the world, as similar debates about the future of the internet are taking place in most developed countries. In the UK, the regulator Ofcom plans to consult on the issue after British Telecom warned that the popularity of iPlayer meant the BBC was hogging too much of the nation's network capacity.
Telecoms companies argue that being allowed to charge more to heavy-traffic internet companies will bring in the money needed to increase network capacity. Opponents fear a two-tier web, in which start-up companies and individual bloggers will be frozen out, and where prices for consumers could rise sharply.
Josh Silver, of the US advocacy group Free Press, said a Google-Verizon deal was the "doomsday scenario" that had been feared for years. "It marks the beginning of the end of the internet as you know it," he said. "Since its beginnings, the net was a level playing field that allowed all content to move at the same speed, whether it's ABC News or your uncle's video blog. That's all about to change, and the result couldn't be more bleak for the future of the internet, for television, radio and independent voices."
Gigi Sohn of Public Knowledge, another internet freedom advocate that has been lobbying for net neutrality, said: "The fate of the internet is too large a matter to be decided by negotiations involving two companies, even companies as big as Verizon and Google."
The regulations governing how telecoms and cable companies manage their networks have been in confusion for several months, since a court overturned the Federal Communications Commission's fine on Comcast, a cable operator which had been censured for secretly slowing down some customers' internet connections. The company had been trying to limit the amount of bandwidth used by people who download large amounts of music and video over the web. The FCC's legal authority to regulate internet traffic, and therefore make good on President Barack Obama's campaign promise to safeguard net neutrality, has been unclear since the court ruling.
News of the agreement of principles with Verizon, after 10 months of talks between the companies, began to emerge yesterday and Google was immediately subjected to a deluge of criticism on Twitter. "Don't be evil, my ass," one correspondent wrote, while many others called it a "sell-out" and urged followers to support online petitions in favour of net neutrality legislation. One Twitter user, jkercado, said simply: "Et tu, Google?"
Without giving more details, Verizon last night said its goal is "an internet policy framework that ensures openness and accountability, and incorporates specific FCC authority, while maintaining investment and innovation".
Don't be evil?
1998 Larry Page and Sergey Brin officially launch Google, two years after they develop a search engine called BackRub as a research project at Stanford University. It is named Google, a play on "googol", which is the numeral 1 followed by 100 zeros.
1999 An employee comes up with the informal motto "Don't be evil" which is later written into the company's official Code of Conduct.
2000 Google becomes the largest search engine, allowing users to search more than 1 billion URLs. The group begins selling advertising. AdWords allows anyone with a credit card to create advertising targeted to keywords to run alongside search results.
2004 The search index hits 6 billion items, including 4.2 billion web pages. The company goes public, listing at $85 a share.
2005 Google Earth: a map of satellite images of the entire Earth's surface, drawing criticism from privacy groups and security officials.
2005 Publishers and authors take legal action over Google scanning and copying books.
2006 Google buys YouTube. It offers a censored version of its search service in China.
2007 The debut of Google Street View, which raises privacy fears over displaying faces and number plates. Separate concerns raised over the archiving of users' searches.
2008 European Union report says Google and its rivals should delete user data after six months. Google had already committed to making search logs anonymous. The indexing system counts 1 trillion URLs.
2008 The first smartphone running Google's Android operating system is launched – the HTC Dream.
2009 Annual revenues hit $23.6bn. Google falls prey to hacking in China and responds by removing the restrictions to its search results.
2010 Google admits some of its Street View cars harvested information from public WiFi spots. More privacy concerns over the launch of its microblogging service Google Buzz.
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