The UK government's plans to abandon net neutrality threaten British business startups and if taken up elsewhere could undermine democracy, says Peter Gabriel, the influential musician and technology entrepreneur who has backed a number of successful internet companies.

"I feel very strongly about it," said Gabriel, who has invested in a number of companies, including Bath-based The Filter and On Demand Distribution (OD2). "Freedom of access [to information online] is going to be an important battleground. It's vital to a free and open democracy: [net neutrality] serves everybody."

The communications minister Ed Vaizey said in a speech on Wednesday that internet service providers would be allowed to discriminate in favour of one content provider over another in order to manage internet traffic as long as they informed customers what they were doing. He said a lightly regulated internet was "good for business, good for the economy and good for people".

But Gabriel, and David Maher Roberts, chief executive of The Filter – the Bath-based company which has sold its recommendation system to a number of companies including Nokia and NBC – said that such a move would potentially undermine new businesses and users' access to information.

"From our point of view net neutrality makes things accessible," said Maher Roberts. "That plays into the ubiquity of content, and that makes everything more relevant to me. If users only have access to what their ISP allows through, that's not good from a business perspective. You've got to allow startups to deliver next-generation tools."

Gabriel sees the abandonment of net neutrality as a dangerous precedent when governments around the world are trying to stifle the free flow of information as the internet reaches further and further. "The pace of technological change means there's a battle for the internet," he said. "It used to be a free and open zone. Now there are governments around the world, especially in China, spending money trying to control this beast."

Others have added their voices to calls about the importance of net neutrality elsewhere. Barry Diller, head of the US content provider IAC, said that the principle was under attack from big telecoms providers, who he said wanted to set up a "tollbooth" on the internet. He said that would hurt "the little guys" who create content: "It seems ridiculous to charge the toaster for the electrical grid, instead of the consumer. [The ISPs and telecoms providers] want to charge both."

Vaizey's suggestions may meet other opposition. Sir Tim Berners-Lee, the inventor of the world wide web who is presently advising the cabinet office on making data accessible, said in 2006 that net neutrality was a simple principle: "If I pay to connect to the net with a certain quality of service, and you pay to connect with that or greater quality of service, then we can communicate at that level... net neutrality is not asking for the internet for free, or saying that one shouldn't pay more money for high quality of service... Freedom of connection, with any application, to any party, is the fundamental social basis of the internet, and, now, the society based on it."

The proposals have been opposed by the BBC's Erik Huggers, who said last month that "This innovative and dynamic ecosystem, that enables huge public value, could be put at risk if network operators are allowed to use traffic management to become gatekeepers to the internet."