The Federal Communications Commission plans to propose new rules that would allow Internet service providers to charge content companies for preferential treatment over the “last mile” to users, according to multiple reports, in a blow for advocates of “Net neutrality,” the principle that consumers should have equal access to content available on the Internet.

The proposed rules, which are being circulated among the five FCC commissioners, come three months after a federal court struck down the agency’s 2010 Open Internet Order. After details of the proposal leaked out Wednesday evening, Net-neutrality advocates reacted with anger, with some claiming the new rules threaten the Internet’s traditionally free and open culture.

In a statement released late Wednesday, FCC chairman Tom Wheeler called that notion “flat-out wrong.”

Under the FCC’s new plan, Internet service providers like Comcast and AT&T “would be required to offer a baseline level of service to their subscribers,” according to an FCC spokesperson. The companies would also be prohibited from blocking or discriminating against online content, but they would be allowed to strike special deals with Internet companies like Netflix or Skype for preferential treatment, as long as they acted in a “commercially reasonable manner subject to review on a case-by-case basis.”

Net-neutrality advocates argue that Internet startups might not be able to afford to pay for such special treatment, potentially stifling innovation on the Internet, which has spawned one of the greatest periods of technological development in U.S. history, generating hundreds of billions of dollars in economic growth.

“The FCC is inviting ISPs to pick winners and losers online,” Michael Weinberg, vice president at Public Knowledge, a Washington-based consumer-advocacy group, said in a statement. “This is not Net neutrality. This standard allows ISPs to impose a new price of entry for innovation on the Internet.”

Net neutrality was enshrined in the FCC’s 2010 Open Internet Order, which required Internet service providers to be transparent about how they handle network congestion, prohibited them from blocking traffic such as Skype or Netflix on wired networks, and barred them from discriminating against such services by putting them into an Internet “slow lane” in order to benefit their own competing services.

In February the U.S. Court of Appeals for the District of Columbia struck down the FCC’s authority to enforce the antiblocking and antidiscrimination rules. That verdict was a blow for President Obama, who campaigned as a strong supporter of Net neutrality. In the wake of that defeat, many Net-neutrality advocates called for the FCC to reclassify broadband as a telecommunications service.

Such reclassification would have restored the FCC’s authority to enforce the rules, but it also would have prompted a major showdown between the FCC and broadband giants like AT&T and Verizon, which are extremely powerful on Capitol Hill and oppose such reclassification. Instead, the FCC appears to have chosen a more politically palatable route — based on the agency’s so-called Section 706 authority — that will seek to address blocking and discrimination on a case-by-case basis.

“This is not Net neutrality,” Craig Aaron, president and CEO of Free Press, which has long championed Internet openness, said in a statement. “It’s an insult to those who care about preserving the open Internet to pretend otherwise. The FCC had an opportunity to reverse its failures and pursue real Net neutrality by reclassifying broadband under the law. Instead, in a moment of political cowardice and extreme shortsightedness, it has chosen this convoluted path that won’t protect Internet users.”

FCC chairman Wheeler is a former cable and wireless industry lobbyist who was previously managing director at Washington-based venture-capital firm Core Capital Partners. Wheeler, a longtime Obama loyalist, raised hundreds of thousands of dollars for Obama’s two presidential campaigns, according to the Center for Responsive Politics. Wheeler has insisted he is committed to a “free and open Internet.”

The FCC’s new proposal would establish a “baseline” rule prohibiting broadband providers from engaging in “commercially unreasonable” practices in sending Internet traffic to consumers, but it’s unclear what would constitute a “commercially unreasonable” practice. The proposal would also establish a process for resolving disputes between Internet service providers and content companies on a case-by-case basis.

For over a decade, the Internet has largely adhered to Net neutrality, which is why most consumers take it for granted. In practice, Net neutrality means that all users have open access to the Internet, just like all Americans have the right to travel anywhere in the 50 states without a passport. Without this open access, startups like Google, Twitter and Facebook might never have flourished, according to Net-neutrality advocates, who say the FCC’s new proposal threatens the Internet’s vibrant ecosystem.

“This is a stake in the heart for Internet openness,” says Lauren Weinsten, a veteran tech-policy expert and prominent Net-neutrality advocate. “The nation’s largest Internet service providers have hit the ultimate jackpot. These companies keep secret all of the information needed to evaluate whether violations of Internet openness have occurred, and because the FCC moves so slowly, by the time it acts, a company that’s been victimized could be out of business.”

Wheeler disputed the suggestion that the new rules would harm the Internet’s openness, calling such claims “flat-out wrong.”

In a statement issued late Wednesday, Wheeler said the proposal “will restore the concepts of Net neutrality consistent with the court’s ruling in January. There is no ‘turnaround in policy.’ The same rules will apply to all Internet content. As with the original Open Internet rules, and consistent with the court’s decision, behavior that harms consumers or competition will not be permitted.”

The new proposal, which was first reported by the Wall Street Journal, would not apply the rules to so-called paid peering arrangements, like the one recently struck by Netflix to pay for a direct connection to Comcast, in order to improve performance for users. In the wake of that deal, Netflix CEO Reed Hastings called on the FCC to establish “strong” Net-neutrality rules preventing companies like Comcast from “charging a toll for interconnection to services like Netflix, YouTube or Skype.”

Updated on April 23 at 10:20 p.m. E.T. with a statement from FCC chairman Tom Wheeler.

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