Politicians, business and consumer groups used to agree on one government policy: “Hands off the internet.” Now, some internet service providers such as Verizon, AT&T and Comcast want to change the game. They want to stick it both to content providers such as CNN and to consumers, instead of just charging end-users as they do now.

Critics fret that this could end the internet as we know it. We think it may bring a better internet if government weighs policies carefully.

Both sides agree that it is fine to charge consumers different prices for different speed connections, but the agreement ends there. Some consumer groups and internet content providers such as Google and Microsoft want the government to intervene. Ron Wyden, Democratic senator from Oregon, recently introduced the Internet Non-Discrimination Act of 2006, which would mandate “net neutrality”.

Net neutrality means that ISPs charge consumers only once for internet access, and never favour one content provider over another or ask them to pay more. Net neutrality enthusiasts argue that ISPs should not be allowed to charge consumers more for, say, streaming Star Wars than for downloading a recipe. They further argue it should be illegal for ISPs to charge companies such as Google for sending its bits to consumers. Of course, the people supplying high-speed connections see it differently. Fortunately, they face pressure from two sides to behave.

Competition among providers for end-users is the best way to spur them to innovate, invest and keep prices down. In 2004, 83 per cent of US zip codes had two or more broadband providers; 67 per cent had three or more. Whether that is enough competition is debatable, but the trend is good: more providers are serving more people.

But competition for subscribers is not the only thing keeping providers in check. They also need content, which is why they will think twice before restricting it. Other businesses requiring different types of customers face similar challenges. Some newspapers charge advertisers and readers, while others give papers away. There is no single “right” way to charge different customers in these markets. Broadband providers should be able to price freely, unless consumers are clearly harmed.

Rapidly changing technologies mean the boundaries of net neutrality blur quickly. Google, one of the louder advocates, may itself be poised to violate the principle with its bid to provide “free” WiFi in San Francisco. In particular, Google might deliver paid advertisements to users and therefore control how some internet content goes to computers – exactly what net neutralists fear. The way out of the net neutrality box is to drop the slogan and replace it with sound economics. Suppose you believe that broadband providers do not face enough competition. Rather than mandating someone’s notion of an ideal internet architecture, policymakers should consider whether some factors are blocking competition and consumer choice.

Two barriers currently reduce choice. The first restricts the use of spectrum – the airwaves that carry wireless signals. Outdated regulations prevent much spectrum from going to its highest-valued use. Lawmakers could give the economy a boost of at least $100bn (€83.1bn) by making more spectrum available and allowing spectrum rights to be traded. One attractive use could be more wireless broadband options.

Second, local governments block competition by limiting entry and services that can be provided over broadband lines. New entrants often must obtain local approval and pay fees. Congress should eliminate most of these wasteful, anti-consumer rules.

Both these suggestions would improve competition, but a government role is still important. Say a monopoly broadband provider favours itself when providing internet telephone services by charging a competitor a fortune for access. The government should police such behaviour, as it has done, through antitrust laws.

The dynamic nature of internet technologies makes it difficult to know what is best for consumers today and in the future. Companies should be able to experiment with different pricing methods. If government regulates who can be charged and how much, it risks snuffing out new competitors who could usher in the next internet revolution. “Hands off the internet” was good policy when it was a new phenomenon; it is good policy now.

Robert Hahn is executive director of the AEI-Brookings Joint Center for Regulatory Studies, where Scott Wallsten is a senior fellow