The internet was humming on Thursday night and Friday morning with rampant speculation over a supposed deal between web giant Google and US carrier Verizon that many industry watchers fear as the end of the internet as we know it.

Yet both parties deny anything sinister is going on behind the scenes, even if they don’t completely deny something is going on.

The rumour mill was put in motion by a New York Times article which claimed Verizon and Google were in discussion over a model that would see certain content delivered as a priority over other traffic. There would be a price associated with this prioritisation, which many fear would eventually be passed on to the end user.

The article caused a stir because Google is a long time campaigner for net neutrality, a movement to preserve the integrity of internet content by ensuring that all traffic is delivered equally. Any such deal would be seen as Google switching allegiance in a bid to get its own bandwidth intensive content, like YouTube, delivered to end users faster than the next guy.

Yet Google came out with a short statement saying no such discussions had taken place. While Verizon said that while the NY Times article was mistaken, it hinted that some dialogue was taking place between the two firms. “It fundamentally misunderstands our purpose…our goal is an Internet policy framework that ensures openness and accountability, and incorporates specific FCC authority, while maintaining investment and innovation. To suggest this is a business arrangement between our companies is entirely incorrect,” Verizon said.

Coincidentally, the speculation over the Verizon-Google deal began just as US communications watchdog the FCC wrapped up its own discussions with leading service providers on the same topic. The issue of net neutrality is huge and complicated issue, made more so by the fact that the industry cannot agree on a definition for what net neutrality actually means. And it seems that those involved in discussions with the FCC are unable to come to that agreement.

The FCC is presently trying to re-establish its authority over operators, after having its claws pulled in April when a US federal court ruled that the FCC does not have the authority to force all service providers to treat internet traffic the same. The case, which had been running since 2007, when the FCC took cable network operator Comcast to task for interfering with its customers’ use of peer to peer networking technologies.

Comcast argued that the FCC failed, “to justify exercising jurisdiction over its network management practices.” That argument was upheld by the court, meaning that the FCC cannot force a service provider to treat all traffic travelling over its network with equal weighting. The upshot is the discussions the FCC held on net neutrality and considerations on new regulation affecting broadband services.

Commenting on the speculation about Verizon and Google, Lee Myall, UK regional director at backbone network operator Interoute, said: “The net neutrality debate has been catapulted forward. Consumers are used to paying a certain amount for data downloads, but this deal between Google and Verizon sets a precedent for changing the status quo and it will be the consumer that feels the impact of this deal.To remove neutrality on the web is a drastic step and could lead further problems over how the industry decides what to restrict. Net neutrality is pretty much an absolute state, so once it’s gone it’s gone and the genie is out of the bottle.”

In related news, Google is increasing its content portfolio with the acquisition of social networking games developer Slide, which creates community-based apps and games for the likes of Facebook.

The move goes someway to supporting expectations that Google is planning to make a more concerted move into the social networking realm, even as it shuts down its Google Wave venture. Google said that it wasn’t “quite sure how users would respond to this radically different kind of communication” and it turns out they didn’t respond very well. The firm said it has not seen the user adoption it would have liked and does not plan to continue developing Wave as a standalone product.

However, Wave as a technology will be integrated into other Google products so perhaps it will turn up in some social networking development from the firm.