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The breakdown of the talks followed news of a separate agreement between Verizon and Google that would let Verizon give priority to certain Web content on its fixed-line networks. The deal between the two companies -- which are partners in the Android wireless phone platform -- does not apply to Verizon's mobile networks.

Insiders lamented the end of the agency-led talks, saying that there had been progress among FCC officials and representatives of AT&T, Verizon, Skype, Google, a cable trade association and a coalition for firms such as Amazon and public-interest groups. The parties had been working out agreements on network neutrality, which would prohibit Internet service providers from dictating what subscribers are able to access on the Web.

Participants in the FCC's talks had discussed tighter boundaries for managing Web traffic than those agreed upon by Verizon and Google, according to sources familiar with the meetings. The sources spoke on condition of anonymity because they were not authorized to discuss the matter on the record.

The series of meetings has been "productive on several fronts, but has not generated a robust framework to preserve the openness and freedom of the Internet -- one that drives innovation, investment, free speech, and consumer choice," said Eddie Lazarus, chief of staff to FCC Chairman Julius Genachowski, in a statement. "All options remain on the table as we continue to seek broad input on this vital issue."

Genachowski had convened the negotiations with industry representatives in an attempt to present Congress a blueprint for net neutrality legislation. With its talks disbanded, the agency faces a quandary over how to proceed on net neutrality rules.

The agency's next step could be a move to assert its authority over broadband service providers. But its ability to do so could be hampered by an April court ruling that called into question the agency's authority to regulate the high-speed Internet market. In that case, a federal appeals court found that the FCC had overstepped its bounds in sanctioning Comcast for allegedly improperly slowing traffic to the BitTorrent file-sharing site.

On Capitol Hill, legislation on net neutrality has made little progress. "As we work to find a path forward for governing broadband, Congressional stalemate is making a legislative solution look increasingly unlikely in the near term," Sen. John F. Kerry (D-Mass.), chairman of the communications subcommittee, said in a statement. "As a result, Chairman Genachowski is now moving forward along a regulatory path. While this is an imperfect solution, it's his only real option to maintain the proper role of government oversight in communications."

Since June 22, participants in the FCC talks had been meeting with Lazarus to discuss a legislative framework for net neutrality rules, such as whether the regulations would apply to wireless services. Skype official Christopher Libertelli had been adamant that they should, saying that otherwise his voice and video software platform could be blocked from Verizon and AT&T, for example, which could choose to prioritize Apple or Google software, according to sources.

The participants also debated whether carriers could offer faster downloads for some Web sites offered to customers as "specialized services." The parties agreed that dedicated capacity for things such as telemedicine could be allowed, but some feared that allowing that could result in tiered service offerings where a carrier would charge for better-quality channels dedicated to YouTube, for example, over Netflix.

"We have negotiated in good faith to bridge differences," AT&T Senior Executive Vice President Jim Cicconi said in a statement. "We put a number of significant concessions on the table and, despite today's setback, remain convinced that a consensus solution can be achieved."