Culture minister Ed Vaizey has backed a "two-speed" internet, letting service providers charge content makers and customers for "fast lane" access.
It paves the way for an end to "net neutrality" - with heavy bandwidth users like Google and the BBC likely to face a bill for the pipes they use.
Mr Vaizey said ISPs must be free to experiment with new charges to help pay for the expansion in internet services.
But critics warn the move could harm free speech and stifle innovation.
Internet Service Providers (ISPs) are supposed to treat all web traffic equally - serving only as a one-size-fits-all pipe for whatever data is passing from content providers to end users.
But a debate has been raging around the world over how much they should be allowed to control the size of their pipes, and thus the internet speed that users get from the site.
In the US, President Barack Obama has backed net neutrality - treating all traffic equally - and regulators have threatened possible legal action against ISPs that block or restrict access to sites.
But some traffic management, where traffic from one source is favoured over another, is likely to be allowed, with a ruling due next year, Mr Vaizey suggests.
The EU has also backed traffic management but with greater transparency to ensure the internet remains "open" - something that will soon be enshrined in UK law.
Mr Vaizey argues that most ISPs already carried out traffic management "to ensure the smooth running of their networks" without any impact on competition or consumer rights.
In his speech, he argues that the continued quality of internet services in the UK is under threat due to the rapid expansion of mobile and wireless networks and the "massive investment" it needed.
As a result, ISPs had to be free to experiment with new ways of raising revenue - provided customers were clear about what they were buying.
He says: "We have got to continue to encourage the market to innovate and experiment with different business models and ways of providing consumers with what they want.
"This could include the evolution of a two-sided market where consumers and content providers could choose to pay for differing levels of quality of service."
He also suggests that content makers could be charged for the first time for the use of the ISP's networks - provided they too were clear about what they were getting.
"Content and application providers should be able to know exactly what level of service they are getting especially if they are paying for it," he says.
He added that the government did not want to introduce new laws on top of those already being adopted from the EU to guarantee an "open" internet, arguing that light touch regulation was better.
He also argued that, that unlike in the US where some areas only had the choice of one service provider, there was enough rivalry between providers to ensure consumers' rights were protected.
"The essential competition we enjoy in Europe and especially in the UK, will be an essential safeguard against unfair discrimination," he argues.
He said ISPs must also guarantee that net users can continue to access any legal website or content.
"In order for the internet to continue as the open, innovative force for good that it has been over the past 20 years it is essential that all elements continue to prosper.
"This means ensuring that content providers and applications have open access to consumers and vice versa.
"But it also means allowing ISPs and networks to innovate and experiment with new ways of delivering what consumers want so we can ensure continued investment in the infrastructure that delivers the content and applications we all use."
But Jim Killock, of net freedom campaigners the Open Rights Group, said the proposals could have "appalling" consequences for free speech and commercial innovation.
"Ed Vaizey is wrong to assume that there is no problem if BT or Virgin restrict people's internet access for their commercial advantage. Removing 'net neutrality' will reduce innovation and reduce people's ability to exercise their freedom of speech.
"This is why ORG will campaign against any market abuse, should Ed Vaizey allow it to happen."
But the Internet Service Providers Association (ISPA) welcomed what it called Mr Vaizey's "lightly-regulated, market-based approach" towards traffic management, adding that ISPs should be "open and transparent" to boost confidence in the industry.
An ISPA spokesman said: "This approach will reassure those who are investing in networks and coming up with new, innovative online business models.
"A number of ISPA members already provide consumers with clear information on traffic management practices and we expect to see this extended.
"ISPs use traffic management techniques so that they are able to effectively and efficiently run and manage their networks for the benefits of all users.
"This enables ISPs to prioritise time-sensitive applications, such as VoIP and online gaming, at peak times."