Internet service providers like AT&T Inc are making greater efforts to manage traffic on their networks as they seek ways to avoid congestion caused by bandwidth-hogging services like video, industry officials said on Thursday.

Network management of Internet traffic has become a flash point between companies and public interest groups which worry that companies will become the arbiter of what is important or discriminate against certain applications or content.

Internet providers say they must engage in reasonable network management due to increasing bandwidth of applications used by consumers and that they are not policing content.

In the future we are going to get into applications like real time video that are going to require some sort of management, Bob Quinn, senior vice president for regulatory policy at AT&T, told a panel at an event held by the Free State Foundation, a Washington think tank opposed to heavy regulation. Management is going to absolutely be required.

The issue came to a head last year when the Federal Communication Commission upheld a complaint accusing Comcast Corp of violating the agency's open-Internet principles by blocking file-sharing services, such as those that distribute video and television shows.

The FCC has guidelines to prevent Internet service providers from discriminating against certain network traffic, but many advocates want teeth behind those guidelines and some back legislation to codify them.

President Barack Obama strongly backed net neutrality during the campaign and as a senator. Observers are monitoring how he will change policy.

Comcast, which is appealing the FCC ruling in the courts, now uses a fair share approach, which compares users against their neighbors, without regard to particular applications, according to Joseph Waz, a senior VP for public policy at Comcast Corp

Cox Communications recently said it would test a new technology that prioritizes time-sensitive Internet traffic like Web pages and streaming videos, while delaying less time-sensitive traffic like file uploads when the local network is congested.

Consumer groups decried this move as heavy-handed, and called on regulators to review the practice.

Cox has taken a page from our book in that policy, Waz said.

Earlier this month, the chief executive of Frontier Communications Corp said tiering of prices makes sense so that customers who use less Internet do not wind up subsidizing those who use large amounts.

Deutsche Telekom AG's T-Mobile must manage its network traffic as a wireless carrier because it is more limited in volume and bandwidth than companies like AT&T and Verizon, said Tom Sugrue, vice president of government affairs for the company.

T-Mobile may use up to 10 gigabits a month, or possibly be downgraded to a speed that is roughly equivalent to the first generation of Apple Inc's iPhone.

To avoid crashing the network, you have to have reasonable management, Sugrue said.

(Editing by Matthew Lewis)

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