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It’s pretty clear that the AT&T (T) and Bellsouth (BLS) merger has turned into a proxy war over Net Neutrality, with Yahoo (YHOO) and Google (GOOG) spearheading the effort in a naked attempt to keep their distribution costs near zero. Correspondingly, Washington bloodsuckers lobbyists on both sides are gearing up.

The Wall St. Journal editorial yesterday captures the true issue at hand, and why the FCC is now deadlocked on approving the merger.

Meanwhile, Congressmen Ed Markey and John Dingell deserve their place in this story, having bared their teeth at Mr. McDowell in a threatening letter last week that questioned Mr. McDowell’s suitability to vet the merger. Their true interest was in strengthening the hand of Democratic Commissioners Copps and Adelstein, who seem bent on using this merger review to advance “Net neutrality” mandates that neither Congress nor the FCC have seen fit to impose through normal channels.

We’d like to see these two Congressmen demonstrate the same concern for public integrity by calling on the Commission to quickly approve a merger that everyone from shareholders to the relevant unions supports. But that probably makes us “uncurable optimists” too. The duo are eager to do favors for the campaign check-writers at Google and MoveOn.org, which want Net neutrality rules so AT&T and other telecom companies can’t charge market prices for use of their broadband pipes.

Check out the latest video from the “Save the Internet” coalition.

The only thing worse than having Washington involved in free markets is when they are trying to solve a problem that DOES NOT EXIST. My extended opinions can be found here.

Source: Net Neutrality: The Real Issue Behind the AT&T/BellSouth Showdown