AT&T moved to end a Federal Communications Commission stalemate on the company’s $85.8 billion merger with Bell South by agreeing to some conditions it had wanted to avoid, including a ban on charging content providers more for access to faster Internet pipes important to video programming.

That ban-dubbed “net neutrality”-had been sought by the two Democratic FCC commissioners and opposed by the two voting Republicans. It became key to winning FCC approval after a third Republican, former telecommunications lobbyist Robert McDowell, recused himself from voting.

The deal is now expected to get a swift OK from the FCC, further altering competition in the pay—TV industry, which has been in flux amid changes in ownership of cable operator Adelphia Communications, satellite—TV company DirecTV and a push by telephone providers including Verizon and AT&T to rollout video services.

AT&T announced its agreement in a statement filed with the FCC Thursday. It said it would not impose extra fees on customers for using high speed Internet pipes for 30 months, a time period that would put the condition’s expiration after the next president takes office in 2009.

The company also agreed to make high-speed Internet available in large parts of the combined companies’ territory for less than $20 a month and also permit consumers to buy DSL Internet service without having to also take phone service.

AT&T in the statement said it expected to have the capability to serve video to 1.5 million households in former Bell South areas by the end of next year.

Consumer groups tonight expressed mixed feelings on the deal.

“This merger endangers long-term competition,” said Gene Kimmelman, VP-Consumers Union. “But by making AT&T’s high-speed Internet service available to consumers for less than $20 a month, the FCC could open the door for consumers to connect low-cost Internet telephone service to broadband and thereby pressure market to keep delivering lower prices for all telecom services.”

Mark Cooper, Director of Research, Consumer Federation of America, called the conditions a win for the public.

“By holding AT&T’s feet to the fire and demanding the Internet remain neutral, the FCC can maintain a level playing field for all,” he said. “We’ll continue to work next year in Congress to ensure that the essential, consumer and innovation-friendly characteristics of the Internet are preserved as truly high-speed broadband networks are deployed.”

(Editor: Baumann)