telecommunications

AT&T, others must include net neutrality vote, SEC says

Posted 2/15/12

WASHINGTON - The U.S. Securities and Exchange Commission has told AT&T Inc. and other telecommunications companies they must include a resolution supporting wireless net-neutrality in annual shareholder votes.

In a letter posted on the SEC website, the agency asserted that net neutrality -- the idea that Internet service providers must treat traffic equally -- has become a “significant policy consideration” and can no longer be excluded from shareholder ballots. AT&T, Verizon Communications Inc. and Sprint Nextel Corp. must now grant shareholder requests for votes this year on resolutions that would support net neutrality.

“In view of the sustained public debate over the last several years concerning net neutrality and the Internet and the increasing recognition that the issue raises significant policy considerations, we do not believe that AT&T may omit the proposal from its proxy materials,” the SEC said in the Feb. 10 letter.

The shareholder resolution would recommend each company “publicly commit to operate its wireless broadband network consistent with network neutrality principles,” the letter said. The companies should not discriminate based on the “source, ownership or destination” of data sent over their wireless infrastructure.

“It allows shareholders to come to the table for the first time on an issue that we think is really of preeminent importance,” said Farnum Brown, an investment strategist at Boston-based Trillium Asset Management LLC, which led the multiyear effort of shareholder groups. “Persistence pays, I guess is the moral of the story.”

FCC Regulation

The Democrat-led Federal Communications Commission approved a regulation in 2010 that bars land-line Internet-service providers from blocking or slowing online content sent to homes and businesses, while still allowing mobile-phone companies to put limits on Internet traffic. Verizon sued the FCC in federal court, arguing the regulator lacks authority to regulate how companies provide Internet service.

Trillium, with the Benedictine Sisters of Mount St. Scholastica Inc. and the Nathan Cummings Foundation, had been seeking access to company ballots for at least four years.

Beastie Boys

Trillium is representing three individual AT&T investors -- Michael Diamond, better known as Mike D of the hip-hop band Beastie Boys; his wife Tamra Davis, director of films including “Billy Madison” and “Half Baked”; and John P. Silva, of Silva Artist Management, which represents recording artists Foo Fighters and Beck.

AT&T argued the proposal “would directly interfere with its network management practices and seriously impair its ability to provide wireless broadband service to its customers,” David B. Harms, a lawyer at Sullivan & Cromwell LLP, wrote in a letter to the SEC on behalf of the company. Mike Balmoris, a company spokesman, didn’t immediately respond to a request for comment on the response.

The SEC’s Division of Corporation Finance had found in past years that similar net-neutrality proposals fell under the category of day-to-day business operations and that companies could exclude them from shareholder voting. With the agency changing its position, the previous exclusion no longer applies.

“Net neutrality is the free speech issue of our time and today’s decision by the SEC was a big win in the fight to maintain a free and open Internet,” Senator Al Franken, a Minnesota Democrat, said in a statement. Franken had co-written a Jan. 31 letter to SEC Chairman Mary Schapiro with four other senators, urging the commission to deny the companies’ exclusion requests.

Reviewing Next Steps

“We received word last week that the SEC declined,” said John B. Taylor, a spokesman for Sprint, in an email. “We understand other companies in our industry received similar guidance. Sprint is reviewing the information received from the SEC and potential next steps.”

Bob Varettoni, a spokesman for New York-based Verizon, declined to comment. His company had argued that this latest shareholder proposal didn’t offer “any new information that would indicate that ‘net neutrality’ has emerged as a consistent topic of widespread public debate,” according to a Dec. 22 letter to the SEC from Mary Louise Weber, an assistant general counsel at Verizon.

Companies whose requests are declined by the SEC can challenge the regulator’s findings in court.

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