Shareholder Advocacy: Merged or Not, AT&T Still Threatens Net Neutrality

The U.S. Department of Justice’s (DOJ’s) announcement in August that it will try to block the proposed AT&T/T-Mobile merger in federal court is highly welcome news. One thing to keep in mind, however, is that even if the government is successful, AT&T’s will still be trying to squash net neutrality – the principle that it cannot privilege, degrade or prioritize information transmitted over its wireless infrastructure based on its source, ownership or destination.
The DOJ upended the story of inevitability that AT&T was asserting about its $39 billion purchase of T-Mobile, arguing that AT&T’s elimination of T-Mobile as an independent, low- priced rival would remove a significant competitive force from the market, and would:

Result in tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for mobile wireless services. Consumers across the country, including those in rural areas and those with lower incomes, benefit from competition among the nation’s wireless carriers, particularly the four remaining national carriers.

The deal would have been particularly bad for minorities. The National Hispanic Media Coalition reports:

Latinos pay the highest rates on AT&T, averaging bills of $120 per month, and the lowest on T-Mobile, averaging $102. Thus, it should be no surprise that approximately 21–25 percent of T-Mobile’s 34 million customers are Latino, compared to 12 percent of AT&T’s customers. If this acquisition were approved, T-Mobile customers would have fewer choices for pricing plans and devices and would be subject to AT&T’s documented history of poor customer service.

The DOJ action is a strong rebuke to the corrosive influence of mammoth lobbying budgets. AT&T had pulled out all the stops in its lobbying efforts, and it is no small victory of the rule of law over political spending that this tactic appears to have failed. Bloomberg reported that the company boosted its spending on lobbying by 30 percent to $11.7 million in the first six months of 2011 (from the same period last year) as it sought regulators’ blessing for the merger. Its political action committee, which distributes money raised from employees, gave over $800,000 to federal candidates in 2011, more than any other company, according to the Center for Responsive Politics.
By many indications, despite AT&T’s pledge to fight the DOJ to the bitter end or try and negotiate a settlement, the proposed mergers seems on the path to failure. The highly respected telecom analyst Craig Moffett of Bernstein Research concluded in the wake of the DOJ’s announcement that the deal “can be considered all but definitely dead.”
But even if the deal is dead, a problem of great concern remains – the movement of the US wireless internet access market toward a duopoly in which AT&T and Verizon act as gatekeepers to the Internet with the power to exercise discriminatory pricing. Without net neutrality, AT&T and Verizon would have powerful economic incentives to promote the content of their “partners” – big content producers, like Disney, NBC and NewsCorp, from whom they can charge higher prices, while offering slower, inferior service to small, independent or politically controversial voices that are unwilling or unable to “pay to play”.
In support of net neutrality, the California chapter of the National Organization for Women stated, “The Internet is one of the few ways left for ordinary people to make their views heard in a national forum. Organizations, coalitions and individuals from underserved and underrepresented groups can use the web to get their issues and voices heard. If content from large corporations gets priority, what happens to these voices?” The Internet is has become the public square of the 21st century and it must be protected as a resource for all of us.
This is why we will continue to press AT&T and Verizon through shareholder proposals to make meaningful and specific commitments to respect net neutrality – the principle that they cannot privilege, degrade or prioritize information transmitted over its wireless infrastructure based on its source, ownership or destination.
As the lawsuit and potential settlement negotiations proceed this fall and winter, we will be making our case to AT&T and Verizon shareholders that for the good of our society, our economy, and yes, the individual companies, that they should adopt and abide by strong net neutrality principles.
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Sources: U.S. Department of Justice Press Release, August 31, 2011 (www.justice.gov); National Hispanic Media Coalition (www.nhmc.org); Financial Times, September 1, 2011; OpenSecrets blog, August 31, 2011 (www.opensecrets.org); California National Organization for Women statement, November 23, 2010 (www.canow.org).