New AT&T Report on Net Neutrality Highlights ‘Failure in Corporate Citizenship' Say Investors

A new report by AT&T Inc. summarizing the company’s positions on so-called network neutrality principles highlights a “worrisome failure in corporate citizenship” and raises significant concerns about AT&T’s long-term commitment to open Internet principles that benefit the American economy and all consumers, according to a group of AT&T investors.

The report was issued by AT&T last month (December 2012) in response to a proposal by shareholders concerned about the company’s current open Internet policies for wireless networks, which comprise the fastest-growing segment of the Internet. In 2011 wireless constituted about half of AT&T revenue; the company has projected that its mobile data traffic will grow more than eight times in the five-year period ending in 2016.

“We believe open Internet policies help drive the economy, encourage innovation and reward investors,” the investors said in their proposal. “An open Internet also has particular importance for minority and economically disadvantaged communities, which rely on wireless more than other demographic groups.”

AT&T’s response to the shareholders was noted in a filing with the Securities and Exchange Commission but not otherwise publicized by the company. Following AT&T’s action, shareholders informed the SEC that their proposal requesting a report has been withdrawn.

“We’re happy to have the report, but it doesn’t really answer many fundamental questions about how AT&T intends to honor its publicly-stated commitment to open Internet principles, especially on wireless networks,” said Jonas Kron, Senior Vice President, Director of Shareholder Advocacy & Corporate Engagement at Trillium Asset Management LLC, which filed the proposal on behalf of shareholders.

Trillium’s Mr. Kron noted that AT&T’s position on open Internet for wireless amounted primarily to complying with existing federal regulations – which, in fact, provide huge exemptions from oversight for wireless networks. Other shortcomings of the report:

• AT&T does not mention a recent and widely-publicized controversy concerning alleged violations of federal regulations involving the blocking of Apple’s FaceTime wireless application. The FaceTime episode raises significant questions about AT&T’s willingness to be forthright with the public and its ability to manage risk.

• AT&T fails to discuss reports of an increasing number of consumer complaints about discrepancies in how much data AT&T wireless customers are using and being charged for.

• There do not appear to be adequate protections to ensure that AT&T does not act as a gatekeeper to innovation, especially with regard to new wireless services and applications. Innovation without the permission of incumbents has been the basis of the Internet becoming an engine of economic growth. AT&T needs to go the extra mile to ensure that innovators are free to develop the next important technology.

Other filers included Zevin Asset Management LLC, the Nathan Cummings Foundation, the Park Foundation, and the investment funds of several religious orders.

“AT&T represents itself as an industry leader, but this report represents a worrisome failure in corporate citizenship,” said Sonia Kowal, Director of Socially Responsible Investing at Zevin Asset Management. “We’re especially concerned about potential risks to both the company and the Internet economy at large – as diversified institutional investors, it’s critical that we consider the importance of an open Internet to all.”

Jon M. Jensen, Executive Director of the Park Foundation, said: “The public has a right to know how decisions about access to the Internet are being made. AT&T’s report leaves too many questions unanswered.”

AT&T’s report comes on the heels of a November announcement that the company plans to invest $14 billion over the next three years to significantly expand and enhance its IP (Internet Protocol) networks to support growing demand for high-speed Internet access, especially on wireless. While generally welcomed as an important technological plan, the AT&T announcement, which appears to focus investment on the largely unregulated mobile network, has raised concern about its potential impact on the availability of basic telephone service for many Americans as well as the open Internet protections that would be provided to wireless subscribers in the absence of network neutrality rules.

“As we move forward in developing the nation’s broadband infrastructure, it’s important that we adhere to the adage: ‘Trust, but verify,'” said Michael Connor, Executive Director of Open MIC a non-profit organization that works with shareholders on open Internet issues. “We look forward to engaging with AT&T and other leading telecommunications companies to help demonstrate that corporate profits and corporate responsibility are not mutually exclusive in the digital age.”

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About Open MIC

The Open Media and Information Companies Initiative – Open MIC – is a non-profit organization working to promote a vibrant, diverse media ecosystem through market-based solutions. Founded in late 2006, Open MIC is a project of the Tides Center, a 501(c)(3) non-profit organization.

For more information:

Jonas Kron / Trillium Asset Management / JKron@trilliuminvest.com / 503-592-0864

Jon Jensen / Park Foundation / jmj@parkfoundation.org / 607.272.9124

Michael Connor / Open MIC / mconnor@openmic.org /212-875-9381

The views expressed are those of the authors and Trillium Asset Management, LLC as of the date referenced and are subject to change at any time based on market or other conditions. These views are not intended to be a forecast of future events or a guarantee of future results. These views may not be relied upon as investment advice. The information provided in this material should not be considered a recommendation to buy or sell any of the securities mentioned. It should not be assumed that investments in such securities have been or will be profitable. To the extent specific securities are mentioned, they have been selected by the authors on an objective basis to illustrate views expressed in the commentary and do not represent all of the securities purchased, sold or recommended for advisory clients. The information contained herein has been prepared from sources believed reliable but is not guaranteed by us as to its timeliness or accuracy, and is not a complete summary or statement of all available data. This piece is for informational purposes and should not be construed as a research report.