Outcome: Successfully Withdrawn
Wireless communications are critical to AT&T. In 2011 wireless constituted about half of Company revenue; over the next five years, AT&T expects mobile data traffic to grow more than eight times from 2011 levels.
A critical factor in this growth is the open (non-discriminatory) architecture of the Internet. Non-discrimination principles are commonly referred to as “network neutrality” and seek to ensure equal access and non-discriminatory treatment for all content.
We believe open Internet policies help drive the economy, encourage innovation and reward investors. Network neutrality principles may help AT&T financially by bringing new products to its platform, attracting customers and creating opportunities to share revenue with developers.
An open Internet also has particular importance for minority and economically disadvantaged communities, which rely on wireless more than other demographic groups. According to Colorofchange.org, an organization representing African Americans, “The digital freedoms at stake are a 21st century civil rights issue.”
AT&T’s public policy website states: “We understand the Internet is an essential medium for free expression and communication, for education and creative endeavors and for innovative business activities.” A 2010 AT&T video said: “At AT&T we support a core set of standards that will guide the Internet into the future…We support a fair and open Internet,
affordable and accessible to everyone…transparent networks managed in ways that are clear to all users.”
However, as investors, we are deeply concerned that AT&T is not transparent and has not evidenced practices to guide implementation of its stated values. In light of potential reputational, regulatory, and legislative risk related to AT&T’s network management practices and the issue of network neutrality, this lack of disclosure is troubling.
While wireless Internet has some exemptions from current federal regulation, the Federal Communications Commission has said it “will investigate and evaluate concerns as they arise” and “will adjust our rules as appropriate.” AT&T has been the subject of a widely publicized controversy concerning alleged violations of FCC policy involving the blocking of one wireless application (“FaceTime”). This followed the Company’s unsuccessful bid, blocked by regulators, to merge with T-Mobile.
There may also be reputational and commercial risk in not providing customers with evidence of open Internet policies – especially in what AT&T describes as “a very dynamic and competitive U.S. wireless marketplace.” A primary concern is that customers could choose another wireless provider.
Resolved: Shareholders request that the Board of Directors report by October 2013 (at reasonable cost and omitting proprietary and confidential information) how AT&T is responding to regulatory, competitive, legislative and public pressure to ensure that its network management policies and practices support network neutrality, an Open Internet, its “core set of standards”, and the social values described above.
We are not seeking a report on legal compliance or the details of network management. Rather, we seek to ensure that shareholders have sufficient information to evaluate how AT&T manages this significant policy challenge – e.g. how it takes into account that network management decisions could potentially affect future regulatory developments.