Net Neutrality - The SEC Finally Comes Down
March 19, 2012
Lawyers read exciting periodicals such as SEC No-Action Letter Weekly (published by Wolters Kluwer). Normally, I would not bore you with this stuff, but this week the lead article had the titillating title of “Staff Reverses Position on Net Neutrality Shareholder Proposals.”
Apparently, the SEC has finally come around to the notition that net neutrality is a really important issue. I have included three of the salient paragraphs below.
The SEC’s Division of Corporation Finance has advised Sprint Nextel Corporation and AT&T Inc. that they may not omit from their proxy materials shareholder proposals that ask the companies to publicly commit to operate their wireless broadband networks in accordance with network neutrality principles. The staff explained that, due to the sustained public debate over the last several years about net neutrality and the Internet, and the increasing recognition that the issue raises significant policy consideration, the proposals may not be omitted in reliance on the ordinary business exclusion.
AT&T wrote that the proposal represents an attempt to repackage substantially similar proposals about its network management practices, which the staff, in the past, has concluded were excludable as ordinary business. In AT&T’s view, the proposal would directly interfere with its network management practices and would seriously impair its ability to provide wireless broadband service to its customers. AT&T also sought to omit the proposal under Rule 14a-8(i)(2) on the basis that it would impair the company’s ability to comply with federal wireless licensing requirements.
AT&T said the proposal cited the same reports as in a 2011 proposal and that the only substantive addition was a citation to a 2011 survey that presents statistical information similar to that presented in the January 2010 report and cited in the 2011 proposal. AT&T challenged the notion that net neutrality has emerged as a consistent topic of widespread public debate that would reflect a significant policy issue for purposes of Rule 14a-8(i)(7).
The point is that stockholders of public companies can propose that the stockholders, at the company’s annual meeting, adopt a resolution directing the company to observe principles of net neutrality. It will be interesting to see how many, if any, companies include this type of resolution and if any of them pass.