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Summary:

AT&T’s shareholders today didn’t require the telecommunications giant to implement network neutrality on its wireline and wireless networks. The proposal lost with a mere 5.9 percent of the vote. But here’s why one fund manager thinks net neutrality won — and should continue to win.

Wall Street Bull
photo: Corbis / James Leynse

AT&T’s shareholders today didn’t require the telecommunications giant to implement network neutrality on its wireline and wireless networks. The proposal lost with a mere 5.9 percent of the vote. But based on an interview I had two weeks ago with Jonas Kron, Vice President of Trillium Asset Management, the goal of the shareholder proposal was to get 3 percent of the vote so they could bring it back next year. So in that case, Trillium and other shareholders in favor of the proposal (including Mike D of the Beastie Boys) won.

In fact Kron told me that anything over 5 percent would be a substantial victory because it means that the company would have to pay attention to the issue.

Regardless of change coming from this particular vote, in our talk Kron offered me something far more interesting, an economic justification for broadband companies to embrace network neutrality. So despite Wall Street analysts who argue that such rules would turn the nation’s largest wireline and wireless phone companies into commodity utilities with the profit margins to match, Kron explains why American’s capitalists should be fine with network neutrality.

“Most people are diversified investors and interested in broad-based economic growth. And just because it’s good for a single company doesn’t mean it’s good for the market,” Kron explained when I asked about the potential damage to AT&T’s or Verizon’s profit margins. “The concept of negative externalities comes into play. Just like pollution that isn’t priced in will add costs in the other parts of the market, a free and open Internet is responsible for significant value, and we don’t want to interfere with that. And wireless is where so much activity is moving to — that’s where a lot of money is being made for the market, and that’s why we wanted to make wireless net neutrality a specific issue.”

Now Trillium is in the small class of socially conscious investment firms that take perhaps a more holistic view of their asset management strategy, but compared to returns for the large-cap funds that invest in AT&T and other wireless company, it doesn’t pay a penalty for its social stance. It’s returns in the 1-3-year time frame are slightly lower than the returns from the S&P when you include its management fee, and slightly above the S&P in the 5-to-10 year time frame. Trillium has $1 billion in funds, which means it’s not a small player either.

And given how Comcast appears to be formulating an end-run around wireline network neutrality with its decision to let Xbox streaming of Comcast network traffic sneak onto the network without affecting a user’s data cap, we’re still not done trying to protect the rights of services running on all broadband networks. So on both wireline and wireless networks, network neutrality is still very much a concept we need to pay attention to.

Similar proposals regarding wireless network neutrality are scheduled for votes at the upcoming annual meetings of Verizon Communications on May 3 and Sprint Nextel Corporationon May 15.

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  1. This blog post has too many absurd statements to enumerate them all…

    If its such a great financial move for investors, why doesn’t Trillium have a meaningful position in T or VZ, and why do they have just a 3% position in telecom in their large cap portfolio?

    Since the Soviet Union is out of business and you can’t take your fantasies there, maybe you could put your money where your mouth is and deploy your vast industry and technical acumen (LOL) to build a Trillium backed wireless provider that offers free and unlimited product! 

    If only physical resources were available in the same abundance as populist rabble rousing… 

  2. Richard Bennett Friday, April 27, 2012

    The Trillium proposal employed the most extreme form of net neutrality, single service level for all applications. It asked that “AT&T commit to operating its wireless network without the ability to privilege, degrade or prioritize any traffic.”

    Anyone who thinks that mode of operation is good for network efficiency, social utility, application diversity or innovation needs an education on Network Engineering 101.

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