The SEC ruled last month that publicly-owned wireless providers must allow resolutions on network neutrality to be included on their annual shareholder ballots, and Verizon's proxy statement — published just this week — does exactly that. "The open (non-discriminatory) architecture of the Internet is critical to the prosperity of our economy and society," the proposal reads. "Shareholders request the company publicly commit (while not conceding or forfeiting any issue in litigation related to network neutrality) to operate voluntarily its wireless broadband network consistent with network neutrality principles."
Proponents of net neutrality generally consider it a fundamental issue about preserving the usefulness and the spirit of the internet, arguing that carriers are incentivized to wall off content in the name of profit; indeed, we just heard a number of them argue that YouTube should be paying for their subscribers' eyeballs at MWC several weeks ago. Verizon is also vehemently opposed to wireless net neutrality, saying that it'd be impossible to maintain network quality if all packets were treated equally. The company's board responds to the proposal on no uncertain terms (emphasis ours):
The Board of Directors strongly believes that by requiring the Company to "not privilege, degrade or prioritize any packet transmitted over its wireless infrastructure based on its source, ownership or destination" this proposal will harm Verizon's ability to provide robust and secure wireless broadband service to its customers. The delivery of high-quality and safe wireless Internet access services is a highly complex, technical undertaking. The proponents appear to have no concept of the negative technical and operational ramifications of requiring purely "neutral" routing of Internet traffic. This proposal would substantially interfere with the technical operation of Verizon's wireless broadband network and have a wide-ranging and significant impact on Verizon's business and operations. Among other things, the proposal would prevent Verizon from engaging in reasonable network management practices designed to address potential congestion, security and other wireless network problems and make the network more efficient and more widely available to all customers. The proposal would also prevent Verizon from giving priority to police, fire and military communications over its wireless broadband network in the event of natural disasters or terrorist attacks.
Importantly, this very proposal was rejected by the FCC in its recently adopted rules addressing net neutrality issues. The FCC recognized that managing a broadband network in "non-neutral" ways was critical to ensuring network integrity, providing security capabilities and reducing congestion. It further concluded that wireless networks in particular present unique operational issues and expressly permitted providers to develop differentiated services that this proposal would prevent. The proposal disregards the FCC's conclusions about the importance of network management and would impede Verizon's ability to manage its networks and offer services to meet the needs of its customers.
Finally, Verizon is committed to maintaining an open and vibrant Internet. Verizon already complies with the FCC's net neutrality rules and voluntarily operates its wireless broadband networks in accordance with additional openness principles published on its website. The Board believes that the rigid operational requirements of this proposal will not further the "openness" of the Internet; to the contrary, it would expose Verizon's wireless broadband customers to reduced service quality and security.
For these reasons, the Board strongly opposes the proposal.
The Board of Directors recommends that you vote AGAINST this proposal.
Verizon name-checks the FCC in its response, which has failed to support net neutrality on wireless networks the same way it has on wirelines services, famously using Android as a defense for its position (or lack thereof) back in 2010. Shareholders face an interesting dilemma here: as investors, obstructing the unbiased flow of data across the wireless network can be a profitable venture — particularly as services like VoLTE come online over the next year — but as customers, you just want to use your data bucket any way you choose.
We'll be watching closely to see whether the measure passes in May — if it does, it could signal a sweeping precedent for shareholders of other networks.
Thanks, Jaxon G.!