Investors Urge Federal Communications Commission to Adopt Strong Principles to Protect an Open Internet

A coalition representing socially responsible investors in media and telecommunications firms today urged the Federal Communications Commission to adopt “clear principles, policies and practices” to guarantee that the Internet remains free and open for all Americans.

The recommendations were made by the Open Media and Information Companies Initiative - or Open MIC ( – in a filing related to the FCC’s proposed rule-making on so-called “network neutrality” principles.  Joining Open MIC in the filing was Trillium Asset Management Corporation, an independent investment management firm.

 “The potential of the Internet to open new markets for commerce, new venues for cultural expression and new modalities of civic engagement is without historic parallel,” the filing said. “As widely diversified investors, we consider broad-based economic growth important to increasing the value of our portfolios. Accordingly, we view threats to the health of Internet-based commerce as a material issue.”

Open MIC is a non-profit organization that works with shareholders of publicly-held media and information technology companies to bring about responsible corporate management policies; its organizing principle is that a dynamic, open and critical media sector is good for both the business of media and the health of democratic society.

To ensure the growth of the digital economy, Open MIC told the FCC, the organization has sought to persuade the managements of major Internet Service Providers that greater transparency and accountability with regard to their Internet network management practices is in the corporations’ and their shareholders’ best interests.

One concern cited by Open MIC is “Deep Packet Inspection” (DPI) technology which permits the major carriers of Internet traffic to distinguish various sources and types of Internet content, enabling them to potentially charge and provide preferential treatment for certain content providers.  Such practices could stifle innovation on the Internet and prove especially harmful to minorities and other socially and economically disadvantaged groups, Open MIC said.

Open MIC urged the FCC to consider the conclusions of a recent study by the Institute for Policy Integrity at NYU School of Law , which found that DPI technology could enable a dangerous element of price discrimination on the Internet.   According to the study:

“DPI technology is the final component, making Internet market segmentation possible and therefore allowing price discrimination. DPI makes it possible for ISPs to identify the source and type of packets traveling over their network, and to treat them differently for pricing purposes. By using DPI to charge content providers (for) their willingness?to?pay to access subscribers, and thereby extract surplus from content providers, ISPs would be able to transfer surplus from content providers to themselves. This would amount to a significant “wealth transfer” in the Internet market—a transfer of surplus from Internet content providers to Internet Service Providers. Ending the de facto net neutrality regime could force every content provider to pay each ISP to access the ISP’s broadband subscribers. Content providers would then need to use part of their revenue to pay ISPs for access to subscribers.”

While acknowledging the need for governmental policy to encourage investment in broadband infrastructure, the Institute for Policy Integrity study concludes that discrimination based on price would be dangerous because it would:

 “...drastically reduce the value of the Internet by destroying its unrestricted end?to?end dynamic architecture. With less content, less information, and fewer websites, the network could become less valuable for users; and some users may leave the network, making it less valuable for other content providers and other users.”

Open MIC urged the FCC to adopt a strong principle regarding transparency of Internet network management, noting recent legal scholarship which suggests that there may be an emerging fiduciary duty for corporate directors to consider human rights risks. 

“Our concerns are rooted in our particular experience in dealing, as investors, with major ISPs,” Open MIC told the FCC.  “Critical to this analysis is the importance and ‘materiality’ of certain basic human rights – including freedom of expression and privacy – in the operations of media and telecommunications companies.”

A complete copy of the filing by Open MIC and Trillium Asset Management Corporation can be downloaded here.