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Net neutrality 'weaklings' must answer to shareholders - FEAF

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Shareholder meetings look set to become the next battleground in tech and internet companies' fight with US politicians over net neutrality.

A self-styled conservative investment group wants Google, Yahoo!, eBay and Amazon to explain to their stock holders why they want the US government to stop broadband service providers from charging different tariffs for using the internet. The Free Enterprise Action Fund (FEAF) is looking at plans to table resolutions at the companies' next shareholder meetings, due in Spring 2007.

FEAF has already tabled a similar resolution for Microsoft's next meeting, expected in December, after the company joined Google, Yahoo!, eBay and Amazon asking Senators to back wording in proposed legislation that could stop carriers levying charges for using the internet.

What exactly is FEAF's beef?

Tom Borelli, FEAF portfolio manager, told The Register FEAF thinks companies that "run" to government - especially Microsoft who has a habit of usually going in the opposite direction when it comes to officials and regulation - are acting against "innovation." They should focus on improving their products not legislation, he said.

"Our antenna goes up when big companies seek regulation. In our view that's a sign of weakness. A free market should be out there competing and innovating, rather than running to the government to protect the market. That's a defense strategy."

Borelli, who holds 5,000 Microsoft shares, said the software maker should be more specific about the financial implications of net neutrality. FEAF wants a breakdown on the regulatory impact, legal liabilities, product development costs and customers costs that net neutrality would hypothetically cause.

FEAF is an investment group whose free-market philosophy could easily be described as pro libertarian and small government. FEAF has a particular problem with "social and political activists" it says threaten business.

The group has already used the shareholder resolution tactics over General Electric's policy on global warming, which FEAF believes is damaging shareholders' value, at an annual meeting in April. FEAF believes GE has succumbed to non-government organizations and environment advocates who Borelli calls "looters" interested in using GE's resources to "achieve their social and political agenda."

FEAF's actions can be seen in a broader US context. With the argument over net neutrality breaking down along partisan lines, lobbyists and other interested parties are now springing to the fore to shape the issue.

These groups include NetCompetition.org, which recently blasted Microsoft and Co. for attempting to protect their economic interests by imposing government regulation on the internet. NetCompetition.org's membership reads like a who's who of companies that ultimately stand to gain from an end to net neutrality.

For its part, Microsoft refused to comment on individual shareholder resolutions, but said in a statement: "While current legislation does a commendable job of ensuring that consumers will continue to enjoy internet connections unimpeded, we believe more could be done to preserve fair access for those offering online content and services."

Microsoft has reportedly asked the US Securities and Exchange Commission if it can ignore FEAF's proposed motion. As a Microsoft shareholder, FEAF is entitled to put resolutions to the board for shareholders to vote on.®

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