AT&T and Verizon Pressed to Detail Roles in U.S. Surveillance Efforts

Two separate but similar shareholder resolutions, from New York State’s comptroller and a large investment firm, say that the two dominant wireless carriers hurt customers’ trust by not disclosing more about the data they share with governments. The resolutions are the latest sign that the flurry of revelations about American spying efforts is putting business pressure on the companies lassoed into providing customer data to the government.

“If a customer is concerned about their privacy perhaps being compromised, they could switch to another service,” said Thomas P. DiNapoli, New York’s comptroller, the trustee of the $160.7 billion New York State Common Retirement Fund. He filed a resolution with AT&T this month demanding that the carrier publish reports on the information it collects and shares.

AT&T and Verizon Wireless, which juggle enormous amounts of phone calls and Internet data over their networks, have been quiet about the types of information they share about their customers. Internet giants like Yahoo and Google, meanwhile, have published so-called transparency reports detailing the types of information they share with government agencies.

Some tech companies, including Microsoft and Apple, have also been outspoken about their desire to release more information on government requests, including how many orders they receive to disclose the contents of email and other communications.

The comptroller and Trillium Asset Management, an independent investment adviser with over $1.3 billion in assets under management, are pushing for similar disclosure from AT&T and Verizon. They say their investments in AT&T and Verizon are at stake because a lack of trust could make customers look for other service providers.

Trillium, which describes itself as a leader in shareholder advocacy, filed its resolution with Verizon Communications this month. “Transparency is essential if individuals and businesses are to make informed decisions regarding their data,” Trillium wrote in its proposal.

Some analysts and American tech executives are also worried that the spying revelations will hurt profits. Many analysts have predicted the government’s actions would especially hurt companies with major business cloud computing services, which have been a particular target of the spying efforts. Cisco recently attributed a decline in sales in China partly to hostility toward American companies.

In the last several months, AT&T and Verizon have come under scrutiny for their cooperation with government surveillance programs. A court order revealed that the Obama administration secretly collected records for calls made between the United States and abroad, as well as calls within the United States. This month, it was revealed that the Central Intelligence Agency paid AT&T $10 million a year for access to its enormous database of phone records, including Americans’ international phone calls.

Historically, there are stronger laws protecting phone information than Internet traffic, said Harold Feld, senior vice president for Public Knowledge, a nonprofit group that focuses on information policy. That is why government requests for phone information is limited to so-called metadata like the name of a caller, the time the call was made and the recipient of the call, as opposed to tapping the phones, he said.

Compared with tech companies, the American carriers have had a closer working relationship with the government. They provide communications services to the American government. And unlike Internet companies like Google and Yahoo, which have global operations, the carriers have less at stake overseas, where foreign customers might be angry about the revelations of American surveillance.

The carriers also work with regulators to obtain spectrum licenses to operate their networks, so it benefits them to get along, Mr. Feld said. “From an economic perspective they have less incentive to fight” pressure from the government, he said. “The carriers have wanted to stay on the good side.”

Bob Varettoni, a Verizon spokesman, confirmed receiving Trillium’s proposal, but declined to comment on the topic of government requests. “We’ve received the proposal and we’re currently evaluating it,” he said.

Mark Siegel, an AT&T spokesman, said, “As standard practice we look carefully at all shareholder proposals but at this point in the process we do not expect to comment on them.”

It may be difficult for the shareholders to convince AT&T and Verizon, the two biggest American carriers, that they will lose customers because of a lack of trust. In general, very few customers leave those networks. At AT&T, for example, churn, the rate at which subscribers leave, was 1.07 percent in the third quarter, compared with 1.08 percent in the same quarter a year ago. Many customers are subscribed to family plans or corporate accounts, making it tricky to switch devices to a different carrier.

But Trillium believes an enormous amount of money is at stake. It cited the Information Technology and Innovation Foundation, which estimates that controversy around surveillance programs could cost the information technology industry at least $21 billion in business over the next three years if foreign customers lose trust in American companies.

Both resolutions may be voted on at shareholder meetings in the spring.

Mr. DiNapoli said privacy was a relatively new issue for AT&T and eventually may become a factor for customers when they choose a provider. “I certainly think there’s a heightened sensitivity that could redirect and reinform consumer behavior,” he said.

This article has been revised to reflect the following correction:

Correction: November 20, 2013

An earlier version of this article included an incomplete reference regarding a resolution filed by Trillium Asset Management. It was filed with Verizon Communications, the parent company of Verizon Wireless.