Telecoms Sue Over High-Speed Links from Faulhabe a discussion

[David Farber <dave () farber net>]

________________________________________
From: Gerry Faulhaber [gerry-faulhaber () mchsi com]
Sent: Tuesday, July 08, 2008 11:35 AM
To: David Farber
Subject: Re: [IP] Telecoms Sue Over High-Speed Links

[For IP, if you like]

Brett Glass and I agree on many things, and disagree on many things.  His
position on AT&T v. LinkLine is one on which we disagree.

LinkLine, an ISP, alleged that AT&T provided it with access to its Internet
backbone network at very high wholesale rates, while charging retail rates
(in competition with LinkLine) that were low.  LinkLine claimed the margin
between AT& T's wholesale and retail rates (which LinkLine had to match) was
too small for them to make a profit, and that they were the victim of a
"vertical price squeeze".

AT&T counterclaims that selling access to the backbone is an unregulated
service (which is true) and as such they have no obligation to serve
LinkLine at all, much less at a specified wholesale-retail price margin.
They further argue that in any case the appropriate test of the
wholesale-retail price margin is not whether or not a competitor such as
LinkLine can make money on the margin.

In the recent Trinko case, SCOTUS noted that executing a vertical price
squeeze doesn't make a lot of sense if the upstream supplier has no duty to
deal.  The supplier has no need for anything sophisticated like a price
squeeze; it can simply refuse to sell to the downstream firm.  However, they
note that if an industry regulator (such as the FCC) believes there ought to
be a duty to deal at specificed prices, then it is perfectly free to do so.
The Court's view was that this is a regulatory job, not an antitrust job.
If the FCC does not act on this, then absent a law to the contrary, there is
no duty to deal and vertical price squeezes are moot.  The AT&T request for
cert pointed this out, saying this is not a regulated business and they have
no duty to deal.

Brett references the "essential facilities doctrine"; the point of Trinko is
that the regulator can deem a firm a common carrier, which carries with it
the duty to deal, and this makes it equivalent to an essential facility.
Most obvious case in point: the local loop of the telephone company, which
is regulated, and for which the telcos have a duty to deal at a regulated
price.  UNEs also require the resale of the local loop at a regulated price
(a model which has been spectacularly unsuccessful, BTW).  But all this is
under the umbrella of common carriage, and it does not extend to sale of
access to the backbone.

Think of a shoe store in a mall that is the only distributor of
SuperRocket88 sneakers, and it attracts some ne'er-do-well kids that scare
off customers.  The store is within its legal rights to refuse to deal with
the ne'er-do-wells, indeed refusing them entry into their store.  This is
true even if the store is an "essential facility" for buying SuperRocket99
sneakers;-)

We may wisht the law were different (and of course IANAL), but this seems to
be the way it is.  The essential facilities doctrine in antitrust law died
off some years ago, so I wouldn't depend upon its early return.

Prof. Gerry Faulhaber Emeritus
Wharton School and Penn Law




----- Original Message -----
From: "David Farber" <dave () farber net>
To: "ip" <ip () v2 listbox com>
Sent: Tuesday, July 08, 2008 7:58 AM
Subject: [IP] Telecoms Sue Over High-Speed Links



________________________________________
From: Brett Glass [brett () lariat net]
Sent: Monday, July 07, 2008 9:41 PM
To: David Farber; ip
Subject: Re: [IP] Telecoms Sue Over High-Speed Links

Dave, and everyone:

Lawsuits against municipal systems aren't the biggest concern,
because there are plenty of private players (myself included!)
ready to step forward to ensure that there are choices in the last
mile. The lawsuit that is the true threat to broadband deployment
and competition is AT&T v. LinkLine (see
http://biz.yahoo.com/ap/080623/apfn_scotus_internet.html).

If AT&T wins this suit, the "essential facilities doctrine" will be
gutted, and ILECs will be immune from antitrust lawsuits regarding
to refusal to deal in access to essential facilities. This would
allow the ILECs to cut off third parties' wholesale access to the
backbone as well as to local DSL systems, destroying virtually all
remaining broadband competition.

--Brett Glass


> http://www.law.com/jsp/legaltechnology/pubArticleLT.jsp?id=1202422769174&rss=ltn
>
> Telecommunications companies are suing cities around the nation to
> stop the construction of publicly owned fiber optic systems to
> bring high-speed Internet, telephone and cable television to
> communities far from metropolitan centers.




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