Re: Telecoms Sue Over High-Speed Links [DoJ, FTC disagree too]

[David Farber <dave () farber net>]

________________________________________
From: eackerma () gmail com [eackerma () gmail com] On Behalf Of Ethan Ackerman [eackerma () u washington edu]
Sent: Tuesday, July 08, 2008 1:04 PM
To: David Farber
Cc: gerry-faulhaber () mchsi com; brett () lariat net
Subject: Re: [IP] Telecoms Sue Over High-Speed Links [DoJ, FTC disagree too]

Greetings Dave,
(if interesting for IP)

It appears there is plenty of disagreement to go around on this issue
- the antitrust divisions of the FTC and DoJ have taken opposing
approaches on this particular case as well.

In short, the DoJ wants a category of claims antitrust violations
removed that the FTC still thinks should be a part of antitrust law.

(All the relevant filings, including the "Statement of FTC in
OPPOSITION to Brief of the United States," are at
http://www.scotuswiki.com/index.php?title=Pacific_Bell_Telephone_Co.%2Cdba_AT%26T_California_v._linkLine_Communications
) (emphasis mine)



The FTC says "claims of a predatory price squeeze in a partially
regulated industry remain viable after Trinko," while the DoJ says
roughly 'no antitrust violations for 'price-squeeze' claims" where
there's no duty to deal on one side of the market.'

This particular case is not so much about the essential facilities
doctrine, whose fate is unfortunately roughly as Prof. Faulhaber has
described.  This particular case is about how and whether "price
squeeze" claims can be shown or claimed in partially regulated
industries.

It should also be noted that the facts of this case are a real stinker
- SBC(now AT&T) charged lower retail service prices than they charged
for wholesale carriage.  Compounding things, AT&T's wholesale prices
and conduct _were_ regulated.


On Tue, Jul 8, 2008 at 11:42 AM, David Farber <dave () farber net> wrote:
> ________________________________________
> 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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