Saturday, December 13, 2014

Back to the future: How Title II litigation could spark antitrust actions against AT&T and Verizon

In 1984, AT&T was split into seven regional companies under a consent decree to settle a 1974 antitrust lawsuit brought by the U.S. federal government, United States v. AT&T, aimed at busting Ma Bell’s monopoly over local and long distance telephone service. Three decades later, AT&T has through a series of mergers and acquisitions reassembled itself into a telecommunications behemoth, rivaled in size only by Verizon, which was formed out of NYNEX and Bell Atlantic, two of the AT&T regional operating companies.

Now as the U.S. Federal Communications Commission considers classifying Internet-based telecommunications as a common carrier utility service under Title II of the Communications Act, the stage is being set for another potential massive antitrust court case.

Here’s how it might play out. Both AT&T and Verizon vow they will litigate to block the FCC if it opts to put in place common carrier regulation as recently urged by President Barack Obama. If that happens, it could spark complaints to Obama’s Justice Department from core content providers like Netflix and transport layer providers like Level 3 Communications that the monopolies that AT&T and Verizon enjoy over residential Internet service in their respective service territories violate the Sherman Antitrust Act and restrain interstate commerce. The Justice Department could then opt to initiate antitrust lawsuits as logical counter actions to the telcos' lawsuits against the FCC.

In the antitrust actions, the complainants could conceivably point to disputes with the two big telcos over interconnection arrangements and allege the telcos are engaging in anti-competitive behavior by deliberately degrading services delivered to their end user consumers while wholly denying other consumers services by redlining landline-delivered Internet services in selected neighborhoods and streets. They could demand the courts order the FCC to require the telcos to open their last mile networks to competitors pursuant to the 1996 amendment of the Communications Act. Or sell them off to smaller regional providers or local governments or telecom cooperatives.

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