The U.S. Supreme Court has unanimously rejected an antitrust suit brought by a consortium of small Internet companies against AT&T.
A group of Internet service providers (ISPs), led by Ontario, California-based linkLINE Communications, complained AT&T abused its strong position in the marketplace by charging smaller carriers high rates for wholesale access to its lines.
That had the effect, said the smaller ISPs, of pushing them out of the market and constituted a violation of the Sherman Antitrust Act—the bedrock of anti-monopoly law since its passage in 1890.
Suit ‘Cannot Succeed’
But the Court disagreed, in a February ruling authored by Chief Justice John Roberts. Citing as precedent the Court’s 2004 decision in Verizon v. Trinko, Roberts wrote, “a firm [has] no antitrust duty to deal with its rivals at all” and cannot be compelled to provide any service.
“The group of carriers suing AT&T tried to join a wholesale claim that cannot succeed, with a retail claim that cannot succeed, and alchemize them into a new form of antitrust liability never before recognized by this court,” Roberts wrote.
AT&T spokesman Michael Balmoris said the company was pleased with the final outcome and was happy the Supreme Court was united in the ruling.
“AT&T is gratified by the Court’s decision,” Balmoris said. “And I can tell you that we highly value our ISP customers and believe we operated, and continue to operate, properly and fairly in setting wholesale and retail prices.”
Experts Not Surprised
Andrew Grossman, an antitrust analyst at the Washington, DC-based Heritage Foundation, says the unanimous ruling against the smaller ISPs did not surprise him.
“[The decision] is thoroughly supported by economic theory and practice—and was foreshadowed by the Verizon v. Trinko decision,” Grossman said. “That ruling set the precedent for reform of how our courts interpret the Sherman Act, and makes the courts more inclined to make rulings based on sound economic thinking.”
Grossman believes the latest ruling was the culmination of an ideological shift that began a quarter-century ago in America’s courts and has resulted in judges who are more pragmatic and keen on doing what is beneficial for the consumer.
“This is another decision in a 25-year-march to economic rationality in antitrust law,” Grossman said. “The movement called ‘law in economics’ really began to exert its influence upon the high court’s opinions 25 years ago. That marked a real reversal from prior practice.
“Bottom line: This decision is a good decision for consumers,” Grossman said. “It is based on sound economic methodology, and it recognized the limits of courts’ expertise and competence.”
‘Consumer Activists’ Displeased
Self-described consumer activist groups decried the ruling, arguing the government had an obligation to force AT&T to open its lines to competitors.
Gordon Cook, editor and publisher of the Cook Report on Internet Protocol, Technology, Economics and Policy and an ally of the consortium of ISPs that sued AT&T, refused to answer questions submitted via email, but he posted a reporter’s query on his blog.
“I am someone who might well have an opinion on the question, … but [Infotech & Telecom News] … should not expect me to be sympathetic,” wrote Cook.
Competition vs. Government
Grossman says those who are angry with the decision are “people who, for ideological reasons, want the government to control and compel businesses to strike contracts with others.” Those who support AT&T, by contrast, believe “government in the marketplace is bad,” he said.
“It’s also something that economics really shows to be true,” Grossman added. “If you are anti-competition, this was a not a good ruling; it was a bad ruling for you. If you believe this was a good decision, then you believe in competition and know it was the best decision to make to lower prices and get better services.
“This is a decision that should give people hope for the future,” Grossman said. “The Supreme Court has really come down on the side of the consumer.”
Thomas Cheplick ([email protected]) writes from Cambridge, Massachusetts.
For more information …
Pacific Bell Telephone Co., DBA AT&T California, et al., v. Linkline Communications, Inc., et al., February 2009, United States Supreme Court: www.supremecourtus.gov/opinions/08pdf/07-512.pdf