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Supreme Court To Investigate If AT&T Is Violating Antitrust Laws With Wholesale DSL Pricing

from the competition? dept

Mon, Jun 23rd 2008 4:36pm — Mike Masnick

In most cases, antitrust rules seem fairly bogus. They often are used to try to punish companies for being successful, even if they're not actually abusing any kind of monopoly situation. However, there are some cases where antitrust laws become a lot more interesting, when it comes to governments effectively granting monopoly rights to certain companies. That's what's happened with many telco services, where the government has basically provided monopoly "rights of way" to certain companies to put down infrastructure in places that no other company can. These rights of way were supposed to come with "common carrier" status, that would require the provider to allow equal access, without discrimination, even to companies that might "compete" in some manner or another with the core infrastructure provider. A few years back, however, the FCC made sure to classify broadband services as information services rather than telco services -- even if they were using the same infrastructure. This was great for the telcos, since information services weren't subject to common carrier restrictions like telco services were.

Yet, those broadband services still benefited from those rights of way, and they used their new found lack of restrictions to raise wholesale prices to smaller ISPs who offered services on their networks. A series of lawsuits followed, including an appeals court ruling that found that AT&T was abusing monopoly rights to offer prices that were simply out of line with market pricing -- making it effectively impossible for any other provider to compete. AT&T has appealed and now the Supreme Court has agreed to hear the case. This could be very important, as it could force a company like AT&T, which relies on these government granted rights of way, to offer up access to their network to potential competitors who could offer more reasonably priced services. This also could have a major impact on both the overall competitiveness of broadband in the US as well as network neutrality -- since having more competition would make it harder for AT&T and others to violate net neutrality.

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Filed Under: antitrust, common carrier, supreme court, wholesale pricing
Companies: at&t, linkline

23 Comments

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Anonymous Coward, 23 Jun 2008 @ 4:54pm

that's too difficult
AT&T response: But it's too hard to compete, so just let us what we want, ok ?
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Anonymous Coward, 23 Jun 2008 @ 5:55pm

Oh the Possibilities
Last sentence says it all. This is going to be HUGE one way or another for network neutrality.

Here's hoping SCOTUS keeps with their majority of decisions, and do the right thing.
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Anonymous Coward, 23 Jun 2008 @ 6:00pm

lets see
We do all the expensive laying of fibre optics cable, we have to do all repairs and maintenence, BUT we cant charge enough to recop our investments?

can you see AT&Ts point here?
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Derek Kerton (profile), 23 Jun 2008 @ 6:01pm

Competition...Oh Yeah.
I'd love more competition.

That's why I disagree with Mike on the separate issue of broadband service throughput caps. If caps become common, and there IS competition, what we'll see is lower tiers of service offered, like a "entry level" $10/mo for 1GB of throughput DSL service while the $40/mo service price doesn't go up.

Without zero competition, what you'd see with caps is that the $40/mo (average US cost) would get capped lower and lower, so that it is the entry-level package, and more demanding customers would have to pay more to get the throughput caps they need.

Caps + competition = good
Caps + monopoly = bad

My belief is that in the long-term, the broadband market will tend towards increased competition (through wireless, or other solutions) and that caps will be a plus. They will mean differentiated services for different customers. Since when is the US consumer thrilled with "one size fits all"?
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Anonymous Coward, 23 Jun 2008 @ 6:11pm

I am perfectly happy to let 5 of my neighbors pay for my usage... they only surf and check email
lol
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Andy, 23 Jun 2008 @ 6:31pm

common carrier
I never understood why the telcos wouldn't exploit their common carrier status and ONLY provide connection endpoint services to third-parties. Third-parties that would provide whatever kind of services they want on the lines. They wouldn't have to compete with anyone, they wouldn't need to be burdened with having to be subjected to (for the kids!) monitoring/limitation/restrictions. They would just provide the connectivity.

The problem is when the connectivity provider is also the service provider, and doesn't want to compete with other service providers who are legally allowed to use/lease the lines for a competing service.
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Matt (profile), 23 Jun 2008 @ 7:45pm

caps = bad, at all times
Here's the problem.

Introduce cap, competition introduces cap.

Instead of offering better service the new competition becomes who offers a better cap instead of who offers a better service.

I'd rather they compete on better service than "less restrictive".
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R. McCrea, 23 Jun 2008 @ 7:51pm

I'm off-topic, cuz I'm mad (and a few years late)
"the FCC made sure to classify broadband services as information services rather than telco services"

I want the friggin FCC of my Internet -- Divine Providence bastards. I concede that society demands some Internet regulation, so feel free to set up some other organization, maybe a joint university venture would be nice. No regulation at all was better than the FCC.
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Jiminy, 23 Jun 2008 @ 8:03pm

Re: lets see
Yes. I can see AT&T's point. the only problem is, they made a deal.
the government has basically provided [AT&T] monopoly "rights of way"...These rights of way were supposed to come with "common carrier" status, that would require the provider to allow equal access, without discrimination
If they didn't want to share the pipe equally, they should have thought of that before they made the deal, not after.

Say you and I agree that you will give me your Ferrari to use as I please, as long as I drive you to/from work, gratis, every day for the rest of your life. Would you accept the current gas prices as an excuse for me to stop taking you? How about if just want you to buy half the gas, or walk a mile to meet me?
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R McCrea, 23 Jun 2008 @ 8:05pm

Re: caps = bad, at all times
Concur, but have different wording.

Cap means less potential profit than no cap, thus fewer parties enter the market. (I am speculating)
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Trey, 23 Jun 2008 @ 8:13pm

Re: lets see
I believe you actually have it backwards. The courts didn't say they weren't allowed to set prices HIGH to recoup R&D, but that they were setting their prices too LOW, and thus making what little competition they have almost invisible. Which would normally be a case of supply and demand, but when your a huge company like AT&T who owns half of...God, you have to mind your P&Q's. As for caps; I don't see how this plays into net neutrality. They aren't restricting what data they move of ours, just how much. And maybe if they can get some money from the bandwidth hogs, it will stop them from tiering off the internet websites themselves.
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Nick, 23 Jun 2008 @ 8:40pm

I'm a wholesale DSL provider through AT&T
I'm a wholesale DSL provider through AT&T, and I hope that something good comes of this.

The crux of the situation here is not IF they let others play, but WHAT THE PRICE IS. You have to realize that their WHOLESALE RATE is only about $3 less than RETAIL after you've factored in all the costs involved (not just the transport).

While the wholesale rate is, indeed, less than the retail rate; it's more of a philosophical "it's not enough less to foster competition". Basically if you don't have 3 million subscribers like AT&T does, you MUST set your prices higher to have enough profit to maintain business operations - and that's just talking break even, not profit.
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Anonymous Coward, 23 Jun 2008 @ 9:17pm

Re: lets see
AC -> "We do all the expensive laying of fibre optics cable"

And what was the government subsidy for then, higher CEO bonuses ?
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Jiminy, 24 Jun 2008 @ 12:07am

Re: I'm a wholesale DSL provider through AT&T
How high enough would the margin need to be to foster competition? At least to make it attractive to try?
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Anonymous Coward, 24 Jun 2008 @ 1:57am

Re: Re: I'm a wholesale DSL provider through AT&T
one.. billlion dollars
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Nasch, 24 Jun 2008 @ 8:40am

Re: caps = bad, at all times
Instead of offering better service the new competition becomes who offers a better cap instead of who offers a better service.

How is a higher cap, or a better price for the same cap, not a better service?
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Cricket, 24 Jun 2008 @ 9:57am

Re: lets see
What's missing here is that AT&T agreed to those terms when they were made an offer they could not refuse. It was agree to the government's terms or be taken over or split up. Then the government split them up anyway while still requiring AT&T to maintain their side of the deal.
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Jiminy, 24 Jun 2008 @ 11:25am

Re: Re: lets see
So are you suggesting that they were offered a monopoly at gunpoint? They were required to become a common carrier and spend their capital to build out the infrastructure?

That doesn't seem to jibe with a definition of common carrier:

A common carrier is an organization that transports people, goods, or services and offers its services to the general public under license or authority provided by a regulatory body. A common carrier holds itself out to provide service to the general public without discrimination for the "public convenience and necessity". A common carrier must further demonstrate to the regulator that it is "fit, willing and able" to provide those services for which it is granted authority.

I am not contradicting you, I'm just surprised that your assertion could be the case.
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Anonymous Coward, 24 Jun 2008 @ 4:29pm

caps
put some bandwidh monitor on your internet and you will be surprised how much you accually use just surfing the net with todays high content webpages and ads that are constantly updating, then go to you tube, or other sites sites that stream audio and/or video... you will bust your cap in 2 weeks... the internet is gearing up for the new high bandwidth thats available. caps would kill that.
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Grem135, 24 Jun 2008 @ 4:45pm

caps2
I have a 10 meg line. I downloaded Ubuntu linux (700meg) in about 12-13 minutes, i upgraded 2 vista boxes to SP1, 2 XP boxes to SP3.... i whould have used up half of my Aussie friends monthly cap and not even surfed the web yet or played any online games. Not sent or recieved new pictures to/from friends and family. not even got on here to hear peeps think caps are a good thing when all they do is check email and bitch on here.

I for one am damn glad i dont have caps.
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Anonymous Coward, 25 Jun 2008 @ 12:29pm

Stop messing up my phone calls
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free money, 25 Jun 2008 @ 12:51pm

Supreme Court & AT&T
Andy's point "I never understood why the telcos wouldn't exploit their common carrier status and ONLY provide connection endpoint services to third-parties." Easy - then they would not receive the free millions through universal service.
Universal Service monies accounts for up to 75% of some carrier's revenue...that can be as high as $4000 a line. Who pays the USF ... mmmmm let's see, oh ya, its the subscriber. Level playing field - eliminate USF.
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Mr Wholesale Dropship, 17 Jan 2009 @ 3:31am

Yet, those broadband services still benefited from those rights of way, and they used their new found lack of restrictions to raise wholesale prices to smaller ISPs who offered services on their networks.
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