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Verizon Appeals to Supremes

Yesterday, the U.S. Supreme Court agreed to review a case against Verizon Communications Inc. (NYSE: VZ) that experts say could mire the regional Bells in antitrust litigation.

At issue is whether the RBOCs are liable for violating antitrust laws by failing to provide competitors adequate access to their networks in a timely manner. Some also accuse the RBOCs of acting monopolistically by sending erroneous bills, or dropping links to local lines owned by competitors.

There's surely nothing new about such complaints. But up to now, most courts have followed the decision in 2000's "Goldwasser vs. Ameritech," in which a circuit court dismissed a customer's complaint against an RBOC, saying it didn't fall into the realm of antitrust laws at all but represented instead a violation of the Telecom Act of 1996. Without antitrust violations, the plaintiffs in the case weren't owed any damages, the court said. Since this ruling, many CLEC-related cases also have been dismissed in like manner.

The Supreme Court In October will review one of these cases, "Verizon Communications vs. Law Offices of Curtis Trinko," in which a New York City lawyer sued Verizon for damages, claiming his carrier, AT&T Corp. (NYSE: T), wasn't able to give the law firm and other consumers local loop service on a par with Verizon's -- because Verizon wouldn't cooperate.

While a district court dismissed the case, a circuit court upheld it on appeal. Now, the Supreme Court will consider whether the circuit court should have thrown out the antitrust claim, too. The case will be considered in October, but a final decision isn't expected for at least a year.

This latest development, however, is the crest of a tide that's been turning for months (see Courts Coming Through for CLECs).

"This is one of about thirty-six complaints, half from consumers, half from competitors," says Daniel Berninger, managing director of Pulver.com, a group that tracks telecom antitrust legislation, which held a conference call with journalists on the case today.

The Supreme Court's ruling will determine two key things, Berninger says: first, whether consumers can bring antitrust claims against RBOCs; and second, whether RBOCs are subject to damages arising from antitrust law violations.

Berninger's careful to delineate the issues. "Whether the Telecom Act replaces antitrust isn't before the Court. The Telecom Act says antitrust laws continue to apply," he says. But so far, the courts haven't given consumers the necessary green light to qualify as damaged parties under the Sherman Antitrust Act, the principal U.S. antitrust law.

If the Supreme Court rules that the appeals court was right, Berninger says it will open the doors to numerous similar cases pending. On the other hand, if the court rules the other way, "We roll back history," he says. Verizon would be absolved of about "80 percent" of the "bad deeds" that brought on the antitrust complaints. And other lawsuits would land in the deep freeze.

Another observer sees a less dramatic, but possibly more pernicious, outcome: "There's a lot of room for the Supreme Court here," says Becky Dick, an attorney with the firm of Swidler Berlin Shereff Friedman, who was on today's call with Berninger. "There are a lot of ways things could be left murky. It's hard to predict."

Indeed, it seems the most dire outcome might be akin to recent decisions from the Federal Communications Commission (FCC), which some have labeled a setback that doesn't promote either side (see The Five Stooges, Will RBOCs Spend More on Broadband?, and Powell Loses FCC Vote).

For its part, Verizon's attorney John Thorne says the carrier's "delighted" that the Supreme Court took the case. The antitrust claims have no merit, he says. What's more, numerous courts have determined that antitrust laws don't require companies to help their rivals.

Trinko's attorney wasn't available for phone queries and didn't respond to an email request for comment.

— Mary Jander, Senior Editor, Light Reading

BobbyMax 12/5/2012 | 12:28:14 AM
re: Verizon Appeals to Supremes The Telecom Act of 1996 is the most intrusive an the RBOCs. This act has brought about the bankrupcy of many Telecom companies and is also responsible for causing downturn in the telecom industry. This act alone is responsible for the demise of many CLECS.
happy_go_lucky 12/5/2012 | 12:28:02 AM
re: Verizon Appeals to Supremes It would be nice to see the ruling go against Verizon, the prople with local service today is that it is monopolistic, and the improvements that have been promised for years always take 5x years to accomplish.

Competition will be healthy for all, in general, services will improve and finally bandwidth.
fgoldstein 12/5/2012 | 12:27:17 AM
re: Verizon Appeals to Supremes > This act alone is responsible for the demise of many CLECS.

Another pithy quote from Booby Max, whose mother alone is to blame, because without her, there would be no Booby Max, just as with a Telecom Act, there would have been no CLECs, some but not all of whom have failed.

Before 1996, the ILECs had little antitrust risk for the simple reason that telecom regulations kept them in line. The Telecom Act has a "savings clause" (Section 601) which states clearly that it does not override the Sherman Antitrust Act. Deregulation of the ILECs has given them more flexibility, and Powell wants to give them more (rope to hang themselves with). The result is that they are no longer prohibited by telecom regulators from behaviors that are nonetheless prohibited by antitrust law. ILECs like VZ are not used to this -- they should have learned from Intel, which is very cognizant of antitrust law. But that's certainly not an excuse.
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