Supreme Court whacks DSL antitrust suit against AT&T

The Supreme Court has unanimously rejected a lawsuit against AT&T charging that the telco engaged in "price squeezing" against smaller Internet providers. A group of carriers led by Linkline Communications complained that the DSL giant charges high rates for wholesale access and low rates to consumers, effectively pushing competitors out of the market.

But the Supremes ruled on Wednesday that AT&T had "no duty to deal" with these carriers, at least as far as the Sherman Anti-Trust Act is concerned. The key to this logic is that while the Sherman Act forbids a company from monopolizing trade or commerce, it doesn't force the business to sell its services to other firms.

"If AT&T had simply stopped providing DSL transport service to the plaintiffs, it would not have run afoul of the Sherman Act," declared Chief Justice John Roberts, speaking for the court. "Under these circumstances, AT&T was not required to offer this service at the wholesale prices the plaintiffs would have preferred."

Lower courts did not see the matter this way. Linkline and three other carriers first brought their case to a California district court in 2003, charging that AT&T's retail and wholesale pricing policies effectively allowed it to "preserve and maintain its monopoly control of DSL access to the Internet." That venue agreed that AT&T's alleged squeezing techniques could run afoul of the Sherman Act. The Ninth Circuit Court of Appeals in San Francisco backed this perspective in 2007.

At issue for these courts was a ruling that the Supreme Court issued in 2004, Verizon vs. Trinko, which concluded that "a firm with no antitrust duty to deal with its rivals at all" doesn't have to provide a baseline level of service to them. As soon as the Supremes made that call, AT&T invoked Trinko in a bid to get the Linkline case dismissed. But majorities on both lower courts said that the "price squeezing" aspect of the dispute made the matter more complicated.

It got even more complex in 2005 when the Federal Communications Commission issued its Order releasing telecommunications carriers from the obligation to share their networks with unaffiliated ISPs. But in exchange for FCC permission to acquire BellSouth in late 2006, AT&T agreed to continue to offer DSL transmission access to smaller telcos "at a price not greater than the retail price in a state for . . . service that is separately purchased by customers who also subscribe to AT&T/BellSouth local telephone service."

The Supreme Court did not rule on whether AT&T has kept its end of that bargain. But it did uphold its own position in Trinko. "Trinko holds that a defendant with no antitrust duty to deal with its rivals has no duty to deal under the terms and conditions preferred by those rivals," Roberts wrote.

The Chief Justice seems to have had some fun with this case, e.g. this flourish: "[Linkline and company] 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."

And furthermore: "If AT&T can bankrupt the plaintiffs by refusing to deal altogether, the plaintiffs must demonstrate why the law prevents AT&T from putting them out of business by pricing them out of the market."

Perhaps they can demonstrate that, but they'll have to go back to the lower courts now with different arguments. The other plaintiffs involved this dispute are In-Reach Internet, Om Networks, and Nitelog, Inc.