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SBC Hit with Antitrust Lawsuit

Posted by michael on from the slings-and-arrows-of-outrageous-fortune dept.

mrtaco01 writes "Four Internet service providers have filed an antitrust suit against SBC Communications, alleging that the Baby Bell unfairly inflated wholesale prices for high-speed Internet access."

6 of 209 comments (clear)

  1. How is this illegal? by mandalayx · · Score: 5, Insightful

    The suit, filed Thursday in the U.S. District Court for Central California, claims that the rate SBC charged the companies for digital subscriber line (DSL) service was too expensive for them to resell profitably. Linkline Communications, Inreach Internet, Om Networks and Red Shift Internet Services are seeking $40 million in damages and a discontinuation of alleged "price squeezing" from SBC, according to the court filing.

    Attorneys for the California ISPs say San Antonio-based SBC must discontinue its pricing system in order to give smaller companies a chance to compete for DSL subscribers.

    Looking at the way the article was written, I get the impression that some ISPs are suing SBC for providing a service which was hard to resell at a higher price.

    In other industries, this is known as not having a good business plan. I'm unaware of how this is illegal and wanting clarity on this issue..

    1. Re:How is this illegal? by panda · · Score: 4, Insightful

      In other industries, this is known as not having a good business plan. I'm unaware of how this is illegal and wanting clarity on this issue..



      It's because ISPs and phone companies operate in a regulated market, and not a free market. Telcos are pretty much required (for the moment) to offer wholesale access to their lines to competitors at a rate that is fair because the telcos usually have a monopoly on the lines in a given geographical area. This was all spelled out in the Communications Reform Act of 1996 in the USA. It is up to the regulators and the courts to determine what is fair pricing, and these things are usually determined by lawsuits such as this.



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    2. Re:How is this illegal? by mblase · · Score: 4, Insightful

      In other industries, this is known as not having a good business plan.

      Actually, in other industries, this is known as falling victim to a monopoly. That's why it's illegal.

    3. Re:How is this illegal? by BrynM · · Score: 4, Insightful
      Linkline Communications, Inreach Internet, Om Networks and Red Shift Internet Services are seeking $40 million in damages
      Speakeasy is a good provider because they offer a reasonable terms of service without charging "Business Class" prices.
      I happen to be a customer of one of the litigants, Om Networks (known to me as Omsoft - the article got the name wrong). Before Omsoft, I was an SBC customer. Like some Speakeasy customers, I went with Omsoft for the business class service at regular rates as well (I have web and e-mail on a static IP). Not only did they offer better customer service than SBC (they are local and I can even go to their offices if I had to) and a Static IP address, but they seem to know how to run a company. SBC made me feel like I was inconveniencing them by being their customer. Every time I had to call SBC (they screwed up the PBX a couple of times), they had this "We wish you wouldn't call us unless we told you to buy something" attitude. It seems SBC doesn't have to care because they will get some of my money whether I like it or not.

      Omsoft service is a remarkable contrast to SBC and in my opinion worth every penny - even with the SBC price gouge. I got an error from their proxy server and sent an e-mail requesting removal from the proxy. Guess what? They did it and replied to me the same day. Link problems? I just give them a call and we troubleshoot it together - which brings up another point: They don't treat me like an idiot. Run your own server? Omsoft encourages it and sees it as a way for their customers to learn technology. It's like having a local "mom and pop" ISP again. I value Omsoft and would be pretty disturbed if SBC ran them out of business with price gouging tactics. I think I'll give my ISP a call tonight to congradulate and encourage them.

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  2. Antitrust will be the main avenue to competition by isdnip · · Score: 4, Insightful

    SBC and the other incumbent telephone companies grew up with protected monopolies. They grumbled when the FCC's Carterfone ruling in 1969 forced them to allow "foreign" attachments of customer-owned equipment like telephone sets, PBXs, answering machines and modems. (Before that, you could only rent equipment from them. A 300-baud modem was $25/month.) They grumbled when long distance competition was authorized.

    They would have grumbled when local telephone service competition was authorized in 1996, but they got, in return, permission to offer long distance service and "advanced" services such as Internet. So having gotten much in return, they're trying to weasel out of their half of the bargain. Powell's FCC has rolled back competition. They're making it next to impossible for CLECs to lease the high-frequency part of copper that's needed to offer consumer DSL service, and even cutting off some access to plain old full-price copper wire. So the CLECs like Covad won't be able to offer the ISPs a substitute for ILEC (SBC, VZ, etc.) DSL. Game! Powell also has a pending proposal that removes common carrier status from ILEC DSL, which is what this case is about -- SBC won't be required by federal regulation to offer raw DSL bit-pipe service to competitors of its Prodigy ISP service. Set! And even dial-up is coming under increased attack; many dial-up ISPs are becoming reclassified as toll calls, as the ILECs try to worm in a back-door "modem tax". It's happening -- I'm involved in some of these cases. Match!

    So the independent ISPs are being squeezed hard. Under the old pre-1996 regulations, the ILECs were not subject to much antitrust review, because regulation controlled them. Now, they're being unshackled, but they still have their inherited monopolies on essential facilities -- that's a term of art in the antitrust business. They're blatantly using these monopolies (the copper loop) to leverage sales of what should be fully-competitive businesses (ISPs like Prodigy and VZ Online). That is certainly a red flag in antitrust.

    Since the regulators (FCC) have stepped aside, relief will have to happen in the courts. A number of cases are pending now; this one looks to be particularly important. Its fate will help determine if the American public will have free access to the Internet, or whether we'll be stuck behind a corporate-administered Great Firewall of Bell, paying top dollar for limited choice.

    And with an Internet in monopoly hands, the FCC's excuse for broadcast ownership deregulation (extreme concentration of ownership of the media) is proven a lie. But Powell hopes we don't notice.

  3. Look, it's very simple by Rogerborg · · Score: 4, Insightful

    If you want genuine competition among suppliers of a service, you can't have one of the suppliers running the infrastructure that the service is supplied over. Public infrastructure should be owned by and run for the benefit of the public, not for the profit of one particular user of it.

    Welcome to the Illinois State Toll Highway Authority, Now A Wholly Owned Subsiduary of Ford Motor Co. Inc. $2 Surcharge Per Axle for Non Ford Vehicles.

    Would we tolerate that? Well, the Bell network is little different, it's just less blatant.

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