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SBC Hit with Antitrust Lawsuit
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."
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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..
Good. This will mean they should have less time for suing people using frames in websites, erm, I mean "Structured Document Viewer".
I think this case could have a big precedent if the plantiffs win.
It could mean that your installed DSL line could have several different choices of ISP's instead of just the ISP officially supported by the telephone company, which will lead to price competition and eventually monthly pricing more akin to dial-up pricing (e.g., US$20 to US$22 per month unlimited access).
Just two months ago, with the addition of the first 3rd party DSL provider, SBC dropped their price to $29.95/mo (which I was able to sign up for).
Granted, this wasn't due solely to the entrance of this 3rd party, but also high competition between Time Warner, the local cable modem supplier. The dramatic decrease in the pricing though just goes to show how good competition is for the consumer.
We lived about 15000 ft from the CO, and we wanted DSL. We called them, and instead of saying "GFY", they said they'd look into it and call back.
One day later, they said we could get it. Turns out, we were the first, i repeat, FIRST in that whole area for DSL. They installed a DSLAM and got rid of 2 load coils on the lines. All that for a piddly 30$ a month for a 1 year contract.
I'm usually against inflation praticies, but the cost has to come from somewhere if they're going to solve the last mile problem.
Yes, I live 8 miles away from the local city, and there's a CO near there serving OC-3 to local companies.
I live in Chicago, prime SBC territory where SBC (nee Ameritech) is fighting for higher wholesale prices for all resellers of their connectivity and dialtone, claiming they (SBC) can't compete. My home is served by an ISP out of Seattle, who finds it profitable enough to offer me great prices on a twice-resold DSL (SBC ==> Covad ==> Speakeasy.net) and a 1-year contract almost up. These other ISPs are crybabies, or trying to enter SBC markets too late to compete. Fire their MBAs and hire some that have a better penchant for marketing and planning.
SBC/Ameritech in Illinois recently was granted a huge rate increase by the State. This is on rates charged to other phone companies for their lines. Strangely enough they DID shortly thereafter announce new DSL service to some relatively rural areas...but then again, we have not gotten any closer to real competition yet.
That having been said, from the viewpoint of a customer getting DSL from a 3rd party ISP back then, I wasn't too impressed with this, primarily because it caused the formation of ASI (which I think stands for "Advanced Systems Inc.") ASI was the ILEC holding company formed to handle the DSL circuits themselves, and its creation caused a severe increase in the delay of DSL installation, and these delays went on for at least a year.
The second issue I was aware of back then was exactly what these ISPs are complaining about. At some point SBC decided that the resale price for a DSL line to ISPs would be (surprise!) exactly the same as what they charged individual customers for basic DSL (with ISP) service at the same speed.
My ISP wasn't too happy about this, but they really died because they got "hosed" after they were bought out by a CLEC. Another ISP in the area, TexasNet, wasn't too happy about it either, but didn't get rid of DSL until SBC decided that it would remove one mode of billing, I think the one that let SBC pass the charges through to the ISP (the other being having the charges go onto the customer's phone bill).
These days I get my DSL through SBC, fast and reliable but expensive (6Mbit), thanks to being near a Remote Terminal. I depend on them for nothing but a pipe, and have made a point of ignoring their stupid SBC/Yahoo nonsense. In fact, the only ISP service I can't and don't do myself is NNTP.
--
"Open source is good." - Steve Jobs
"Open source is evil." - Microsoft
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.
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.
If you were blocking sigs, you wouldn't have to read this.
Well, you shouldn't have mentioned that you are a former telcom employee. You lost a lot of credibility with that statement.
;).
First off, I want to clear up a few things about equipment costs that telcoms hide behind. They use this as their way to jack up the rates, because after salary and wage expenses, they really don't have much reason to charge a monthly fee to their customers, so they claim to be constantly upgrading their equipment. The telcoms are sneaky though, equipment works its way from the largest areas down to the rural areas so that they are re-using the same equipment where it is needed, and everyone gets an upgrade. Sounds good right!?
WRONG
The trick is how it goes from one CO to another. Each CO liquidates its old equipment to a holding company for pennies on the dollar. The holding company is usually a seperate entity whose main stakeholders are executives at the telco. The holding company then offers the equipment back to the next CO for its *original* price!!! Think of how much money is generated when just one upgrade works its way through the COs in an area. The telco has had to re-purchase the same equipment over and over again, so then they go to the local PUCO (public utilities commission) and ask if they can raise the price since the upgrade cost so much. When they get it approved it is a double win for them, they are getting more from their residual monthly fee, and they have made an ass-load of cash from their holding company entity.
For Public Utilities, it is all about how to work funny-money through the system, they don't have to worry about pleasing the customer since their is no competition. If you really think that your local telco is out to please/help you, then I have a bridge in Brooklyn I'll sell ya
SBC recently sponsored a bill in the Nevada Congress which made it legal for them to do this within the state. SB 400 (I think is the number) was sponsored by SBC and is an attempt to make it legal for SBC to charge whatever they want when dealing with 3rd party ISPs. I was in the car with a few colleagues Wednesday and one of them got a call from some of his clients who went through a 3rd party DSL service to say that their entire internet connection had been shut down because SBC cut the connection to the ISP.
Its not only monopolistic pricing, they are now, at least in Nevada (and I think I heard that Indiana or Illinois had a similar measure passed) absolved from even offering the lines to 3rd parties. We're trying to start a grassroots counter-attack in the Reno area, but its going to be a long fight for certain.
"But that's just my opinion, I could be wrong" - Dennis Miller