GTEi Files Antitrust Suit Against Cable Companies Over Open Access

(October 28, 1999) GTEi filed a lawsuit in U.S. District Court on October 25 against TCI, Comcast, and At Home alleging that bundling broadband data transport service with ISP service violates the Sherman Antitrust Act. GTEi's complaint requests money and an injunction.

While neither AT&T nor GTE are parties to this suit, their subsidiaries are. The lawsuit was filed in Pittsburgh, Pennsylvania, by the GTE Corp.'s subsidiary, GTE Internetworking Inc., and its subsidiary, GTE Intelligent Network Services Inc., which is an Internet service provider (ISP).

The three defendants are Telecommunications Inc. (TCI), Comcast, and At Home. TCI is a cable company which recently became a subsidiary of AT&T. Comcast is also a cable company. Both TCI and Comcast have begun to roll out broadband Internet access over their coaxial cable. At Home provides the excite@home ISP service.

GTEi's complaint rests on Section 1 of the Sherman Antitrust Act. It alleges three counts of illegal tying, and two counts of refusals to deal. The complaint seeks damages and a court declaration that "the defendants may not require customers to purchase the At Home ISP service in order to obtain high-speed data transport". No motion for temporary restraining order, or motion for preliminary injunction, was filed with the complaint.

"The Internet has exploded because of competition and has become the ubiquitous marketplace for the new millennium," said William Barr, EVP and General Counsel of GTE in a press release. "Today, Americans can choose among thousands of ISPs when they sign up for Internet access with the telephone companies. But in the high-speed Internet access world of TCI and Comcast, consumers don't have a choice. They are forced to accept @Home as their only on-ramp to the Internet." Barr preceded Janet Reno as Attorney General of the United States.

No answer has been filed with the court. However, Jim Cicconi, AT&T's General Counsel, had this to say. "Although we haven’t seen their papers, this lawsuit appears to be yet another illegitimate step in GTE’s ongoing effort to protect its own monopoly by seeking forced access regulations on would-be competitors."

"The overwhelming majority of customers must access the Internet over dial-up facilities from GTE and the other local telephone monopolies," Cicconi continued in his press release. "Now that AT&T is trying to use cable facilities to bring choice to the monopolies’ customers, GTE is using every trick in the book to delay that competition. It is preposterous and ironic for a monopoly like GTE to use the antitrust laws to block emerging competition. If the antitrust laws condemn anything, it’s GTE’s dismal record of closed markets, captive customers, high prices and poor service."

"We are confident that GTE’s latest act of desperation will prove as unsuccessful as its numerous prior litigation assaults on the pro-competition initiatives of the Congress, the FCC, and telecommunications customers," concluded Cicconi.

Cicconi, like Barr, held a number of high ranking posts in the Bush administration.

GTEi seeks treble damages and declaratory and injunctive relief. Specifically, the complaint requests:

"... a declaration that (a) the defendants may not require customers to purchase the At Home ISP service in order to obtain high-speed data transport, i.e., customers may obtain high-speed data transport without also purchasing ISP service from At Home; (b) the exclusive contract between the Cable Company Defendants and At Home is unlawful; and (c) the Cable Company Defendants may not agree to refuse to deal with non-affiliated ISPs with respect to the provision of high-speed data transport to residential customers"

This suit is just one of many legal, legislative, and regulatory battlegrounds in the war over open access.

AT&T is a large telecommunications company that is in the process of transforming itself from a long distance voice telephone company into a diversified company providing voice, data and Internet services. One part of its strategy is to acquire cable companies, such as TCI (a defendant in this case), which have cable lines into millions of homes. AT&T's goal is to use these cable networks to provide not only traditional cable entertainment, but also broadband Internet access, and telephony services.

However, ISPs, including GTE's ISP subsidiary, most of whose home customers obtain access via the low bandwidth copper phone lines, are concerned about open access to broadband pipes. There is open access to the phone lines. For example, a local phone company cannot require phone customers to also use the phone company's Internet access service. The rules for cable are different. And since AT&T is spending much money to acquire cable companies, and upgrade capacity, it does not want to have to allow competitors to free ride on its cable network. This would greatly decrease its value to AT&T.

Internet access providers want open access to broadband networks, but do not want to pay to develop them. AT&T's TCI will bundle Internet access with its own propriety Internet access service, @Home. A customer could purchase AT&T's services, and then also subscribe to another ISP, but many would not, since they would already have @Home service. ISPs argue that they will not be able to compete in a broadband world unless they are provided open access to broadband networks.

However, GTE is more than an ISP company. It has other interests. Providing cable Internet access puts AT&T in competition with GTE's DSL service, a competing broadband technology. Also, when AT&T roles out cable telephony services, that will compete with GTE's local telephone service.

Moreover, just as AT&T seeks to maintain control off its broadband cable network, the ILECs have been lobbying Congress to pass legislation that would provide that ILECs that deploy DSL will not have to sell or make available their broadband access services to their competitors.

Congress, the FCC, and many consumers are very anxious to see local telephone competition. The main promise of the Telecommunications Act of 1996 was lower phone bills through local competition. This has not yet happened. AT&T's plan to use cable to enter into local telephony competition is seen by many legislators and federal regulators as a way to provide that competition, and hopefully, lower phone bills.

Hence, requests by GTE and others to force cable companies to open their networks to competitors have been rejected by the Congress and the FCC. Congress has declined to legislate mandatory access. The FCC refused to impose any open access conditions upon AT&T and TCI in their antitrust merger review. Neither wants to inhibit local phone competition. Nor does either want to do anything that might slow down the rapid deployment of widespread broadband Internet access. Of course, while GTE argues in its complaint that open access would further competition, the FCC and Congress, so far, have concluded the opposite.

In contrast, GTE and others have had some success with local cable regulatory entities. For example, both Portland, Oregon, and Broward County, Florida, have imposed open access requirements on cable companies. There is litigation pending over the legality of these actions.