Summary of GTEi v. TCI

Nature of the Case. GTE's Internet subsidiaries sue AT&T's cable subsidiary, TCI, as well as cable company Comcast, and ISP, At Home, alleging that bundling high speed cable data transport with ISP service is a violation of Sherman Antitrust Act.

Plaintiffs. The two Plaintiffs in the suit are GTE Internetworking Incorporated and GTE Intelligent Network Services Incorporated. The GTE Corporation is not a party to the suit. The GTE Corp. is a huge diversified telecommunications company which is the incumbent local exchange carrier (ILEC) in some areas. GTE Internetworking Inc. is a wholly owned subsidiary of GTE Corp. It is the Internet backbone and services company formerly known as BBN. GTE Intelligent Network Services Inc. is a wholly owned subsidiary of GTE Internetworking Inc. It provides ISP service.

Defendants. 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.

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

AT&T is not a party to the suit; but, one of its cable subsidiaries, TCI, is. Similarly, GTE is not a party to the suit; but its Internet subsidiaries are.

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, 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, such as gte.net, AOL, and others, 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 Federal Communications Commission, 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.

Legal Theories. GTE's complaint rests on Section 1 of the Sherman Antitrust Act. GTE's complaint plead five counts against all three defendants. Three allege illegal tying, and two allege refusals to deal.

Relief Requested. Plaintiffs ask for the following relief in their Complaint.

• Treble damages.
• "For 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."
• An injunction preventing Defendants from "engaging in the anticompetitive conduct" as described in the Complaint.

The Plaintiffs did not file a motion for a temporary restraining order, motion for a preliminary injunction, or similar motion, with their complaint.

Status. GTE filed its complaint on October 25, 1999. GTE held a press conference on October 25. Nothing else has happened.

Chronology with Links to Related Materials.

• 10/25/99. Original complaint filed by Plaintiffs. See, Tech Law Journal story.

Attorneys and Other Contacts

GTEi

Thomas Yannucci, Steven Bradbury, Brett Kavanaugh, Gerald Masoudi, KIRKLAND & ELLIS, 655 15th St, NW, Suite 1200, Washington, DC, 20005.
Telephone: 202-879-5000
Facsimile: 202-879-5200

Henry Weissmann and Stuart Senator, MUNGER, TOLLES & OLSON, 355 South Grand Ave., Los Angeles, CA  90071-1560.
Telephone: 213-683-9100.
Facsimile: 213-687-3702.

James Rill, COLLIER, SHANNON, RILL & SCOTT, 3050 K Street, NW, Washington, DC, 20007.
Telephone: 202-342-8430.
Facsimile: 202-342-8451.

Thomas McGough and Gary Kaplan, REED, SMITH, SHAW & McCLAY, 435 Sixth Ave., Pittsburgh, PA, 15219.
Telephone: 412-288-3131.
Facsimile: 412-288-3063.

GTE Press Contacts: Bob Bishop, bishop@dcoffice.gte.com, 202-463-5206;
Briana Gowing, briana.gowing@hq.gte.com, 972-507-6126.

AT&T

AT&T press contacts: Jim McGann  202-457-3942 jpmcgann@att.com; and Rochelle Cohen 202-457-3933.