SBC targeted in antitrust lawsuit

Four California Internet service providers file suit against the Baby Bell, claiming that it unfairly inflated wholesale prices for DSL access.

Jim Hu
Jim Hu Staff Writer, CNET News.com
Jim Hu
covers home broadband services and the Net's portal giants.
2 min read
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.

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.

"Otherwise, (small ISPs) are doomed in the DSL business in long run, and SBC will acquire a complete monopoly of it," Maxwell Blecher of law firm Blecher & Collins said.

An SBC representative said the lawsuit is "nothing more than a re-hash of issues" raised two years ago by the California Internet Service Providers Association in a dispute, now amicably settled, that went before the Public Utilities Commission. "This (California) lawsuit's without merit," the representative said.

The lawsuit underscores an ongoing battle between the Baby Bells, which own the landlines that can carry DSL service, and smaller ISPs, which want a piece of the pie. Federal regulations require the phone giants--Verizon Communications, BellSouth, SBC and Qwest Communications International--to share the lines with third-party DSL service providers, a rule that they have begrudgingly accepted.

Since the Baby Bells were deregulated as part of the Telecommunications Act of 1996, which requires them to sell data and voice-equipped lines in bulk to third parties, some ISPs have filed lawsuits against the Baby Bells, claiming that the phone companies tried to dissuade consumers from signing up with smaller providers.

For their part, the local phone giants argue that federal regulations have impeded the growth and deployment of their broadband services by requiring them to open their gates to third parties. The regulation may have helped the cable industry--which is not required to resell its broadband lines in bulk to outsiders--to make inroads into the booming market in U.S. households for high-speed Internet services.

Competition between cable and phone companies is intensifying. Earlier this week, SBC and Qwest announced deals to bundle EchoStar's Dish Network satellite TV service with their local, long-distance, wireless and DSL offerings. The deals were in response to the challenge posed by cable companies, which can offer similar packages but only with their own video services.