A recent ruling by a U.S. Court of Appeals in New York has opened the door for residential and business customers frustrated by poor service from startup local phone companies to potentially seek revenge from Baby Bells.
The U.S. Court of Appeals for the Second Circuit on Thursday vacated a lower court's decision to throw out a case brought by the customer of a competitive local exchange carrier (CLEC) against incumbent phone company Bell Atlantic, now called Verizon Communications Inc. The case has been remanded to the lower court, although Verizon is contemplating taking it to the U.S. Supreme Court.
The class-action antitrust case against Bell Atlantic was brought by a New York-based law firm on behalf of customers of CLECs that compete with Bell Atlantic, the incumbent local phone company in that region. The plaintiff, the law offices of Curtis Trinko LLP, claimed that three years ago Bell Atlantic interfered with the firm's ability to get dependable local service from telephone giant AT&T Corp., which provides local phone service in a few states, as well as long distance.
"It's a very difficult problem getting access to the (phone) system when you have competing carriers," said Curtis Trinko, the firm's owner. "I went weeks without phone service." Although he dealt only with AT&T, Trinko said the phone company told him problems with his service were related to Bell Atlantic's reluctance to give AT&T access to the local phone system.
Under the Telecommunications Act of 1996, incumbent local phone providers must open up their markets to competing companies, and also must lease components of their telephone networks to these competitors.
The plaintiff claimed Bell Atlantic's actions violated federal antitrust laws. Bell Atlantic argued that the case should be dismissed because the plaintiff was only indirectly harmed by its actions, and therefore had no standing under antitrust law, according to the court's finding.
Last May, the U.S. District Court for the Southern District of New York granted Bell Atlantic's motion to dismiss the case. On Thursday the Court of Appeals vacated that decision, finding that the plaintiff is asserting its own rights to sue and does have standing under antitrust law.
Verizon is currently weighing its options.
"We haven't decided what the next step will be," said a spokesman for the company, which is based in New York, adding that the company believes the case would be eligible for a hearing by the Supreme Court.
Allowing CLEC customers to sue Baby Bells under antitrust law would pose problems for the local incumbent carriers, said Patrick Brogan, assistant director of research with The Precursor Group, a research firm for investors in Washington, D.C. But it's too soon to tell which way this case will ultimately play out, he said.
"If (the Court of Appeals' finding is) upheld, then we go through the process and find out what the process yields. In the meantime, I think FCC policy is going to govern," he said. The U.S. Federal Communications Commission's regulations allow for CLECs to lodge complaints against Baby Bells that they perceive are not providing adequate access to local phone networks.
However, until the outcome of this case is determined, the telecommunications industry, which has fallen on rough financial times in the past few years, will be surrounded by even more uncertainty, Brogan said.