Supreme Court Backs Telcos. Does It Matter?

Carl Weinschenk

Much of the Telecommunications Act of 1996 is geared toward increasing competition between cable, phone and wireless players. It can be argued that the ruling succeeded; other events stimulated competition; or a combination of both occurred. The bottom line is that the telecommunications sector is a far more vibrant place than it ever has been before.


That reality, of course, is something that makes most people -- perhaps with the exception of phone company executives and shareholders -- happy. It also suggests that the real world has bypassed this Supreme Court decision, described here in an Associated Press story posted at MSNBC.


A group of consumers charged that four Baby Bells (whose identities changed during the initial suit and two appeals due to mergers and acquisitions) had agreed not to market phone and high-speed data services in each others' territories. The Supreme Court dismissed the case in a 7-2 decision because the plaintiffs had not produced actual evidence that the companies had conspired.


The plaintiffs hoped to find this evidence during the discovery phase of a trial. The court accepted the telcos argument that it was possible that the companies engaged in parallel behavior due to similar conditions in the marketplace.


Let's assume for a second that the phone companies had conspired to restrain competition by focusing on their own territories in an effort to suppress the upstarts. In that case, it's fair to say that it hasn't worked out so well. The litigants can rightly claim that such a conspiracy would make life difficult for the truly small players looking to gain a toehold. Large long-distance companies and cable operators would have been able to compete no matter what the incumbents did.


In the big picture, however, such action on the part of the incumbent likely wouldn't have too big an impact on the overall direction of the industry simply because of the massive changes in technology during the past decade. The decision is more focused on the mechanics of antitrust law. The key question was whether a plaintiff needs evidence of actual wrongdoing or just a plausible theory before the right to seek that evidence is obtained in a trial's discovery process.


While that certainly is important, it has nothing to do with the telecommunications industry. The technology has evolved so far and the telcos are so changed that any decision the courts came to wouldn't have mattered much, outside of monetary damages eventually awarded the plaintiffs if a trial had been allowed.

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