DOJ REPORTEDLY REVIEWING TELECOMMUNICATIONS INDUSTRY

On July 6, a number of news sources reported that the DOJ has begun looking into whether large U.S. telecommunications companies such as AT&T Inc. and Verizon Communications Inc. are abusing their market power they have amassed in recent years.
The review is an indication of the Obama administration’s aggressive stance on antitrust enforcement. Christine Varney, the new antitrust chief of the Antitrust Division, clearly wants to reassert the government’s role in scrutinizing potential monopolistic and anticompetitive practices by powerful companies.

This investigation follows her speech in May where she withdrew the DOJ’s Section 2 Report. Section 2 of the Sherman Act is used in monopolization cases. The DOJ did not bring a major Section 2 case during the Bush years.

The telecommunication review is not a formal investigation of any specific company rather the review is expected to cover all areas from land-line voice and broadband service to wireless. One area that might be explored is whether big wireless carriers are hurting smaller rivals by locking up popular phones through exclusive agreements with handset makers. For example, consumers have raised questions about deals such as AT&T’s exclusive right to provide service for Apple Inc.’s iPhone in the United States. AT&T’s exclusive arrangement, however, is only one example. The DOJ also may review whether telecom carriers are unduly restricting the types of services other companies can offer on their networks. Public-interest groups have complained when carriers limit access to Internet calling services such as Skype.

Through consolidation and organic growth, AT&T and Verizon have become the two largest players and have a great deal of power with equipment makers. Combined, they have 90 million land-line customers and 60% of the 274 million U.S. wireless subscribers. They both operate large portions of the Internet backbone.

The increased scrutiny of the telecommunications industry as a result of the investigation may lead to more procompetitive behavior that will allow smaller service providers to compete more effectively.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com