BellSouth Antitrust Case Progresses

Covad Communications has won the right to file an antitrust lawsuit against BellSouth. The company also intends to file antitrust lawsuits against Verizon Communications, SBC Communications, and Qwest Communications.

by Jim Wagner of internetnews.com [August 5, 2002]

Overturning a lower court decision, the U.S. District of Appeals in Texas ruled Friday afternoon that competitive DSL provider Covad Communications has the right to file an antitrust suit against incumbent local exchange carrier (ILEC) BellSouth.

The District Court of Northern Georgia had thrown out Covad's case, agreeing with BellSouth's contention that Covad couldn't file a lawsuit on the grounds of Sherman Antitrust Act violations. The court found that the Sherman Act didn't have precedence over the Telecommunications Act of 1996, which is the legislation covering the telecom industry and enforced by the Federal Communications Commission (FCC).

Judge Rosemary Barkett, one of three district judges presiding over the case, stated in her opinion:

"The initial question before us in this case is whether Congress intended in the 1996 Act to provide immunity from antitrust violation claims for conduct covered in that Act. Congress specifically and directly stated that the two Acts were intended to be used in tandem to accomplish the congressional goals served by both Acts—namely, the stimulation of competition."

Martha Sessums, Covad spokesperson, said her company is happy with the ruling and can finally press forward with similar antitrust suits against the other three ILECs, Verizon Communications, SBC Communications, and Qwest Communications.

"We believe this ruling tips the scales favorably in our pending lawsuits against the other ILECs," she said, "in particular, the Verizon suit, which is scheduled to begin at the end of the year."

Verizon is appealing the Covad suit on the same grounds as BellSouth, but now that a federal court has ruled in their favor, Sessums believes other courts will follow suit.

BellSouth officials were unavailable for comment.

Covad is suing the telephone company on 24 counts, claiming BellSouth violated the Sherman Antitrust Act, the Telecom Act, state anti-monopoly statutes and unfair competition laws, and state laws of breach of contract.

In its appeals filing, Covad stated the ILEC delayed and hindered DSL provisioning, because "Covad's market entry and service offerings pose a real threat to BellSouth's monopoly power" and engaged in "a wide variety of unlawful, exclusionary, and anticompetitive acts with the intent and inevitable effect of injuring, thwarting, or eliminating Covad as an actual or potential customer."

These acts, Covad maintains, were party responsible for its stock value decline and Chapter 11 bankruptcy last year. Covad re-emerged from bankruptcy in December of 2001.

— End