In many regions, because of the development of the telecommunications industry and the costs of building the necessary infrastructure, regional telephone companies, known as incumbent local exchange carriers (ILECs), have developed. These ILECs own and control the lines necessary for the delivery of telecommunication services. ILECs tend to own the local telephone network as well as the telephone lines—known as the “last-mile”—that connect each individual consumer to the network. Because any company that seeks to connect with users at the end of these last-mile connections must interconnect with the ILEC, the ILEC’s facilities are commonly referred to as “bottleneck” facilities.

linkLine Communications, Inc. and several other Internet service providers (ISPs) who sell DSL access to the Internet to retail customers filed an action against one of these ILECs, SBC California, a subsidiary of SBC Communications, Inc. SBC California, through various related entities (the SBC Entities), sold wholesale DSL access to independent ISPs, as well as retail DSL access to individual consumers. linkLine’s complaint alleged, among other things, that the SBC Entities, acting as a single entity, monopolized and attempted to monopolize the regional DSL market in violation of Section 2 of the Sherman Act. linkLine asserted that the SBC Entities created a price squeeze by charging ISPs a high wholesale price in relation to the price at which defendants were providing retail services. On appeal, the U.S. Court of Appeals for the Ninth Circuit considered whether the Supreme Court’s previous decision in Verizon Communications, Inc. v. LawOffices of Curtis V. Trinko, LLP104 barred a plaintiff from claiming a Section 2 violation by virtue of an alleged price squeeze perpetrated by a competitor who also serves as the plaintiff’s supplier at the wholesale level, but who has no duty to deal with the plaintiff absent a statutory compulsion. The Ninth Circuit concluded that it did not, found that the SBC Entities’ price to the ISPs was too high, and ruled against the SBC Entities on their motion for judgment on the pleadings. The SBC Entities appealed to the U.S. Supreme Court, and the Supreme Court accepted certiorari. What arguments will the SBC Entities make in support of their claim that there is no Section 2 violation? What arguments should linkLine make? Should this type of dispute, in a regulated industry, be covered by antitrust law? Could the SBC Entities violate antitrust law without setting their retail prices below their own cost? How do you think the Supreme Court will rule? [linkLine Communications, Inc. v. SBC California, Inc., 503 F.3d 876 (9th Cir. 2007), cert. granted, 128 S. Ct. 2957 (2008).]