Telco Antitrust Immunity Limited Under Trinko Precedent, DOJ's Delrahim Says

LAS VEGAS -- Telecom provider antitrust immunity under a 2003 Supreme Court case isn't sweeping, said Makan Delrahim, DOJ assistant attorney general, at the Incompas show Tuesday. In Verizon v. Trinko, justices said "the mere violation of an FCC rule that was intended to deregulate a market does not create an antitrust violation," he said in Q&A with Steptoe & Johnson's Markham Erickson. "It doesn't mean the antitrust laws don't apply. … Where there has been deregulation, if it meets our test, we would challenge either the conduct or the transaction.”

Erickson said some believe Trinko "somehow means that action that might be subject to regulation at the FCC potentially is forever foreclosed by antitrust enforcement. I think that that's clearly wrong. I think it's a more narrow holding than that. The DOJ has an important role in the telecommunications sector to prosecute its mission, confronted with conduct that violates the antitrust statutes."

"That's an important point," responded Delrahim, saying “I hear different folks [say], 'Oh, there is an immunity from the antitrust laws under the Telecom Act,' and frequently they cite Trinko. It's just not correct.” He urged people to read the ruling. “They just basically said, a violation that doesn't meet the antitrust standards does not become a violation merely by violating the Telecommunications Act. So antitrust is alive and well.”

Delrahim voiced skepticism about merger-and-acquisition behavioral remedies after noting differences between the DOJ's continuing attempt to block AT&T's takeover of Time Warner and its 2011 Comcast/NBCUniversal conditions, which ended in September. He said the substantive concern is that behavioral remedies try to force companies to do things that are against their business interests and economics. Such remedies also are time limited, and while government can hope the market will change sufficiently to address concerns, it hadn't changed that much in fixed broadband 2011-18, he said: "Those are the reasons I disfavor that type of market manipulation."

The department is required by law to review telecom transactions of a certain size, Delrahim said. He suggested he doesn't believe FCC reclassification of broadband internet access from a Communications Act Title II telecom service to a Title I information service changes Justice's basic jurisdiction, even though it restored FTC broadband jurisdiction. Asked how the DOJ and FTC would deal with broadband deals, he said, "Where it goes over a communications line, the mergers will still be reviewed by us." He noted FCC reclassification restored the FTC's consumer protection role. FTC Chairman Joe Simons said in June his agency would be "all over" any ISP anti-competitive conduct and is "very interested" in potential cable and telco deal reviews (see 1806200057).

Delrahim said DOJ is working on developing new vertical merger guidelines, calling the current "non-horizontal" merger guidelines unhelpful. DOJ-AT&T/TW litigation could affect the new guidelines, which he hopes to issue for comment in the next year. Delrahim said DOJ is working on a multilateral antitrust framework to create international norms currently lacking. He said a document could be released in November and he hopes some of 140 foreign antitrust counterparts will sign by year-end.

Incompas Notebook

Speakers on a panel were optimistic about the fiber and data-center businesses. FirstLight Fiber is "incredibly bullish on fiber," said CEO Kurt Van Wagenen, who said his company has deployed 14,000 route miles of fiber. Ryan Lahmann, Logix Fiber Networks vice president-carrier sales, said his company has 6,200 route miles and is also "very bullish on fiber." QTS Data Centers is "pretty bullish" in general, said David McCall, vice president-innovation, citing connectivity, data centers and "applications and algorithms." CEO Bill Cook said SummitIG has 500 miles of dark fiber connecting 70 data centers in the booming Northern Virginia data market. Incompas CEO Chip Pickering said he was awed by "data center alley" in Ashburn, where he saw what seemed like 100 "Superdome" data centers. Cook called that area "the magic kingdom" of data centers and said "supposedly" about 80 percent of the world's data traffic goes through Northern Virginia. Unlike a previous "build it and they will come" belief in the early internet years, "insatiable" customer demand is driving all the fiber networking, said Van Wagenen, noting his company won't build connections unless it has a signed order. He said incumbents and competitors are racing to deploy fiber. "It is demand driven," agreed Mark Boxer, OFS applications engineering manager, who called the market "very lumpy" and said that "we continue to see the rises and the falls." Lahmann said Logix added 60 data centers onto its network in the last year, a more than doubling. McCall said some business customers now want "mega data centers" and "with all that demand comes connectivity." Pickering said Incompas repositioned itself to support fiber and wireless networking. Wireless 5G networks need "massive amounts" of fiber, Boxer said.

Incompas will hold its next show Nov. 4-6, 2019, in Louisville, said Pickering and a release.