From the MFJ to Trinko: Regulation versus Antitrust and the Essential Facilities Doctrine

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From the MFJ to TrinkoRegulation versus
Antitrustand the Essential Facilities Doctrine

• Daniel F. Spulber
• Northwestern University

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Trinko

• Compelling access to essential facilities reduces
  dynamic efficiency
• Division of authority between regulators and
  antitrust courts -- rejects the courts capacity
  to oversee mandated access

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Regulation versus antitrust

• In the wake of the MFJ, there is a confusion of
  roles
• Regulation of telecommunications becomes a method
  of actively promoting competition FCC and
  Telecomm Act
• Antitrust policy and consent decrees as a form of
  ongoing regulation

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Regulation versus antitrust

• Promoting of competition differs from
  deregulation because policy makers try to
  influence the outcome of competitive markets
  effects of Telecom Act 1996
• Regulation by antitrust can impede entry and
  innovation in competitive markets -- development
  of telecom industry

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Shift of regulation to access regime

• Access to networks of incumbent carriers in
  telecom
• Creates incumbent burdens MacAvoy and Spulber
• Leads to deregulatory takings Sidak and
  Spulber
• Jeremy Rifkin, The Age of Access (2000).
• Parallels trackage rights in rail, access in
  transport in natural gas pipelines, compulsory
  licensing of intellectual property

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Transactions-based approach to access Spulber
and Yoo

• Retail access transactions between network
  firms and retail customers
• Wholesale access transactions between network
  firms and resellers
• Unbundled access transactions between network
  firms for leasing network elements such as lines
  and switches
• Platform access the set of transactions between
  network firms and suppliers of complementary
  services, such as programming on cable networks
  or Internet content providers
• Interconnection access transactions between
  network firms for origination, termination and
  transit of transmissions.

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Classification of types of regulated access to
networks
Spulber Yoo, Networks in Telecommunications
Economics Law, Cambridge University Press
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Access and antitrust

• Classification of types of access is useful in
  sorting out regulation and the 1996 Telecom Act
• Classification of types of access yields insights
  into antitrust particularly the essential
  facilities doctrine
• Each type of access has implications for network
  design, operating costs, and transaction costs

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Access and antitrust

• Retail access
• No application of essential facilities doctrine
  or antitrust generally
• Wholesale access
• Manufacturers can enter into exclusive contracts
  with retailers
• Trinko Court on Aspen Skiing no duty to sell to
  competitors at wholesale prices
• Interconnection access
• MCI sought to connect to ATT
• After Trinko, little support for interconnection
  access in antitrust

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Access and antitrust

• Platform access
• MCI-ATT involved platform access to local
  network for complementary services
• Equal access to local phone system part of the
  MFJ
• At issue in the Internet network neutrality
  debate
• Mandating platform access will reduce efficiency
  and innovation
• Multiple transmission modes should limit
  application of antitrust

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Access and antitrust

• Unbundled access
• Network elements as essential facilities
• Disruptive form of access in managing a network
• Difficult for courts to administer
• Trinko Court Compelling telecomm firms to share
  the source of their advantage is in some tension
  with the underlying purpose of antitrust law,
  since it may lessen the incentive for the
  monopolist, the rival, or both to invest in those
  economically beneficial facilities.

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Coasian analysis

• Networks can be structured through coordination
  of physical facilities owned by the firm or
  market contracts between network firms
• Boundaries of networks depend on the relative
  costs of internal coordination versus the
  transaction costs of access

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Overview

• Access should be based on market contracting
• Mandated access through regulation or antitrust
  affects efficiency of access contracts between
  network providers
• Access regulation and antitrust affect efficiency
  of the structure of networks