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Caltech Antitrust Case by CLEC Against Pacific Bell Proceeds to Trial

This article was edited and reviewed by FindLaw Attorney Writers | Last reviewed March 26, 2008

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Morrison & Foerster has been monitoring developments in an antitrust lawsuit filed by Caltech International Telecom Corporation (.Caltech.), a Competitive Local Exchange Carrier (.CLEC.), against Pacific Bell. The case may have potentially far-reaching repercussions for incumbent utilities facing deregulation, as well as new competitors such as competitive local exchange carriers in the telecommunications industry and energy service providers in the deregulated energy business. In a Complaint filed June 5, 1999, Caltech alleged that Pacific Bell monopolized or attempted to monopolize local exchange service in California by adopting a series of actions to prevent customers from switching, or .migrating,. to Caltech. According to Caltech, Pacific Bell thwarted migration by causing service interruptions and disconnection of migrating customers, devising anti-competitive processes and procedures for handling customer migration, and creating .extraordinary and serious delays and a substantial backlog of orders in the hope that migrating customers [would] revert back to PACBELL.. Caltech also charged that Pacific Bell disparaged CLECs in an attempt to create doubts about the efficacy and legality of CLECs.

Since the case was filed, Pacific Bell, utilizing both the outside firm of Pillsbury, Madison & Sutro and its Law Department, has mounted an aggressive defense, including serial rounds of motions to dismiss based on state action immunity, exclusive CPUC jurisdiction and other grounds. When these motions failed, Pacific Bell filed a motion for summary judgment on January 3. Pacific Bell.s summary judgment motion argued that Pacific Bell lacks monopoly power as a matter of law, and that it lacked sufficient power to exclude competition from the local exchange market. Pacific Bell.s motion attempted to trivialize CalTech.s grievances, which included delays in processing wholesale orders, frequent service disruptions such as disconnection and loss of dial tone, and billing format problems. Pacific Bell argued that it .did work hard to ameliorate interface problems as they arose. and that it had .eliminated any backlog in order processing by the summer of 1997..

Pacific Bell also attempted to rely on the California Public Utility Commission.s (.CPUC.s.) dismissal of administrative complaints in which AT&T, MCI and Sprint alleged that Pacific Bell had failed to cooperate in their efforts to resell local exchange service. Pacific Bell emphasized that those allegations were very similar to those asserted by Caltech, including slow handling of changeover requests and disconnection of migrating customers. Pacific Bell pointed out that the CPUC found that the evidence only supported the existence of .start-up problems inevitable for this transition from monopoly to competitive service..

However, Pacific Bell.s latest effort to short-circuit the Caltech case was unsuccessful. On February 28, the District Court denied Pacific Bell.s Motion for Summary Judgment and set the Pre-Trial Conference for April 11, 2000, at which time the Court will set a trial date.

The Caltech case may have significant repercussions for other competitors of Pacific Bell who may have similar claims. In addition, the case may set a precedent that might in the future be applied to investor-owned utilities, who have experienced similar problems and delays in processing direct access service requests or so-called .DASRs,. the procedure used for departing electric customers to switch to a new electric service provider such as NewEnergy.

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