American Telephone & Telegraph Co., having ended a long court battle with the government with the settlement of the Justice Department's eight-year-old antitrust suit, is about to enter another court fray.
Tomorrow, w antitrust trial at a U.S. District Court here, AT&T will defend itself against charges levied by one of its long-distance competitors, Southern Pacific Communications Co., which offers the Sprint service.
SPCC, a subsidiary of Southern Pacific Co., is seeking $564 million in damages--a sum that would automatically be tripled if it wins the case--on the grounds that AT&T conspired to keep it out of the lucrative long-distance business.
"This is not a case in which (AT&/T) relied on its efficiency and ingenuity to make its product or service better than that of its competitors," SPCC states in a pre-trial document. "Rather, this is a case in which AT&T's persistent use of its monopoly power and exclusionary conduct to hinder every possible aspect of its competitors' operations reflects a deliberate, coordinated and nearly successful plan to eliminate competition."
The SPCC case, one of nearly three dozen pending against the Bell System, is similar to the highly publicized MCI Communications Corp. suit against AT&T two years ago. In that suit, a federal jury found that AT&T violated the antitrust laws and awarded MCI $600 million in damages, which, under antitrust laws, was tripled to $1.8 billion. That case is under appeal in Chicago.
"This case is a carbon copy of the MCI case in its complaint," says AT&T's lead counsel, Sidley & Austin's George Saunders, who was AT&T's chief attorney in the MCI trial as well as the company's top lawyer in the government's antitrust suit.
Not only are most of the issues identical, but also the same documents and witnesses will be used by both sides to make their cases.
As MCI charged, SPCC plans to argue that it lost hundreds of millions of dollars in business because AT&T refused to provide access to the local network, which would have made SPCC a competitor in the long-distance phone business. SPCC also accuses AT&T of setting its rates for large long-distance users in a way to keep companies from turning to AT&T's competition.
Even though AT&T lost at the MCI trial, Saunders is confident of prevailing at the SPCC trial and says, "we'll defend the case much the same way." The company will argue that AT&T's actions were mandated by state and federal regulators to protect its customers and the nationwide phone network from competitors who wanted to take away AT&T's most profitable high-volume, low-cost business. Additionally, AT&T will contend that SPCC's losses stemmed not from actions by the Bell System, but from poor management by SPCC.
"It is apparent that SPCC's problems are properly attributable to lawful competition, its own inefficiency and mismanagement, or both--not the alleged anticompetitive conduct of defendants--and that SPCC is seeking to reap a windfall at the expense of the Bell System and ultimately the public itself," AT&T contends in its pre-trial brief.
Southern Pacific first entered the telecommunications business in the early 1960s after a Federal Communications Commission decision opened up for private telecommunications services part of the radio spectrum that until then had been reserved for use by AT&T.
Following that decision, Southern Pacific Railroad Co. received permission to build a private microwave radio system for its own internal needs.
After MCI was licensed by the FCC, Southern Pacific "decided to capitalize on its experience by building a system which would compete with AT&T in the provision of intercity telecommunications," SPCC states in its pre-trial document.
A new subsidiary, SPCC, was formed to provide private long-distance telephone service, using microwave towers, to other companies. Initially, the SPCC network followed the railroad's rights of way between California and other points in the Southwest, but it gradually expanded to the point where SPCC now serves 174 metropolitan areas in almost all parts of the nation.
In 1978, SPCC began offering low-cost long-distance service to small businesses, and eventually to homeowners, who had relatively small communications needs.
For 1981, SPCC had operating income of $34.1 million on revenue of $234.5 million. But it contends those earnings would have been far higher if it had not been for AT&T's alleged anticompetitive actions.
So much like the MCI case is the SPCC suit that its outcome may be clouded by the current appeals battle now being waged over the $1.8 billion verdict. The appeals case has already had an affect on the SPCC suit, with both sides acknowledging that an out-of-court settlement possibly could have been reached if the appeals decision had been made.
As one lawyer close to he case said, SPCC doesn't want to settle for much less than--nor AT&T for nearly as much as--the award in the MCI case.
Unlike the MCI case, the SPCC suit will be tried by a judge because both sides have waived their rights to a jury. Deciding the case will be U.S. District Judge Charles R. Richey.
"It's an extremely complex matter and seemed like a sensible thing to waive jury rights," says SPCC's lead counsel, Stephen Ailes of Steptoe & Johnson. "It's going to be difficult to put before a judge as it is."
Yet, notes Saunders, because there is no jury, AT&T plans to call more witnesses "to get into more of the real technicalities of the case."
AT&T plans to call 150 witnesses, although most of their initial testimony will be written and will consume little trial time. SPCC says it will call about 22 witnesses.
Saunders says the trial may last until August, but Judge Richey reportedly is hoping to finish the case by July.