The Justice Department has launched an antitrust investigation of the world's biggest telecommunications companies that connect the world with undersea fiber-optic cables for possible violations.
"The only thing we are saying publicly is we are looking at the possibility of anti-competitive practices in the international undersea cable industry," said Justice Department spokeswoman Jennifer Rose.
A spokesman for AT&T Corp. acknowledged that the company has received an 18-page "civil investigative demand," an initial request for information in investigations. But the company would not comment further.
The investigation, first reported in yesterday's editions of the Wall Street Journal, comes at a time of explosive growth and change in the undersea cable industry.
The giant telecommunications companies traditionally pool money and resources to take on the daunting task of laying the cables and providing the infrastructure to connect them to the world's networks.
The basis of the investigation is likely to stem from allegations against the large consortias of cable owners by Global Crossing Ltd., an upstart international telecommunications company that has bucked the consortium system and financed its own cable-laying ventures, allowing it to offer steep discounts.
Global Crossing declined to comment on the Justice Department moves. The company has been highly critical of the cable establishment, however, in recent filings with the Federal Communications Commission. In a memorandum filed with the FCC in March opposing an application for a trans-Pacific license sought for a new $1.2 billion cable network, Global Crossing denounced the "club system" that created and maintains the bulk of the world's undersea cables. That system is "dominated" by the world's biggest telecommunications companies: AT&T, Deutsche Telekom AG, Japanese phone giant Nippon Telegraph and Telephone Corp. and other major world carriers, the company said.
That system, the Global Crossing memorandum stated, has one chief purpose: "to enhance market power and slow the erosion of international telecommunications prices on which these large carriers' profit margins depend." The major carriers get to plan pricing and governance for the cables, Global Crossing said. That means the companies control the bottleneck for all access to the telecommunications networks in their home countries, and can raise prices for anyone not in the club -- such as Global Crossing, which has been trying to line up customers for its own trans-Pacific cable project. Global Crossing has asked the FCC to force open access to those networks.