11998 John T. Soma, David A. Forkner, and Brian P. Jumps

Professor of Law, University of Denver College of Law; J.D., University of Illinois, Urbana, 1973; M.A., Economics, University of Illinois, Urbana, 1973; Ph.D., Economics, University of Illinois, Urbana, 1975.

B.A., Economics, University of Denver, 1993; J.D., University of Denver College of Law, 1997; Judicial Clerk for the Honorable Thomas M. Shanahan, United States District Court, District of Nebraska.

B.A., Communications, University of Wyoming, 1994; J.D., University of Denver College of Law, 1997; Associate, Gorsuch Kirgis L.L.C., Denver, Colorado.

2. Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (1996).

3. J. Gregory Sidak, Telecommunications in Jericho, 81 CAL. L. REV. 1209, 1209 (1993) (book review).

4. Robert Pitofsky, Address at the Glasser LegalWorks Seminar on Competitive Policy in Communications Industries, Washington, D.C., Competition Policy in Communications Industries: New Antitrust Approaches (Mar. 10, 1997).

5. See id.

6. See infra notes 81-93 and accompanying text.

7. See infra notes 94-102 and accompanying text.

8. See generally Elizabeth A. Nowicki, Competition in the Local Telecommunications Market: Legislate or Litigate?, 9 HARV. J.L. & TECH. 353 (1996).

9. Thomas G. Krattenmaker, The Telecommunications Act of 1996, 29 CONN. L. REV. 123, 127 (1996) ("The perception of technological balkanization has yielded to the reality of technological convergence. Since the 1934 Act, we have witnessed satellites, microwave, television, computers (with their transistors and microprocessors), fiber optics, and the World Wide Web. These have shattered our previous illusion of tightly compartmentalized technologies.").

10. These include the passage of the Federal Communications Act of 1934, the 1956 Consent Decree, the 1982 Modified Final Judgment, and the Telecommunications Act of 1996.

11. The Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (1996).

12. See Krattenmaker, supra note 8, at 127 (noting that the governmental response to the technological convergence has been one of forcing the new technologies into the regulatory framework of the old technologies thereby creating a "Procrustean bed").

13. 47 U.S.C. 151-613 (1994).

14. AT&T, the Bell Operating Companies, and Western Electric were colloquially known as the Bell System.

15. See James E. Meadows, Telecommunications Law in the Age of Convergence, 444 PLI/PAT 201, 203 (1996).

16. See id.; see also Robert B. Friedrich, Regulatory and Antitrust Implications of Emerging Competition in Local Access Telecommunications: How Congress and the FCC Can Encourage Competition and Technological Progress in Telecommunications, 80 CORNELL L. REV. 646, 655 (1995) (stating that "[t]he most important feature of the Communications Act [was] its establishment of the FCC").

17. See 47 U.S.C. 151 (1994).

18. See id. 152. This section provides in part:

Except as provided in sections 223 through 227 of this title, inclusive, and section 332 of this title, and subject to the provisions of section 301 of this title and subchapter V-A of this chapter, nothing in this chapter shall be construed to apply or to give the Commission jurisdiction with respect to (1) charges, classifications, practices, services, facilities, or regulations for or in connection with intrastate communication service by wire or radio of any carrier ....

Id.

19. See Friedrich, supra note 15, at 655 & n.50 (stating that "[i]n 1980, the Bell System's operating revenues exceeded $50 billion-almost 2% of the gross national product of the United States"); SONNY KLEINFIELD, THE BIGGEST COMPANY ON EARTH 3-12 (1981).

20. See Friedrich, supra note 15, at 655.

21. See id. The Long Lines Division provided the long-distance services while the Bell Operating Companies (BOCs) exclusively maintained the local communications networks. AT&T's Western Electric division maintained almost exclusive control over the telecommunications equipment manufacturing and leasing. See id.

22. See United States v. American Telephone & Telegraph Co., 552 F. Supp. 131, 135 (D.D.C. 1982) (AT&T).

23. See id. at 225.

24. See id. at 136, 160-95.

25. See id. at 135.

26. See id. at 135-36; see also 15 U.S.C. 1-2 (1994).

27. STAFF OF ANTITRUST SUBCOMM. OF HOUSE COMM. OF JUDICIARY, 86TH CONG., REPORT ON THE CONSENT DECREE PROGRAM OF THE DEP'T OF JUSTICE, 56 (Comm. Print 1959); see also Friedrich, supra note 15, at 656.

28. See AT&T, 552 F. Supp. at 138.

29. Friedrich, supra note 15, at 656. The Consent Decree remedy consisted of:

(i) precluding AT&T from engaging in any business other than the provision of common carrier communications services (i.e., both local and long-distance), (ii) precluding Western Electric from manufacturing equipment other than that used by the Bell System, and (iii) requiring the defendants to license their patents to all applicants upon the payment of appropriate royalties.

Meadows, supra note 14, at 206.

30. See Friedrich, supra note 15, at 656.

31. See AT&T, 552 F. Supp. at 139. The DOJ instituted this lawsuit because "the 1956 consent decree was not adequate to prevent activities that unreasonably restrained competition in telecommunications equipment markets, and did not protect against antitrust violations in the intercity telecommunications field." Id. at 139 n.18; see also Competitive Impact Statement, 47 Fed. Reg. 7170 (1982).

32. See AT&T, 552 F. Supp. at 139.

33. See id. at 225.

34. See id. at 160-95.

35. See id.

36. These included Ameritech Corporation, Bell Atlantic Corporation, BellSouth Corporation, NYNEX Corporation, Pacific Telesis Group, SBC Communications, Inc., and U.S. West, Inc. These seven BOCs commonly became known as the Baby Bells.

37. See United States v. American Telephone & Telegraph Co., 569 F. Supp. 990 (D.D.C. 1983) (LATA Opinion) (noting that the seven remaining BOCs provide local service to the 164 local access and transport areas (LATAs) created by the reorganization). A Local Operating Company could encompass several LATAs, but the LECs were only authorized to transmit telecommunications information between points within a single LATA. See id.

38. See id.

39. Competitive Impact Statement, 47 Fed. Reg. 7176 (1982).

40. Meadows, supra note 14, at 208.

41. Id.

42. See United States v. American Telephone & Telegraph Co., 552 F. Supp. 131, 160-70 (D.D.C. 1982).

43. See id. at 161-63; see also BRIDGER M. MITCHELL & INGO VOGELSANG, TELECOMMUNICATIONS PRICING: THEORY AND PRACTICE 166-67 (1991).

44. AT&T, 552 F. Supp. at 161 n.124 (detailing discriminatory practices such as denying customers of competing carriers foreign exchange service and common control switching arrangements).

45. See id. at 223.

46. Friedrich, supra note 15, at 659.

47. Id.

48. See id.

49. Id. at 659 & n.81 ("The local access sector of the telecommunications industry traditionally has been considered a natural monopoly because of the high capital costs of entry and sharply declining long-run average costs.").

50. See AT&T, 552 F. Supp. at 186-94.

51. See id. The interexchange market is also commonly known as the long-distance market. "Long-distance service is defined within the industry as service between 'local access and transport areas,' or 'LATAs.'" Meadows, supra note 14, at 215.

52. See Friedrich, supra note 15, at 660 (citing United States v. Western Elec. Co., 969 F.2d 1231, 1238 (D.C. Cir. 1992)).

53. See Meadows, supra note 14, at 215.

54. See AT&T, 552 F. Supp. at 188-90.

55. See id.

56. See id. at 231.

57. Id.

58. See United States v. Western Elec. Co., 592 F. Supp. 846, 858 (D.D.C. 1984) (noting that the court must "take into account ... the decree's fundamental principles and purposes" when ruling on a petition to waive the line-of-business restrictions).

59. See id. at 860-62.

60. See AT&T, 552 F. Supp. at 197-200.

61. See id. For example, before divestiture, a caller would only have to dial ten or eleven digits to place a long distance call with AT&T as opposed to 22 or 23 with a competing carrier. See Meadows, supra note 14, at 217.

62. AT&T, 552 F. Supp. at 196. The MFJ approved an exception to Equal Exchange Access involving the number of digits a customer had to dial. Total equality in the number of digits between AT&T and other carriers was simply not feasible because it would have required a change in the numbering system for all of the telephones in the United States. The court, therefore, approved reduction in digits to fourteen for competitors. See id. at 197-200; see also Meadows, supra note 14, at 218.

63. See Daniel F. Spulber, Deregulating Telecommunications, 12 YALE J. ON REG. 25, 34-44 (1995).

64. See Nowicki, supra note 7, at 357 n.19.

65. See id. at 357-58.

66. Id. at 358.

67. See infra notes 69-79.

68. The Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (1996).

69. Section 4 states that "[t]his Act is intended to establish a national policy framework designed to accelerate rapidly the private sector deployment of advanced telecommunications and information technologies and services to all Americans by opening all telecommunications markets to competition ...." S. 652, 104th Cong., 1st Sess. 4 (1995).

70. Section 4 included the following goals:

(1) To promote and encourage advanced telecommunications networks, capable of enabling users to originate and receive affordable, high-quality voice, data, image, graphic, and video telecommunications services.

(2) To improve international competitiveness markedly.

(3) To spur economic growth, create jobs, and increase productivity.

(4) To deliver a better quality of life through the preservation and advancement of universal service to allow the more efficient delivery of educational, health care, and other social services.

Id.

71. Section 5 set forth the list of findings. See id. 5.

72. These findings include:

(1) Competition, not regulation, is the best way to spur innovation and the development of new services. A competitive market place is the most efficient way to lower prices and increase value for consumers ...

(9) Achieving full and fair competition requires strict parity of marketplace opportunities and responsibilities on the part of incumbent telecommunications service providers as well as new entrants into the telecommunications marketplace, provided that any responsibilities placed on providers should be the minimum required to advance a clearly defined public policy goal.

Id.

73. "Local telephone service is predominantly a monopoly service .... Some States have begun to open local telephone markets to competition. A national policy framework is needed to accelerate the process." Id.

74. The section includes "[b]ecause of their monopoly status, local telephone companies and the Bell operating companies have been prevented from competing in certain markets. It is time to eliminate these restrictions. Nonetheless, transition rules designed to open monopoly markets to competition must be in place before certain restrictions are lifted." Id.

75. These include:

(11) Ensuring that all Americans, regardless of where they may work, live, or visit, ultimately have comparable access to the full benefits of competitive communications markets requires Federal and State authorities to work together affirmatively to minimize and remove unnecessary institutional and regulatory barriers to new entry and competition ...

(10) Congress should not cede its constitutional responsibility regarding interstate and foreign commerce in communications to the Judiciary through the establishment of procedures which will encourage or necessitate judicial interpretation or intervention into the communications marketplace.

Id.

76. This regime includes:

(6) Congress should establish clear statutory guidelines, standards, and time frames to facilitate more effective communications competition and, by so doing, will reduce business and customer uncertainty, lessen regulatory processes, court appeals, and litigation, and thus encourage the business community to focus more on competing in the domestic and international communications marketplace.

(7) Where competitive markets are demonstrably inadequate to safeguard important public policy goals, such as the continued universal availability of telecommunications services at reasonable and affordable prices, particularly in rural America, Congress should establish workable regulatory procedures to advance those goals ....

Id.

77. This includes:

(4) Transition rules must be truly transitional, not protectionism for certain industry segments or artificial impediments to increased competition in all markets. Where possible, transition rules should create investment incentives through increased competition. Regulatory safeguards should be adopted only where competitive conditions would not prevent anticompetitive behavior.

Id.

78. These include:

(5) More competitive American telecommunications markets will promote United States technological advances, domestic job and investment opportunities, national competitiveness, sustained economic development, and improved quality of American life more effectively than regulation ....

(12) Effectively competitive communications markets will ensure customers the widest possible choice of services and equipment, tailored to individual desires and needs, and at prices they are willing to pay.

(13) Investment in and deployment of existing and future advanced, multipurpose technologies will best be fostered by minimizing government limitations on the commercial use of those technologies.

Id.

79. This includes "[c]ompetitive communications markets, safeguarded by effective Federal and State antitrust enforcement, and strong economic growth in the United States which such markets will foster are the most effective means of assuring that all segments of the American public command access to advanced telecommunications technologies." Id.

80. See infra part VI.

81. The Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (1996).

82. The section states, "(49) Telecommunications Carrier - ... A telecommunications carrier shall be treated as a common carrier under this Act only to the extent that it is providing telecommunications services ...." 47 U.S.C. 251 (1994).

83. Id. Specifically, "(a) GENERAL DUTY OF TELECOMMUNICATIONS CARRIERS - Each telecommunications carrier has the duty-(1) to interconnect directly or indirectly with the facilities and equipment of other telecommunications carriers; ...." Id.

84. See id. 251(b) (providing that "[e]ach local exchange carrier has the following duties: (1) Resale - The duty not to prohibit, and not to impose unreasonable or discriminatory conditions or limitations on, the resale of its telecommunications services").

85. See id. 251(b)(3). Section 251(b)(3) states:

Dialing Parity - The duty to provide dialing parity to competing providers of telephone exchange service and telephone toll service, and the duty to permit all such providers to have nondiscriminatory access to telephone numbers, operator services, directory assistance, and directory listing, with no unreasonable dialing delays.

Id.

86. See id. 251(b)(4) (providing carriers with a duty to "afford access to the poles, ducts, conduits, and rights-of-way of such carrier to competing providers of telecommunications services on rates, terms, and conditions that are consistent with section 224).

87. ADDITIONAL OBLIGATIONS OF INCUMBENT LOCAL EXCHANGE CARRIERS - In addition to the duties contained in subsection (b), each incumbent local exchange carrier has the following duties:

DUTY TO NEGOTIATE - The duty to negotiate in good faith in accordance with section 252 the particular terms and conditions of agreements to fulfill the duties described in paragraphs (1) through (5) of subsection (b) and this subsection. The requesting telecommunications carrier also has the duty to negotiate in good faith the terms and conditions of such agreements.

Id. 251(c).

88. See id. 251(c)(h)(1) (defining an ILEC as "the local exchange carrier that - (A) on the date of enactment of the Telecommunications Act of 1996, provided telephone exchange service in such area").

89. Section 251(c)(2) states:

INTERCONNECTION - The duty to provide, for the facilities and equipment of any requesting telecommunications carrier, interconnection with the local exchange carrier's network -

(A) for the transmission and routing of telephone exchange service and exchange access;

(B) at any technically feasible point within the carrier's network;

(C) that is at least equal in quality to that provided by the local exchange carrier to itself or to any subsidiary, affiliate, or any other party to which the carrier provides interconnection; ....

Id. 251(c)(2).

90. Section 251(c)(3) provides:

Unbundled Access - The duty to provide, to any requesting telecommunications carrier for the provision of a telecommunications service, nondiscriminatory access to network elements on an unbundled basis at any technically feasible point on rates, terms, and conditions that are just, reasonable, and nondiscriminatory. An incumbent local exchange carrier shall provide such unbundled network elements in a manner that allows requesting carriers to combine such elements in order to provide such telecommunications service. A "network element" includes not only the physical equipment used to provide telecommunications service, but also significant functions, systems, and information used in the transmission of, telecommunications service. These would include local loops and sub-loops, switching, and signaling functions ....

Id. 251(c)(3).

91. Section 251(c)(6):

Collocation - The duty to provide, on rates, terms, and conditions that are just, reasonable, and nondiscriminatory, for physical collocation of equipment necessary for interconnection or access to unbundled network elements at the premises of the local exchange carrier, except that the carrier may provide for virtual collocation if the local exchange carrier demonstrates to the State commission that physical collocation is not practical for technical reasons or because of space limitations. In other words, incumbent LECs must allow other telecommunication carriers to place their equipment at the site of the incumbent's own switching center. Again, rates charged for using these premises must be reasonable and nondiscriminatory.

Id. 251(c)(6).

92. (4) Resale - The duty - (A) to offer for resale at wholesale rates any telecommunications service that the carrier provides at retail to subscribers who are not telecommunications carriers; and (B) not to prohibit, and not to impose unreasonable or discriminatory conditions or limitations on, the resale of such telecommunications service, except that a State commission may, consistent with regulations prescribed by the Commission under this section, prohibit a reseller that obtains at wholesale rates a telecommunications service that is available at retail only to a category of subscribers from offering such service to a different category of subscribers.

Id. 251(c)(4).

93. This includes:

(g) Continued Enforcement of Exchange Access and Interconnection Requirements - On and after the date of enactment of the Telecommunications Act of 1996, each local exchange carrier, to the extent that it provides wireline services, shall provide exchange access, information access, and exchange services for such access to interexchange carriers and information service providers in acordance with the same equal access and nondiscriminatory interconnection restrictions and obligations (including receipt of compensation) that apply to such carrier on the date immediately preceding the date of enactment of the Telecommunications Act of 1996 under any court order, consent decree, or regulation, order, or policy of the Commission, until such restrictions and obligations are explicitly superseded by regulations prescribed by the Commission after such date of enactment.

Id. 251(g).

94. See id. 251(c)(2)(d).

95. Section 252(d) establishes relatively few standards for determining whether rates for interconnection, unbundling, and resale are reasonable:

(d) Pricing Standards - (1) Interconnection and Network Element Charges - Determinations by a State commission of the just and reasonable rate for the interconnection of facilities and equipment for purposes of subsection (c)(2) of section 251, and the just and reasonable rate for network elements for purposes of subsection (c)(3) of such section - (A) shall be - (i) based on the cost (determined without reference to a rate-of-return or other rate-based proceeding) of providing the interconnection or network element (whichever is applicable), and (ii) nondiscriminatory, and (B) may include a reasonable profit. (3) Wholesale Prices for Telecommunications Services - For the purposes of section 251(c)(4), a State commission shall determine wholesale rates on the basis of retail rates charged to subscribers for the telecommunications service requested, excluding the portion thereof attributable to any marketing, billing, collection, and other costs that will be avoided by the local exchange carrier.

Id. 252(d).

96. See id. 252(a)(2) ("Any party negotiating an agreement under this section may, at any point in the negotiation, ask a State commission to participate in the negotiation and to mediate any differences arising in the course of the negotiation.").

97. See id. 252(e)(2).

98. Section 252(b)(1):

(b) AGREEMENTS ARRIVED AT THROUGH COMPULSORY ARBITRATION -

(1) ARBITRATION - During the period from the 135th to the 160th day (inclusive) after the date on which an incumbent local exchange carrier receives a request for negotiation under this section, the carrier or any other party to the negotiation may petition a State commission to arbitrate any open issues.

Id. 252(b)(1).

99. See id.

100. Section 252(b)(4)(c):

(c) The State commission shall resolve each issue set forth in the petition and the response, if any, by imposing appropriate conditions as required to implement subsection (c) upon the parties to the agreement, and shall conclude the resolution of any unresolved issues not later than 9 months after the date on which the local exchange carrier received the request under this section.

Id. 252(b)(4)(c).

101. See id. 252(e) ("Approval by State Commission - (1) Approval Required - Any interconnection agreement adopted by negotiation or arbitration shall be submitted for approval to the State commission.").

102. This includes:

Grounds for Rejection - The State commission may only reject-(A) an agreement (or any portion thereof) adopted by negotiation under subsection (a) if it finds that-(i) the agreement (or portion thereof) discriminates against a telecommunications carrier not a party to the agreement; or (ii) the implementation of such agreement or portion is not consistent with the public interest, convenience, and necessity; 252(B) an agreement (or any portion thereof) adopted by arbitration under subsection (b) if it finds that the agreement does not meet the requirements of section 251, including the regulations prescribed by the Commission pursuant to section 251, or the standards set forth in subsection (d) of this section.

Id. 252(e)(2).

103. See id. 252(e)(6).

104. Notice there is no requirement that the duty to deal be based on equipment "necessary" for the provision of telephony service.

105. See A.D. NEALE, THE ANTITRUST LAWS OF THE UNITED STATES OF AMERICA: A STUDY OF COMPETITION ENFORCED BY LAW 67 (2d ed. 1970) ("The Sherman Act requires that where facilities cannot practicably be duplicated by would-be competitors, those in possession of them must allow them to be shared on fair terms. It is illegal restraint of trade to foreclose the scarce facility.").

106. See discussion infra notes 253-66 and accompanying text.

107. See id.

108. See Northern Pac. Ry. v. United States, 356 U.S. 1, 4 (1958) (identifying economic efficiency as one of the principal goals of antitrust law); United States v. Gypsum Co., 438 U.S. 422, 441 n.16 (1978) (characterizing efficiency as procompetitive conduct); Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 605-11 (1985) (accepting that monopoly conduct challenged as being exclusionary, anticompetitive, or predatory may be justified on the basis of an efficiency explanation); ROBERT H. BORK, THE ANTITRUST PARADOX: A POLICY AT WAR WITH ITSELF 91 (1978) (noting that the sole goal of antitrust is "to improve allocative efficiency without impairing productive efficiency so greatly as to produce either no gain or a net loss in consumer welfare"). But see Robert H. Lande, Wealth Transfers as the Original and Primary Concern of Antitrust: The Efficiency Interpretation Challenged, 34 HASTINGS L.J. 65, 72-74, 77-80 (1982).

109. See Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 224 (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962)).

110. "The foremost question facing antitrust is when you get a firm that achieves monopoly and is also an essential facility, what should we do?" Katrina M. Dewey, A New Mission, Media Mergers Raise Issues About Goals of U.S. Antitrust Policy, S.F. DAILY J., Sept. 25, 1995, at 5; see also Allen Kezsbom & Alan V. Goldman, No Shortcut To Antitrust Analysis: The Twisted Journey of The "Essential Facilities" Doctrine, 1996 COLUM. BUS. L. REV. 1, 7 (1996); William B. Tye, Competitive Access: A Comparative Industry Approach to the Essential Facility Doctrine, 8 ENERGY L.J. 337, 346 (1987).

111. Aspen Highlands Skiing Corp. v. Aspen Skiing Co., 738 F.2d 1509, 1519 (10th Cir.), aff'd, 472 U.S. 585 (1985) (quoting Byars v. Bluff City News Co., 609 F.2d 843, 846 (6th Cir. 1980)).

112. See generally Pitofsky, supra note 3.

113. See PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW 736.2b, at 667 (Supp. 1996).

114. Before liability attaches, courts must discern whether a refusal to deal has a truly deleterious effect upon competition. A monopolist has no duty to deal unless doing so actually enhances competition. Absent enhanced competition, a monopolist's refusal to deal does not trigger invocation of the essential facilities doctrine. See, e.g., Rural Tel. Serv. Co., Inc. v. Feist Publications, Inc., 957 F.2d 765 (10th Cir. 1992); see also Gas Utilities Co. of Alabama, Inc. v. Southern Natural Gas Co., 1993-2 Trade Cas. (CCH) 70,316, 70,650, 70,651 (11th Cir. 1993) (invalidating the plaintiff's claim that a refusal to deal violated section 2 because it could not show that it was prepared to enter the market but for the refusal to deal, and therefore could not demonstrate that it had been foreclosed from the market). But see Oahu Gas Serv. v. Pacific Resources, Inc., 838 F.2d 360, 368 (9th Cir. 1988). In Oahu Gas, the Ninth Circuit stated that an affirmative duty to deal arises when there is no justification for refusing to aid a competitor. Id. This passage suggests that the Ninth Circuit would impose an affirmative duty to deal without first finding a negative effect on competition.

115. See Thomas A. Piraino, Jr., The Antitrust Analysis Of Network Joint Ventures, 47 HASTINGS L.J. 5, 12 (1995).

116. See, e.g., Kenneth L. Glazer & Abbott B. Lipsky, Jr., Unilateral Refusals to Deal Under Section 2 of the Sherman Act, 63 ANTITRUST L.J. 749, 756-59 (1995).

117. See Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 605 (1985); MCI Communications v. American Telephone & Telegraph Co., 708 F.2d 1081, 1133 (7th Cir. 1982), cert. denied, 464 U.S. 891 (1983).

118. See, e.g., AREEDA & HOVENKAMP, supra note 112, 736.1a (describing an essential facility as providing a substantial cost advantage).

119. Inability to duplicate the essential facility has been broadly construed as being fulfilled if it is not economically feasible or practical to duplicate the facility. See Delaware & Hudson Ry. Co. v. Consolidated Rail Corp., 902 F.2d 174, 179 (2d Cir. 1990). However, mere inconvenience or some economic loss does not suffice. See Twin Lab. v. Weider Health & Fitness, 900 F.2d 566, 570 (2d Cir. 1990).

120. See infra notes 250-69 and accompanying text.

121. Section 1 of the Sherman Act prohibits "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, ...." 15 U.S.C. 1 (1994). Section 1 has been expansively utilized to control such practices as price fixing, tying arrangements, and refusals to deal. See generally WILLIAM C. HOLMES, 1987 ANTITRUST LAW HANDBOOK 35-137 (1987).

122. Section 2 condemns "[e]very person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations." 15 U.S.C. 2 (1994).

123. See David J. Gerber, Rethinking the Monopolist's Duty to Deal: A Legal and Economic Critique of the Doctrine of "Essential Facilities," 74 VA. L. REV. 1069, 1095-98 (1988).

124. 224 U.S. 383 (1912).

125. Id. at 391.

126. Id.

127. Id. at 393-95.

128. Id. at 403 (noting that "St. Louis is one of the largest railroad centers in the world").

129. Id. at 400.

130. Id. at 410-11.

131. Id. at 400 (noting "[t]hat other companies are permitted to use the facilities of the terminal company upon paying the same charges paid by the proprietary companies").

132. Id. at 410-11.

133. Id. at 406.

134. Id. at 405.

135. Id.

136. See AREEDA & HOVENKAMP, supra note 112, 736.1b, at 646 (stating that the monopoly was "apparently 'natural'"). A "natural monopoly" is a market structure where one firm can satisfy the demand in a market at a lower cost than could two or more firms. See MARSHALL HOWARD, ANTITRUST AND TRADE REGULATION 7 (1983); F.M. SCHERER & DAVID ROSS, INDUSTRIAL MARKET STRUCTURE & ECONOMIC PERFORMANCE 111 (3d ed. 1990).

137. See AREEDA & HOVENKAMP, supra note 112, 736.1b, at 646 ("The Terminal Company's St. Louis monopoly was apparently 'natural' in the double sense that its minimum efficient scale could accommodate all the traffic and that topographical features of the terrain made construction of an alternative impossible or prohibitively expensive"); see also Terminal R.R. Ass'n, 224 U.S. at 396, 404 (noting the importance of "[t]he physical or topographical conditions peculiar to the locality").

138. Terminal R.R. Ass'n, 224 U.S. at 396-98.

139. Id.

140. See supra notes 17-23 and accompanying text.

141. Terminal R.R. Ass'n, 224 U.S. at 396-98.

142. Id. at 399-401.

143. Id. at 405.

144. Id. at 410-11.

145. Id.

146. Id. at 412-13.

147. See AREEDA & HOVENKAMP, supra note 112, 736.1b, at 645; see also Kezsbom & Goldman, supra note 109, at 4 (stating that the doctrine was derived from the Terminal Railroad decision); Robert H. Lande & Sturgis M. Sobin, Reverse Engineering of Computer Software And U.S. Antitrust Law 9 HARV. J.L. & TECH. 237, 262 (1996) (noting the essential facilities doctrine originated in part in the Terminal Railroad decision).

148. Commentators have criticized the doctrine as having nothing to do with the purposes of antitrust law. See, e.g., Phillip Areeda, Essential Facilities: An Epithet in Need of Limiting Principles, 58 ANTITRUST L.J. 841 (1990); HERBERT HOVENKAMP, FEDERAL ANTITRUST POLICY: THE LAW OF COMPETITION AND ITS PRACTICE 7.7 (1994); Scott D. Makar, The Essential Facilities Doctrine and the Health Care Industry, 21 FLA. ST. U. L. REV. 913 (1994). As one court stated:

Had the terminal facilities been owned by a firm unaffiliated with any railroad, the firm could have charged whatever prices it wanted, including prices that discriminated against some of the users (monopolists frequently price discriminate), because the antitrust laws do not regulate the prices of natural monopolists. A natural monopolist that acquired and maintained its monopoly without excluding competitors by improper means is not guilty of 'monopolizing' in violation of the Sherman Act, and can therefore charge any price that it wants, for the antitrust laws are not a price-control statute or a public-utility or common-carrier rate-regulation statute.

Blue Cross & Blue Shield United of Wisconsin v. Marshfield Clinic, 65 F.3d 1406, 1412 (7th Cir. 1995) (internal citations omitted).

149. See generally HOVENKAMP, supra note 147.

150. 326 U.S. 1 (1945).

151. Id. at 4.

152. The record demonstrated that "morning newspapers, which control 96% of the total circulation in the United States, have AP news service." Id. at 18. In fact, the record evidenced that "[e]ighty-one per cent of the morning newspapers of the United States ... [were] members, and 59% of the evening newspapers; the aggregate of circulation of these newspapers ... [was] 96% of the total circulation of morning newspapers in the United States, and 77% of that of the evening newspapers." United States v. Associated Press, 52 F. Supp. 362, 366 (S.D.N.Y. 1943), aff'd, 326 U.S. 1 (1945).

153. Associated Press, 326 U.S. at 9.

154. Id. at 10-11.

155. PHILLIP AREEDA & LOUIS KAPLOW, ANTITRUST ANALYSIS: PROBLEMS, TEXT, CASES 380-81 (4th ed. 1988).

156. The district court noted that "[t]here are a great many other news gathering associations of one sort or another in the United States; but of these, only two are comparable in size and efficiency with AP-United Press ... and International News Service." Associated Press, 52 F. Supp. at 366.

157. See id.

158. Associated Press, 326 U.S. at 24-25.

159. Id. at 26-29 (Frankfurter, J., concurring).

160. "A free press is indispensable to the workings of our democratic society." Id. at 28 (Frankfurter, J., concurring).

161. Id. at 28-29 (Frankfurter, J., concurring).

162. Id. at 46-47.

163. See AREEDA & HOVENKAMP, supra note 112, 736.1c, at 647-48.

164. See id.; Areeda, supra note 147, at 844.

165. See id.

166. 410 U.S. 366, reh'g denied, 411 U.S. 910 (1973).

167. Id. at 368 (delineating that the suit was brought against a single electric utility company).

168. Id. at 373.

169. Id. at 368, 370 & n.2.

170. Id. at 368.

171. Id. at 371.

172. Id.

173. Id. at 371, 372.

174. Id. at 372.

175. Id. at 377-82. The decree also provided "that the District Court, concluding that Otter Tail violated the antitrust laws, should be impervious to Otter Tail's assertion that compulsory interconnection or wheeling will erode its integrated system and threaten its capacity to serve adequately the public." Id. at 382.

176. Id. at 381.

177. See Areeda, supra note 147, at 848.

178. The Court held that the Federal Power Commission's authority to compel "procompetitive" conduct did not provide antitrust immunity. Otter Tail, 410 U.S. at 374.

179. Areeda, supra note 147, at 848 (noting that the existing regulatory agency enabled the court to "airily require Otter Tail to deal but never burden itself with the administrative details").

180. See generally AREEDA & HOVENKAMP, supra note 112.

181. 472 U.S. 585 (1985).

182. Aspen was more conspicuous for what it did not decide than for what it did. Many thought that the case would resolve the debate over the so-called "bottleneck" or "essential facilities" doctrine; arguably it did not .... Instead, Aspen appeared to open a Pandora's box in which a Section 2 plaintiff could claim that any refusal to deal by a monopolist that is not justified with concrete evidence supporting a valid business purpose can form the basis of Section 2 liability.

Patrick J. Ahern, Refusals To Deal After Aspen, 63 ANTITRUST L.J. 153, 157 (1994).

183. Id. at 587-90.

184. Id.

185. Id. at 590 & n.8.

186. Id. at 589-90.

187. Id. at 589.

188. Id. The Court did not worry that joint marketing by the only two firms in the Aspen market could easily facilitate price fixing among them. In fact, the Colorado Attorney General had previously filed a complaint against the two companies under Section 1, and had obtained a consent decree under which the parties were permitted to participate in joint making provided "they set their own ticket prices unilaterally before negotiating ... terms." Id. at 591 n.9.

189. Id. at 589.

190. Id. at 589-90.

191. Id. at 590-91.

192. Id. at 591.

193. Id. at 591-92.

194. Id. at 592-93.

195. Id. at 593.

196. Id. at 593-94.

197. Id. at 594.

198. Id. at 593.

199. Id.

200. Id. at 594-95.

201. Id. at 594 n.15.

202. See AREEDA & HOVENKAMP, supra note 112, 736.1g, at 657-658.

203. Aspen Skiing, 472 U.S. at 608-10.

204. Aspen Highlands Skiing Corp. v. Aspen Skiing Co., 738 F.2d 1509, 1520-21 (10th Cir. 1984), aff'd, 472 U.S. 585 (1985) (relying on United States v. Terminal Railroad Ass'n. of St. Louis, 224 U.S. 383 (1912)).

205. Aspen Highlands, 738 F.2d at 1522.

206. Aspen Skiing, 472 U.S. at 611 n.44.

207. Id. at 611.

208. As the Court explained, the refusal to cooperate may have evidentiary significance or give rise to liability under certain circumstances: "The absence of an unqualified duty to cooperate does not mean that every time a firm declines to participate in a particular cooperative venture, that decision may not have evidentiary significance, or that it may not give rise to liability in certain circumstances." Id. at 601.

209. The Court concluded that, by abandoning the All-Aspen ticket, Ski Co., a monopolist, had intentionally changed a pattern of distribution in the competitive market and therefore its conduct raised the inference that it had acted anticompetitively-on some basis other than efficiency. Id. at 603-04.

210. Id. at 608. Refusal to accept Highlands Ski Pass Coupons resulted in a decline of short-run profits thereby evidencing that Ski Co. was interested in more than reducing competition by harming smaller competitors. Id. at 610.

211. Id. at 611.

212. Id. at 595-96.

213. Id. at 597.

214. See generally Note, The Efficiency Defense: Section Two Limits on Monopolist Conduct After Aspen, 86 COLUM. L. REV. 1712 (1986); Note, Duty to Cooperate Under Section 2 of the Sherman Act: Aspen Skiing's Slippery Slope, 72 CORNELL L. REV. 1047 (1987).

215. Aspen Skiing, 472 U.S. at 600 (stating that "even a firm with monopoly power has no general duty to engage in a joint marketing program with a competitor"). In this respect, the Court reiterated what has been the law since United States v. Colgate & Co., 250 U.S. 300 (1919), that a monopolist has a general right to refuse to deal with anyone, including its competitors, "[i]n the absence of any purpose to create or maintain a monopoly." Colgate, 250 U.S. at 307; see also Becker v. Egypt News Co., 713 F.2d 363, 366 (8th Cir. 1983); Oreck Corp. v. Whirlpool Corp., 579 F.2d 126, 133 (2d Cir. 1978) (en banc) ("It has always been the prerogative of a manufacturer to decide with whom it will deal.").

216. Aspen Skiing, 472 U.S. at 597. This was reinforced by the Supreme Court in Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451 (1992). The post-Aspen cases raise several distinct issues: (1) When does a monopolist have a duty to deal absent a legitimate business justification?; (2) If an alleged monopolist must offer a business justification for its refusal to deal with a competitor, who bears the burden of proof and what is the scope of that burden?; (3) Which business justifications have been accepted or rejected since Aspen? The answers to these questions show that, even after nearly a decade, the legacy of Aspen has not been fully defined.

217. The essential facilities doctrine has been the subject of a good deal of academic and other criticism because of its potential to frustrate rather than promote competitive behavior and economic efficiency. See, e.g., Kenneth L. Glazer & Abbott B. Lipsky, Jr., Unilateral Refusals to Deal Under Section 2 of the Sherman Act, 63 ANTITRUST L.J. 749, 756-59 (1995); William Blumenthal, Three Vexing Issues Under the Essential Facilities Doctrine: ATM Networks as Illustration, 58 ANTITRUST L.J. 855 (1990); David Reiffen & Andrew N. Kleit, Terminal Railroad Revisited: Foreclosure of an Essential Facility or Simply Horizontal Monopoly?, 33 J.L. & ECON. 419 (1990).

218. See infra notes 300-41 and accompanying text.

219. 708 F.2d 1081 (7th Cir. 1983).

220. Id. at 1132-33.

221. Id. at 1092.

222. Id. at 1131 ("The interconnection issue arose in part because MCI had facilities in place to serve only a limited number of cities and in part because MCI was unable to provide the local circuits necessary to connect its long-distance service to the telephone customer.").

223. Id. (noting that "[t]he dispute thus focuse[d] on the local interconnections between MCI towers and its customers' premises and on 'multipoint' interconnections ... between MCI towers and certain AT&T long-distance circuits").

224. Id. at 1132. These included "interconnection for FX and CCSA services, both of which use switching machines, and for essentially local lines that led beyond a limited, defined geographical area." Id.

225. Id.

226. Id. Although AT&T supplied some interconnections when required by a 1973 district court injunction, it promptly terminated those connections when the injunction was vacated on appeal because the same issues were pending before the FCC. MCI alleged that these terminations were aimed at maintaining AT&T's monopoly by injuring MCI's reputation as a reliable firm and were improper because an FCC decision on the very matter of interconnections was imminent.

227. See Frank A. Edgar, Jr., The Essential Facilities Doctrine And Public Utilities: Another Layer Of Regulation?, 29 IDAHO L. REV. 283, 303 (1992/93) (noting that "[m]ost courts apply a variation of the test for liability set out by the Seventh Circuit Court of Appeals in MCI Communications Corp. v. American Telephone & Telegraph Company").

228. MCI, 708 F.2d at 1132-33 (citations omitted).

229. Id. at 1132 (noting that "a competitor's inability practically or reasonably to duplicate the essential facility" is the second element of the doctrine); Hecht v. Pro-Football, Inc., 570 F.2d 982, 992 (D.C. Cir. 1977) ("To be 'essential' a facility need not be indispensable; it is sufficient if duplication of the facility would be economically infeasible and if denial of its use inflicts a severe handicap on potential market entrants.").

230. See infra notes 253-66 and accompanying text; see also Willman v. Heartland Hosp. E., 836 F. Supp. 1522 (W.D. Mo. 1993), aff'd, 34 F.3d 605 (8th Cir. 1994) (stating that the hospital was not an essential facility with respect to surgery when the general surgical market was competitive); Thompson v. Metropolitan Multi-List, 1990-2 Trade Cas. 69,173 (N.D. Ga.) (holding multi-listing service for real estate not an essential facility where a competing service existed), aff'd in part, 934 F.2d 1566 (11th Cir. 1991).

231. See infra notes 285-99 and accompanying text.

232. See Consolidated Gas Co. v. City Gas Co., 665 F. Supp. 1493 (S.D. Fla. 1987), aff'd, 880 F.2d 297 (11th Cir.), vacated, 889 F.2d 264 (11th Cir. 1989), reh'g granted, 912 F.2d 1262 (11th Cir. 1990), rev'd per curiam on non-antitrust grounds, 499 U.S. 915 (1991) (finding that a natural gas pipeline was essential and duplication was possible, though expensive and unnecessary, because the defendant's pipeline could easily carry gas for the plaintiff as well as the defendant.).

233. See Willman, 836 F. Supp. at 1522; Thompson, 1990-2 Trade Cas. 69,173 (holding multi-listing service for real estate not an essential facility where a competing service existed).

234. For example, a telecommunications provider may hold a patent upon a particular switching device, or be required to obtain a license, or have obtained either copyright or trademark protection for a database used in connecting customers across lines.

235. See generally Lawrence Sullivan, Elusive Goals Under the Telecommunications Act, 25 SW. U. L. REV. 487, 494-507 (1996); Joseph Farrell, Creating Local Competition, 49 FED. COMM. L.J. 201, 201 (1996) (noting that "[t]he bottleneck segment of the telecommunications network is traditionally viewed as a 'natural monopoly'").

236. A bottleneck occurs when a competitive market exists on either side of a particular monopoly. Consider, for example, a situation in which the geographical and topographical conditions render only one plausible mode to transmit telecommunications across a particular area and on either side of this area exists multiple suppliers and buyers. For examples of bottlenecks within the telecommunications industry, see Nowicki, supra note 7, at 373 n.56 (concluding that "[f]or local exchange purposes, a bottleneck exists in the access service market which supplies the connection between incoming telecommunications from outside areas and the local loop receivers"); Farrell, supra note 234, at 201.

237. The telecommunications industry provides many examples of how governmental subsidies affect entry by new suppliers in regulated markets. See David L. Kaserman & John W. Mayo, The Economics of Regulation: Theory and Policy in the Postdivestiture Telecommunications Industry, in PUB. POL'Y TOWARD CORP. 141, 148 (Arnold A. Heggestad ed., 1988) (noting that unregulated entities chose to enter unsubsidized portions of the telecommunications industry).

238. A minimum market typically means there are few buyers and sellers participating in the market. For example, a sparsely populated area could only support a single telecommunications provider.

239. Natural fortuity would exist if only one facility is able to produce a resource needed for the production of advanced communication technologies.

240. See AREEDA & HOVENKAMP, supra note 112, 736.2b, at 671.

241. See, e.g., id. 736.1a, at 670 (describing an essential facility as providing a "significant cost advantage").

242. Presumptively, a monopolist depends upon substantial cost advantages to maintain its monopoly. However, using substantial cost advantage as a criteria for the invocation of the essential facilities doctrine is "too broad to be useful." See, e.g., id.

243. See id.

244. Courts and commentators have employed various modifiers to determine the degree of centrality required for invocation of the essential facility doctrine. See, e.g., id. 736.2d, at 675-76 (stating that the facility must be vital to competition). Still other courts have seemed to interlineate monopoly leveraging theory into the essential facilities doctrine. See, e.g., In re Air Passenger Computer Reservations Systems Antitrust Litig., 694 F. Supp. 1443, 1455 (C.D. Cal. 1988), aff'd, 948 F.2d 536 (9th Cir. 1991) (concluding that "when applying the essential facilities doctrine in the context of section 2 of the Sherman Act, a facility should be deemed essential to the downstream market only where control of the facility by a competitor poses a danger of monopolization of the down stream market"). This is true because:

The essential facilities doctrine is designed to deal with the danger that a monopolist in control of a scarce resource will "extend its power vertically from one level of production to an other." ... [A] facility becomes essential if, in restricting competitors' access to that facility, a monopolist gains a competitive advantage in another level of the market - that is, a market downstream or upstream from the market containing the facility itself.

Consolidated Gas Co. v. City Gas Co., 912 F.2d 1262, 1292 (11th Cir. 1990) (Tjoflaj, C.J., dissenting), vacated, 499 U.S. 915 (1991), dismissed with prejudice on remand pursuant to settlement, 931 F.2d 710 (11th Cir. 1991).

245. See Southern Pacific Comm. Co. v. American Telephone & Telegraph Co., 740 F.2d 980 (D.C. Cir. 1984) (holding that local distribution facilities are essential facilities and by using its control over access to these essential facilities, AT&T had the ability to extend its natural monopoly power in the market for local public switched telephone service to the competitive market for intercity private line service). Twin Lab., Inc. v. Weider, 900 F.2d 566, 569 (2d Cir. 1990) (determining that a valid essential facilities claim requires that the defendant possessed monopoly power in relevant antitrust market); Oahu Gas Serv., Inc. v. Pacific Resources, Inc., 838 F.2d 360, 369 n.4 (9th Cir. 1988) (rejecting, in dictum, applicability of the essential facilities theory because defendant had no monopoly power over supplies of propane to the relevant geographic market); Consul Ltd. v. Transco Energy Co., 805 F.2d 490, 494 n.11 (4th Cir. 1986) (rejecting the plaintiff's argument that "essential facility," "leveraging," and "market foreclosure" cases are not concerned with market definition). Some courts have mistakenly replaced the analysis of whether the defendant has power in the "relevant market" with a determination of whether the plaintiff is able to duplicate the defendant's facility. See MCI Communications Corp. v. American Telephone & Telegraph Co., 708 F.2d 1081, 1132 (7th Cir. 1983) (noting that "a competitor's inability practically or reasonably to duplicate the essential facility" is the second element of the doctrine); Hecht v. Pro-Football, Inc., 570 F.2d 982, 992 (D.C. Cir. 1977); Gamco, Inc. v. Providence Fruit & Produce Bldg., Inc., 194 F.2d 484, 487 (1st Cir. 1952) (suggesting that because "a monopolized resource seldom lacks substitutes," the existence of "alternatives will not excuse monopolization," so that a produce warehouse was the "most economical" facility where "[t]o impose upon plaintiff the additional expenses of developing another site, attracting buyers, and transshipping his fruits and produce by truck is clearly to extract a monopolist's advantage").

246. See International Audiotext Network v. American Telephone & Telegraph Co., 893 F. Supp. 1207 (S.D.N.Y. 1994), aff'd, 62 F.3d 69 (2d Cir. 1995) (AT&T's international calling services were not an essential facility to which the plaintiff billing service provider was denied access because numerous other firms provided similar calling services.).

247. The first step in a court's analysis must be to define the relevant market or markets involved in the case. See Soap Opera Now, Inc. v. Network Publishing Corp., 737 F. Supp. 1338, 1343 (S.D.N.Y. 1990) (supporting the proposition that an essential facilities claim exists only when ownership of the facility enables a firm to monopolize a relevant market); Olympia Equip. Leasing v. Western Union Tel. Co., 797 F.2d 370, 375 (7th Cir. 1986) (concluding the "relevant market" is the market "to which access had allegedly been foreclosed by the challenged conduct, not the market for similar business opportunities"). Other courts have mistakenly ignored the relevant market analysis. See, e.g., Woods Exploration & Producing Co. v. Aluminum Co., 438 F.2d 1286, 1306 (5th Cir. 1971). As explained in Woods Exploration:

When one must "look" for a monopoly, determining a relevant market in which to look and in which to evaluate competitive effects is obviously an essential first step. But when, with an illegal practice such as is present here in mind, one can look at an area and see the existence of monopoly power, not by inference from market share, but by determining actual ability to exclude competition and control prices, there appears no real need to go further.

Id. But cf. City of Chanute v. Williams Natural Gas Co., 678 F. Supp. 1517, 1532 (D. Kan. 1989), aff'd, 955 F.2d 641 (10th Cir. 1992) (expressly rejecting the plaintiffs' contention that Woods Exploration stands for the proposition that traditional market definition is not required under an essential facility claim, although observing that "under the 'essential facilities' doctrine, analysis of the relevant market may not take on the same implications as it does in other cases").

248. If they are essential, the owner is not using his ownership to obtain a monopoly. Therefore, antitrust liability would not attach.

249. See Data Gen. Corp. v. Grumman Sys. Support Corp., 761 F. Supp. 185 (D. Mass. 1991), aff'd, 36 F.3d 1147 (1st Cir. 1994) (holding that the defendant's diagnostic program for analyzing its computers was not an essential facility as to independent computer repairers where (1) such repairers were capable of producing their own diagnostic programs, and (2) the program was made available to purchasers of the defendant's computers); Rural Tel. Serv. Co., Inc. v. Feist Publications, Inc., 737 F. Supp. 610 (D. Kan. 1990) (holding that Rural Telephone Services Company's refusal to license its white pages listings to the publisher of a competing directory was not the denial of an essential facility; the information contained in the listings could have been obtained economically from other sources); Illinois ex rel. Hartigan v. Panhandle E. Pipe Line Co., 730 F. Supp 826 (C.D. Ill. 1990), aff'd, 935 F.2d 1469 (7th Cir. 1991) (finding no violation under the essential facilities doctrine where others could have entered the market through alternative pipelines).

250. See Grumman, 761 F. Supp. at 185.

251. See Picker Int'l. v. Leavitt, 865 F. Supp. 951, 965 (D. Mass. 1994) (holding that a replacement part for a sophisticated machine was not an essential facility where the part had adequate substitutes); Flip Side Prod. v. Jam Prods., 843 F.2d 1024 (7th Cir. 1988) (declaring that a rock concert arena was not an essential facility where several alternatives were available); McKenzie v. Mercy Hosp., 854 F.2d 365 (10th Cir. 1988) (declining to find a hospital emergency room and obstetrical care unit essential facilities for a plaintiff who performed the same services in his own private office.).

252. See analysis infra part VI.

253. See In re Air Passenger Computer Reservations Sys. Antitrust Litig., 694 F. Supp. 1443, 1455 (C.D. Cal. 1988), aff'd, 948 F.2d 536 (9th Cir. 1991). ("[W]hen applying the essential facilities doctrine in the context of section 2 of the Sherman Act, a facility should be deemed essential to the downstream market only where control of the facility by a competitor poses a danger of monopolization of the downstream market."); see also Consolidated Gas Co. v. City Gas Co., 912 F.2d 1262, 1292 (11th Cir. 1990) (Tjoflaj, C.J., dissenting), vacated, 499 U.S. 915 (1991), dismissed with prejudice on remand pursuant to settlement, 931 F.2d 710 (11th Cir. 1991). As explained in Consolidated Gas:

[T]he essential facilities doctrine is designed to deal with the danger that a monopolist in control of a scarce resource will "extend its power vertically from one level of production to an other."... [A] facility becomes essential if, in restricting competitors' access to that facility, a monopolist gains a competitive advantage in another level of the market-that is, a market downstream or upstream from the market containing the facility itself.

Id.

254. See David A. Balto, Access Demands To Payment Systems Joint Ventures, 18 HARV. J.L. & PUB. POL'Y 623, 640 (1995) (noting that the essential facilities doctrine "requires a monopolist to share its facility or business relationship where the denial of access would permit the monopolist to extend its monopoly into an adjacent market").

255. Nowicki, supra note 7, at 366.

256. Numerous cases have expressly precluded liability under the essential facilities doctrine where the denial of access did not create a risk of monopolization in the "downstream" market. See, e.g., Interface Group, Inc. v. Massachusetts Port Auth., 816 F.2d 9, 12 (1st Cir. 1987) (holding the doctrine inapplicable to Port Authority's refusal to allow a charter airline to use particular terminal because "the doctrine aims to prevent a firm with monopoly power from extending that power 'from one stage of production to another, and from one market into another'...; [thus] it is difficult to see how denying a facility to one who, like [the plaintiff], is not an actual or potential competitor (of the facility owner) could enhance or reinforce [that owner's] market power"); Official Airline Guides, Inc. v. Federal Trade Commission, 630 F.2d 920, 927-28 (2d Cir. 1980) (finding the doctrine inapplicable where a monopolist has "no purpose to restrain competition or to enhance or expand his monopoly, and does not act coercively").

257. See generally Pitofsky, supra note 3.

258. For example, a network-controlling firm may deny access to a second firm for reasons unrelated to competition. See Drinkwine v. Federated Publications, 780 F.2d 735, 740 (9th Cir. 1985) (noting that a newspaper's refusal to carry a rival's advertising insert was based on the rival's failure to pay bills); HyPoint Tech., Inc. v. Hewlett Packard Co., 949 F.2d 874 (6th Cir. 1991) (finding that although the defendant's withdrawal of a favorable service option hurt the plaintiff's business, it effectively increased competition because it lowered the standard of service, making it easier for competitors to enter the business).

259. See AREEDA & HOVENKAMP, supra note 112, 736.2b, at 671.

260. See id.

261. See Mid-South Grizzlies v. National Football League, 720 F.2d 772 (3rd Cir. 1983) (acknowledging that the essential facilities' goal of competition enhancement would not be fostered by allowing a non-competitor access to an essential facility); Interface Group, 816 F.2d at 11 (noting that "it is difficult to see how denying use of a facility to one who ... is not an actual or potential competitor could enhance or reinforce the monopolist's market power"); Garshman v. Universal Resource Holding, 824 F.2d 223 (3rd Cir. 1987) (refusing to apply the essential facilities doctrine when the plaintiff was not in competition with the essential facility owner).

262. See LaPeyre v. Federal Trade Commission, 366 F.2d 117, 120 (5th Cir. 1966); Official Airline Guides, Inc. v. Federal Trade Commission, 630 F.2d 920 (2d Cir. 1980). Although not stating this explicitly, the decision in Byars v. Bluff City News Co., 609 F.2d 843, 860 (6th Cir. 1979), in which the essential facility charge was brought by a customer-competitor, implicitly supports extending the doctrine to non-competitors. The FTC had not found it necessary that the denial be to a competitor in order to grant relief. But see Grand Caillou Packing Co., 65 F.T.C. 799, 868-69 (1964), aff'd in part, rev'd in part sub nom. LaPeyre, 366 F.2d at 117 (separate opinion of Commissioner Elman) (suggesting that a finding of harm to competitor was not necessary for a violation of section 5 of the Federal Trade Commission Act). The Fifth Circuit upheld the portion of the FTC decision concerning the denial to a non-competitor. See LaPeyre, 366 F.2d at 121-22; see also Getaway Travel, Inc. v. Philadelphia, No. 88-3126, 1989 U.S. Dist. LEXIS 2673, at *3 (E.D. Pa. Mar. 16, 1989) (holding that the doctrine was inapplicable to the denial of airline terminal counter space to a travel agency because such space was not essential to the conduct of agency business and the agency was "not a competitor of any defendant which has monopoly control over the Philadelphia airport.").

263. See Official Airline Guides, 630 F.2d at 920 (acknowledging that arbitrary refusals to deal among different customers in a market in which a monopolist does not directly participate does not impair competition in a downstream market).

264. See id. (opining that a monopolist is legally free to refuse to deal with non-competitors, so long as the monopolist does not have a purpose to restrain competition or enhance or expand monopoly power). The Official Airline Guides court concluded that refusing to deal with a non-competitor neither evinced an anti-discriminatory purpose nor enhanced monopoly power. In reaching this conclusion, however, the court agreed that competition in another market might improve if access to an essential facility was ordered. Additionally, hindered access often hurts the monopolist. See Weiss v. York Hospital, 745 F.2d 786 (3d Cir. 1984) (denying an essential facilities claim on the grounds that the monopolist denied access to a non-competitior and no incentive existed to monopolize a downstream market because providing access would maximize the monopolist's revenue). Thus, denials of access are often undergirded by a legitimate business justification or constitute a bad business decision for which antitrust policy is ill-equipped to remedy. See AREEDA & HOVENKAMP, supra note 112, 736.2, at 685.

265. See TV Communications Network v. ESPN, 767 F. Supp. 1062 (D. Colo. 1991), aff'd, 964 F.2d 1022 (10th Cir. 1992) (holding that the essential facilities doctrine did not apply to a cable television programmer's refusal to deal with a cable operator because the two were not competitors, but stood in a vertical relationship); Garshman v. Universal Resources Holding, Inc., 824 F.2d 223, 230 (3rd Cir. 1987); Interface Group, Inc. v. Massachusetts Port Auth., 816 F.2d 9, 12 (1st Cir. 1987). Courts usually permit unilateral refusals by a defendant who does not compete with the plaintiff in another market. See, e.g., Official Airline Guides, 630 F.2d at 920 (single publisher of an airline flight schedule guide not liable for refusal to include plaintiff airlines); Homefinders of Am., Inc. v. Providence Journal Co., 621 F.2d 441 (1st Cir. 1980) (monopolist newspaper need not sell space to a rental service bureau); Mannington Mills, Inc. v. Congoleum Indus., 610 F.2d 1059, 1069 (3d Cir. 1979) ("We seriously doubt that an arbitrary or discriminatory unilateral refusal to deal by a lawful monopolist is actionable under 2 of the Sherman Act."); Fulton v. Hecht, 580 F.2d 1243, 1247-48 (5th Cir. 1978) (single-firm owner of race track); Fishman v. Wirtz, 807 F.2d 520 (7th Cir. 1986). Similarly, while not couching the issue in essential facilities terms, the Second Circuit found that the Official Airline Guide was not required to provide access to a customer who was not a competitor. See Official Airline Guide, 630 F.2d at 927-28.

266. See Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 608-10 (1985) (placing an affirmative duty to deal on a monopolist that controls an essential facility, absent a legitimate business justification). A duty to deal will not be imposed where a monopolist offers a legitimate business justification to excuse its refusal. See, e.g., Town of Massena v. Niagara Mohawk Power Corp., 1980-82 Trade Cas. (CCH) 63,526 (N.D.N.Y. Sept. 8, 1980) (permitting a power company to refuse to 'wheel' power to a municipally owned retail electric distribution system because the town's subtransmission plan was unsound from an engineering standpoint). Courts have recognized valid business justifications in a wide range of circumstances. See, e.g., Almeda Mall, Inc. v. Houston Lighting & Power Co., 615 F.2d 343 (5th Cir. 1980) (refusal to sell electricity to mall owners for resale to business tenants); Homefinders of Am., 621 F.2d at 441 (refusal to print admittedly deceptive advertisement); Aspen Skiing, 472 U.S. at 605, 608 (determining that liability under an attempted monopolization analysis was predicated on the defendant's "failure to offer any efficiency justification" or other "valid business reasons" for its refusal to continue joint ski lift ticket marketing program with competitor); In re Air Passenger Computer Reservations Sys. Antitrust Litig., 694 F. Supp. 1443, 1456 (C.D. Cal. 1988), aff'd, 948 F.2d 536 (9th Cir. 1991); Laurel Sand & Gravel, Inc. v. CSX Transp., Inc., 704 F. Supp. 1309, 1325 (4th Cir. 1989), aff'd, 924 F.2d 539, 545 (1991) (finding that it was "not feasible" for CSX to provide trackage rights without altering the very basic nature of its permissible business).

267. See AREEDA & HOVENKAMP, supra note 112, at 660.

268. See Areeda, supra note 147, at 849.

269. See Oahu Gas Serv. v. Pacific Resources, 838 F.2d 360 (9th Cir. 1988) (refusing to hold a defendant liable where the defendant had both economically legitimate motives for refusing to deal with competitors and a desire to restrict the supply of goods). "A legitimate purpose renders any accompanying purpose irrelevant." AREEDA & HOVENKAMP, supra note 112, 736.2, at 688.

270. Data General Corp. v. Grumman Sys. Support Corp., 36 F.3d 1147, 1183 (1st Cir. 1994).

271. See Areeda, supra note 147, at 850-51.

272. See id.

273. See City of Malden v. Union Elec. Co., 887 F.2d 157 (8th Cir. 1989) (noting that the owner of an essential facility, an electric transmission line, could refuse to deal if dealing was impractical under a regulatory tariff); Illinois ex rel. Hartigan v. Panhandle E. Pipe Line Co., 730 F. Supp 826 (C.D. Ill. 1990), aff'd, 935 F.2d 1469 (7th Cir. 1991) (finding no illegal denial of an essential facility where the owner was constrained by a regulatory regime in providing access to others).

274. See MCI Communications v. American Telephone & Telegraph Co., 708 F.2d 1081, 1133 (7th Cir. 1982), cert. denied, 464 U.S. 891 (1983).

275. See id. at 1093.

276. See id. at 1093 n.9.

277. See id. at 1094.

278. See id. at 1137.

279. See AREEDA & HOVENKAMP, supra note 112, 736.2c, at 674.

280. See id. 736.2, at 688.

281. See id.

282. But see Olympia Equip. Leasing v. Western Union Tel. Co., 797 F.2d 370 (7th Cir. 1986) (holding that Western Union's desire to enhance sales of its own product constituted a legitimate business justification). The facts of Western Union illuminate the court's reasoning. Western Union sought to sell terminals used in providing telex service. Olympia purchased Western Union's terminals for resale. For a period of time, Olympia relied upon Western Union's sales force and vendors' list to sell terminals. Western Union determined that the liquidation of its own terminals was occurring too slowly. Western Union responded by discouraging its sales force from promoting Olympian owned terminals. Olympia had no sales force of its own. The Seventh Circuit determined that the essential facilities doctrine was inapt because firms have no duty to sell the wares of their competitors and all firms have access to advertising and marketing devices. Thus, Western Union did not engage in predatory acts worthy of antitrust proscriptions.

283. See Oahu Gas Serv. v. Pacific Resources, 838 F.2d 360 (9th Cir. 1988) (concluding that antitrust liability did not attach when the defendant refused to expand his plant when economic conditions did not support such an expansion); Illinois ex rel. Burris v. Panhandle E. Pipe Line Co., 935 F.2d 1469 (7th Cir. 1991) (noting that the essential facilities doctrine does not require a defendant to cut back its own use of its own facility in order to serve a competitor).

284. See AREEDA & HOVENKAMP, supra note 112, 736.2, at 688.

285. See Areeda, supra note 147, at 851.

286. Id.

287. See Nowicki, supra note 7, at 372:

[M]andated interconnections actually would stimulate a skewed competitive result because any service provider requesting interconnections would probably receive them. Also, mandated interconnections would discourage innovations: market entrants would have no need to innovate because interconnections are readily available, and market incumbents would have no incentive to innovate because they would be forced to share anything they produced. Mandated interconnections would also stifle the true competitive functioning of the market.

288. See AREEDA & HOVENKAMP, supra note 112, 736.2, at 689.

289. See Areeda, supra note 147, at 851.

290. See id.

291. See AREEDA & HOVENKAMP, supra note 112, 736.2, at 692.

292. According to one commentator:

[T]he essential facility doctrine should not be invoked unless there is a pre-existing regulatory agency capable of adequately supervising relief, and there are a number of reasons for completely eliminating the doctrine as an antitrust cause of action. Essential facility issues often are best addressed on an industry-wide basis, through legislation or administrative regulation.

Gregory Werden, The Law and Economics of the Essential Facility Doctrine, 32 ST. LOUIS U. L.J. 433, 479-80 (1987).

293. See David J. Gerber, Rethinking The Monopolist's Duty To Deal: A Legal And Economic Critique Of The Doctrine Of 'Essential Facilities,' 74 VA. L. REV. 1069, 1087 (1988) (noting that a monopolist can generally "charge a fee that extracts monopoly rents from the users' market"). This situation does not arise when a monopolist is precluded from extracting such fees in the case of a regulated industry. See id.

294. Obviously the price competition cannot occur when a competitor is forced to charge monopoly rents simply to recover the costs of access.

295. See generally Pitofsky, supra note 3.

296. Regulators often fulfill the role of taking into account antitrust considerations in the regulatory process. This is especially true where the regulatory agency has been commanded specifically to consider the competitive aspects of its decisions. See Otter Tail Power Co. v. United States, 410 U.S. 366, 374 (1973).

297. See generally Pitofsky, supra note 3.

298. See AREEDA & HOVENKAMP, supra note 112, 736.2b-c, at 672-75.

299. Id. 736.2a, at 665. Some commentators go as far as to claim that some regulatory agencies are ill-equipped to handle some situations which, without application of the antitrust laws, would harm both consumers and competition. See, e.g., Bruce M. Owen, Determining Optimal Access to Regulated Essential Facilities, 58 ANTITRUST L.J. 887, 893 (1990).

300. See generally Krattenmaker, supra note 8.

301. See Robert E. Stoffels, Getting into the Act: Lots of Questions, Not Many Answers, AMERICA'S NETWORK, Aug. 15, 1996, at 38.

302. See supra notes 69-79.

303. See id.

304. See John N. Rose, Trouble with The Telecom Act: How Did the Lofty Goals Get So Entangled?, AMERICA'S NETWORK, Dec. 15, 1996, at 10.

305. See id.

306. See Peter Alexander, What Hath Telecom Reform Wrought?, 230 TELEPHONY 48, 56 (1996).

307. See id.

308. See Laurence Huntley, The Telecommunications Revolution: A Survivor's Guide, 230 TELEPHONY 78, 88 (1996) ("[E]very extra call or minute is in practice a direct contribution to fixed costs and overheads. Once these are paid for, incremental traffic is virtually 100% profit.").

309. See Alexander, supra note 305, at 56.

310. See id.

311. See supra notes 69-79.

312. See id.

313. See 47 U.S.C. 251(c)(2)(d) (1994).

314. See generally Vaneetha Demski, Finding the Formula for Success, 232 TELEPHONY 74 (1997).

315. See id. (recognizing that commentators believe "that because of the tremendous amount of money that interexchange carriers have already spent on their advertising, the LECs can never catch up").

316. See Stoffels, supra note 301, at 38.

317. See id.

318. See Nowicki, supra note 7, at 369-70.

319. A legislative mandate requiring one to "share" innovations when this innovation has led to a position of market domination seems contrary to public policy. The judiciary in United States v. Aluminum Co. of America, 148 F.2d 416, 430 (2d Cir.1945), expressed the same concern, stating that "[t]he successful competitor, having been urged to compete, must not be turned upon when he wins." Even the spokesman for the Department of Justice, Antitrust Division, conceded that valid protest can exist when a facility's owner is denied a legitimate return on his investment. See Michael Boudin, Antitrust Doctrine and the Sway of Metaphor, 75 GEO. L.J. 395, 402 n.52 (1986). The argument against mandating interconnections is best summarized by the simple observation that this is a policy consideration; "[r]equired sharing discourages building facilities ... even though they benefit consumers." Areeda, supra note 147, at 851. A legislative mandate of interconnection would fuel these concerns, while a restraint via the antitrust laws would not.

320. See supra notes 69-79. Governmental regulation and antitrust laws may be viewed as flip sides of the same coin; "regulation is an alternative to antitrust" laws, as both focus on a competitive goal. STEPHEN BREYER, REGULATION AND ITS REFORM 158 (1982).

321. See Rose, supra note 303, at 10.

322. S. 652, 104th Cong., 1st Sess. 5 (1995).

323. See discussion supra part V.

324. See id.

325. See Counsel on Competition, Competition Policy: Unclocking the National Information Infrastructure (visited Apr. 29, 1997) <http://icg.stwing.upenn.edu/ cis590/reading.054.txt>. Cf. Spulber, supra note 62, at 57:

[T]he local loop is not an essential facility because there exist many alternatives to the existing local exchange network provided by the regulated local exchange carriers. The multiple technologies currently available for telecommunications transmission, including coaxial cable, fiber optics, and wireless technologies such as cellular and microwave, are sufficient to establish the feasibility of constructing alternative transmission facilities to supplement, compete with, or even replace portions of the local exchange network provided by the RBOCs.

326. See Lawrence A. Sullivan, Elusive Goals Under The Telecommunications Act: Preserving Long-Distance Competition Upon Baby Bell Entry And Attaining Local Exchange Competition: We'll Not Preserve the One Unless We Attain The Other, 25 SW. U. L. REV. 487, 496 (1996) (noting that the "RBOCs have long been and still remain LX monopolists protected by the vast sunk costs of their systems and the technological and economic constraints on duplicating them as well as by regulation and exploitative conduct").

327. See Spulber, supra note 62, at 38-39:

Improvements in computers and related switching technology allow different firms to build and operate multiple networks that can then be interconnected. The costs of interconnection have fallen substantially as the costs of switching technology have decreased. Open network architecture further reduces the benefits of a centrally switched network. In addition, new developments in switching have allowed customer premises equipment, such as the private branch exchange (PBX) and local area networks, to be substituted for transmission and switching by the telecommunications utility. These significant developments promise to render the concept of a natural monopoly telecommunications network obsolete.

328. Will Rodger, Telecommunications Reform Doesn't Ring True, INTER@CTIVE WEEK, Feb. 10, 1997, at 64.

329. See id.

330. See id.

331. See discussion supra part V.

332. See Spulber, supra note 62, at 34-35. The traditional justifications for regulating industries, such as the presence of natural monopoly technologies, may no longer apply in the presence of technological change and competitive entry. See id. at 29, 34. Multiple telecommunications technologies in addition to the traditional copper wire-including coaxial cable, fiber-optic cable, satellite, microwave, cellular, and other radio technologies-signify that it may no longer be possible to define a natural monopoly technology for local telephony. See id. at 34.

333. See Nowicki, supra note 7, at 369-70.

334. See id. at 368 (arguing that the essential facilities doctrine "litigation would bring the technological discussion to the forefront").

335. See id. at 370. It seems as though telecommunication providers have chosen the latter route. See Rodger, supra note 327, at 64 (noting that one year after the 1996 Act, media and telephone companies merged like never before. U.S. West purchased Continental Cablevision Corp. for $10.8 billion, Walt Disney Co. purchased Capital Cities/ABC Inc. for $19 billion, Bell Atlantic Corp. and Nynex Corp. agreed to merge for $22.7 billion, SBC Communications Inc. purchased Pacific Telesis Group for $16.7 billion, Time Warner Inc. purchased Turner Broadcasting for $7.8 billion, British Telecommunications PLC purchased MCI Communications Corp. for $20 billion, WorldCom Inc. purchased MFS Communications Co. for $12 billion, and Westinghouse Electric Corp. purchased Infinity Broadcasting Corp. for $3.9 billion).

336. See discussion supra part V.

337. See id.

338. See 47 U.S.C. 251 (1994).

339. See Nowicki, supra note 7, at 371-72 (arguing that the rigidity of the interconnection order is unnerving).

The Congressional mandate on interconnections in 101 of the Act makes the denial of access virtually unlawful per se for local exchange carriers. The obligation of interconnection seems directly opposed to the theory that "denial of access is never per se unlawful." ... While Sherman Act 2 claims allow flexibility, mandated interconnection allows none. Even at the most basic level, in achieving the goal of competition, mandating interconnections is wrong. Regulating by mandating interconnections "replicates the results of competition." The antitrust laws, however, "seek to create or maintain the conditions of a competitive marketplace." Congress intended a competitive marketplace, not a marketplace that replicates competition.

Id. (internal citations omitted).

340. See discussion supra part V.

341. S. 652, 104th Cong., 1st Sess. 5 (1995).