1. Daniel F. Spulber Northwestern University
From the MFJ to Trinko: Regulation versus Antitrust and the Essential Facilities Doctrine
Daniel F. Spulber
Northwestern University

2. Trinko
Compelling access to essential facilities reduces dynamic efficiency
Division of authority between regulators and antitrust courts -- rejects the court’s capacity to oversee mandated access

3. 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

4. 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

5. 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

6. 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.

7. Classification of types of regulated access to networks
Retail access
(final customer A) B
Interconnection access
(Reciprocal connection of networks I and II)
Wholesale access
(wholesaler B and final customer A)
Unbundled access
(for competitor C)
Platform access (for final customer A and supplier of complements B) I II
Classification of types of regulated access to networks
Spulber & Yoo, Networks in Telecommunications: Economics & Law, Cambridge University Press

8. 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

9. Access and antitrust Retail access Wholesale 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 AT&T
After Trinko, little support for interconnection access in antitrust

10. Access and antitrust Platform access
MCI-AT&T 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

11. 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.”

12. 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

13. 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