Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Miss.: Regional wireless service provider”s claims against AT&T, device manufacturers over spectrum standard setting dismissed, (Sep 12, 2013)

By Tobias J. Gillett, J.D., LL.M.

A regional wireless service provider failed to state antitrust claims against nationwide wireless company AT&T and wireless device manufacturers Motorola and Qualcomm over their alleged manipulation of a standard-setting process to exclude certain smaller carriers such as the regional provider from the market for wireless service in the 700 Mhz spectrum, the federal district court in Oxford, Mississippi, has ruled. Because the plaintiff failed to plausibly allege the existence of an unlawful conspiracy, the court dismissed the third amended complaint and the case with prejudice (Corr Wireless Communications, L.L.C. v. AT&T, Inc., September 10, 2013, Aycock, S.).

In 2008, Cellular South, Inc. purchased 700 Mhz wireless spectrum in the Lower A block at a Federal Communications Commission auction, while AT&T purchased spectrum in the Lower B and C blocks. According to the complaint filed by Cellular South and its affiliates, Corr Wireless Communications, L.L.C. and Cellular South Licenses, LLC, AT&T colluded with mobile device manufacturers Motorola and Qualcomm to manipulate the standard-setting process of Third Generation Partnership Project (3GPP), the organization responsible for setting industry standards for Long-Term Evolution (LTE) service in the 700 Mhz spectrum, to exclude smaller wireless companies like Cellular South from the market.

Motorola, allegedly with “blessing” of AT&T, proposed that a separate band, known as Band 17, should be created that would include spectrum in the B and C blocks, but would not include spectrum in the A block. AT&T then submitted a paper in support of the proposal, and Qualcomm also indicated its support, even though that support was allegedly not in its self-interest. In August 2008, 3GPP adopted the proposal by consensus, with no dissent. AT&T and other defendants allegedly followed the creation of Band 17 by delaying the adoption of standards for Band 12, in which Cellular South”s A block resided. They also opposed an FCC petition filed by purchasers of A block spectrum seeking to ensure that consumers would have access to all 700 Mhz spectrum, and a freeze on the authorization of devices that could not operate on all commercial 700 Mhz spectrum. AT&T allegedly also formed exclusionary agreements to obtain its 4G-LTE devices, and would abuse its monopoly power over 4G-LTE nationwide data roaming in the Lower 700 MHz spectrum to delay or refuse to provide meaningful nationwide roaming to the plaintiffs.

The plaintiffs filed suit, asserting claims under Sections 1 and 2 of the Sherman Act over the creation of Band 17, the delay of Band 12 device development, the effort to deprive the plaintiffs of roaming, and AT&T”s agreements with manufacturers to produce Band 17 devices and refuse to sell devices to AT&T”s competitors. The court granted the defendants” motion to dismiss, but the plaintiffs were granted permission to amend. In the present decision, the court addressed the defendants” motion to dismiss the Third Amended Complaint, in which the plaintiffs additionally contended that AT&T”s “pretextual” excuse for creating Band 17, purported interference from DTV in Channel 51 and high power operations in the E Block, was sufficient to allege a conspiracy.

The court granted the motion, concluding that the plaintiffs had still not provided “factual allegations to plausibly show the existence of an agreement.” Although the plaintiffs had added another conjectural ““had to have an agreement” argument,” they had not alleged specific facts, such as when the agreement happened, what the agreement entailed, or that particular individuals met at particular times. Moreover, the alleged conduct, although purportedly technically unjustified and against the defendants” self-interest, merely constituted “parallel conduct that could just as well be independent action.”

Further, the plaintiffs” allegations that the 3GPP process lacked sufficient safeguards to prevent the defendants from biasing the process were insufficient to state a claim. The court explained that “as long as the standard setting process is conducted in a nonpartisan manner offering procompetitive benefits together with meaningful safeguards that prevent the standard-setting process from being biased by members with economic interests in stifling product competition, that process should not be deemed anticompetitive under antitrust law.”

In its previous ruling, the court had determined that the 3GPP process had been “followed to the letter,” and that the plaintiffs had not presented any “facts demonstrating procedural irregularities within the process, that the 3GPP process was subverted or turned into a sham, or that the defendants agreed to employ—or indeed did employ—any improper practices within the standard setting process.” Although the plaintiffs claimed that the process lacked “meaningful safeguards,” the court noted that the plaintiffs did not allege “what proper safeguards were necessary to prevent the standard-setting process from being biased.” The court observed that 3GPP had hundreds of members, that the creation of Band 17 was on its agenda for months, that the proposal was passed without objection, and that the plaintiffs had the ability to become members of 3GPP and participate in its standard-setting decisions.

The court also concluded that the plaintiffs failed to raise any different or more detailed allegations as to the delay of Band 12 standards, the denial of roaming, and the exclusive agreements with device manufacturers, and therefore the court reiterated its holding from its previous decision at to those claims. Since “it ha[d] been made clear that no additional factual allegations can or have been made to support plaintiffs” claims,” the court dismissed their complaint with prejudice.

The case is Civil Action No. 3:12CV036-SA.

Attorneys: Alan Walter Perry (Forman, Perry, Watkins, Krutz & Tardy, PLLC) for Corr Wireless Communications, L.L.C. Aaron M. Panner (Kellogg, Huber, Hansen, Todd, Evans & Figel PLLC) for AT&T, Inc.

Companies: Corr Wireless Communications, L.L.C.; Cellular South, Inc.; AT&T, Inc.; AT&T Mobility LLC; Motorola Mobility, Inc.; Qualcomm Inc.

Cases: Antitrust MississippiNews