In Southern New England Telephone v. Palermino et al., the Second Circuit ruled that former telecommunications monopolists including an AT&T Inc. subsidiary, Southern New England Telephone Co., must offer lower, regulated rates for network interconnection services to smaller carriers and new entrants into the field. In November 2009, Southern New England Telephone filed the present suit to dispute a decision by the Connecticut Department of Public Utilities Commission in favor of the lower regulated rates. In May 2011, U.S. District Judge Warren Eginton ruled to preserve the department’s decision, after which Southern New England Telephone appealed to the Second Circuit.
The Second Circuit affirmed the lower court’s ruling, holding that Telecommunications Act of 1996 (“TCA”) requires former monopolists, including Southern New England Telephone, to offer the service at regulated rates lower than its negotiated rates to ensure that small carriers can compete fairly with the giants. According to the court, smaller competitors would be left at a disadvantage because of the monopolists’ ongoing control over much of the network infrastructure if they did not receive lower rates for interconnection services. The court further stated that it would be inconsistent with the stated purpose of the TCA to allow AT&T to charge higher negotiated rates for the interconnection service because this would impose additional costs and competitive disadvantages upon the new entrants and would allow AT&T to further exploit its status as a former monopolist.