Opinion ID: 1463897
Heading Depth: 3
Heading Rank: 1

Heading: Characterization of LDI/SMS's Services: Reseller or Provider?

Text: Telmex claims that LDI/SMS provided phone service rather than resold phone service because the end result allowed Mexican callers to call the United States for less money than Telmex would have charged for a direct call. We disagree. The Fifth Circuit aptly explained why, regardless of the practical outcome of LDI/ SMS's services, LDI/SMS cannot be considered the phone-service provider: [T]he crucial difference between resellers and providers ... is that a reseller cannot compete with a monopoly provider because the provider is the reseller's only supplier. The reseller can only undersell the provider if the provider sells its services to the reseller for less than they are worth. That is not the same kind of competition a provider faces against another provider. Competition between the provider and the reseller is at the mercy of the provider and the provider's knowledge or ignorance of the market. Access Telecom, Inc., 197 F.3d at 704. In essence, LDI/SMS acted as a middleman, delivering and billing Telmex's service to Mexican customers. The relevant Mexican law at the time required a government concession to construct, establish, and exploit telecommunications systems. We read this provision to mean that if LDI/ SMS had built its own telecommunications equipment and infrastructure and provided telecommunication service with its own equipment rather than purchasing and reselling Telmex's, then it would have needed a concession. Our conclusion that LDI/SMS's conduct is better characterized as resale is further bolstered by both Telmex's and the FCC's characterization of this and similar services. Telmex refers to LDI/SMS as a reseller several places in the record. For example, Telmex's summary-judgment motion relies on its 1994 letter to MCI requesting the names of all MCI's customers engaged in resale and stating that resale is illegal. Telmex also relied on another 1994 letter to MCI, in which Telmex indicates that it will not knowingly install I800 for resale. The FCC has also characterized call-back services, which are in many ways conceptually similar to LDI/SMS's services, as resale. See generally VIA USA, 10 F.C.C.R. 9540, 9541, 1995 WL 359102 (1995). Thus, we conclude that LDI/SMS was a reseller of Telemex's services rather than a provider of telecommunications services.