Monopoly Money
This case represents one of the things I found the oddest about the government's decision to end AT&T's monopoly - Rather than making phone service truly competitive, the government decided to break up one, relatively efficient monopoly to form seven smaller ones (RBOCs). Over the years, those seven smaller ones have collapsed down to four regional monopolies. Consumers got competition in the long distance arena, but, until recently, none in the local arena. This drove prices down for long distance service, but there was no such corresponding price drop for local service.
Eventually the FCC decided to open up the local market to competition as well. This presented one problem though. All the lines were owned by the RBOCs. This was one of the reasons it actually made sense to allow a monopoly for phone service in the first place. Rather than have lots of small, independent companies laying phone line, it made sense to have one, big company own the phone lines and, as a "natural" monopoly, face government regulation.
As a side note, anyone who believes that there are no times when allowing natural monopolies makes sense ought to come check out the NYC subway system. Because the system grew by having several independent companies running lines, you cannot use the same cars on all subway lines. The tunnels and tracks aren't the same size. It's simply inefficient and makes upgrades difficult. By the time the government did get involved, the inefficiencies were already in place.
Back to the RBOCs, though. Since they own all the phone lines, other companies wishing to compete in the phone market need to lease the lines from the RBOCs, despite the fact that it isn't in the best interests of the RBOCs to lease them the lines. As a result, the RBOCs provide degraded service to their lessees. In order for competition to be fair, the government still has to regulate them. If the government is going to have to regulate anyway, why the hell do they want to regulate multiple companies? It would be far more efficient to have just one company to regulate.
With respect to the case itself, it is a consumer of AT&T's local phone service suing Verizon for poor service. Now it strikes me that the consumer should be able to sue AT&T for poor service, since that is the entity with whom he has the agreement. He has no agreement with Verizon. AT&T, the party with the contract with Verizon, should then turn around and sue Verizon to recoup any damages, if the cause of the poor service is Verizon's treatment of AT&T's leased lines. Although this may sound efficient, there are broader contract principles at stake in this case. If the consumer's case is allowed to go forward, it makes it possible for companies to face lawsuits from people with whom they have no direct relationship. That, I think, is far more problematic than the inefficiency described.