In this extraordinary antitrust case,1 defendant American Telephone and Telegraph Company ("AT & T") appeals from a judgment in the amount of $1.8 billion, entered on a jury verdict, in a treble damage suit brought by plaintiffs MCI Communications Corporation and MCI Telecommunications Corporation (collectively "MCI") under section 4 of the Clayton Act, 15 U.S.C. Sec. 15 (1976).2

MCI's original complaint, filed March 6, 1974, contained four separate counts: monopolization, attempt to monopolize, and conspiracy to monopolize--all under section 2 of the Sherman Act3--and conspiracy in restraint of trade--under section 1 of the Sherman Act. MCI alleged that AT & T had committed twenty-two types of misconduct, classifiable into several categories including predatory pricing, denial of interconnections, negotiation in bad faith and unlawful tying. MCI claimed at trial, on the basis of a lost profits study originally prepared in part for financing purposes, that it had suffered damages of approximately $900 million as a result of AT & T's allegedly unlawful actions.4

The case was tried to a jury between February 6 and June 13, 1980. After completion of MCI's case in chief, the district court directed a verdict in favor of AT & T on seven of the twenty-two alleged acts of misconduct.5 The remaining fifteen charges--all based on section 2 of the Sherman Act--were submitted to the jury. A special verdict form required the jury to make a separate finding of liability as to each of the fifteen charges, but permitted the jury to award damages in a single lump sum, without apportioning MCI's claimed financial losses among AT & T's various lawful and unlawful acts. The jury found in favor of MCI on ten of the fifteen charges submitted, and awarded damages of $600 million--a sum equal to two thirds the total damage figure claimed in MCI's aggregated lost profits study.6 The district court trebled this damage award, as required by section 4 of the Clayton Act, resulting in a judgment of $1.8 billion, exclusive of costs and attorneys' fees.

AT & T filed motions for judgment notwithstanding the verdict or, in the alternative, for a new trial on June 23, 1980. These motions were denied without opinion on July 29, 1980. On August 25, 1980, AT & T filed its notice of appeal. On September 8, 1980, MCI filed a notice of cross-appeal.7 In this opinion, we reject challenges to certain jury findings upon which AT & T's liability was based, sustain other challenges, and remand for a new trial on the issue of damages.

Prior to 1969, the telecommunications industry was regulated as a lawful monopoly. Local exchange service was and still is provided exclusively by one of the twenty-three Bell System operating companies or by one of some 1600 independent telephone companies, depending upon the geographical area involved.8 Long distance service was provided by the Long Lines Department of AT & T in partnership with these operating companies.9 The network of long distance transmission facilities was owned in substantial part by Long Lines; however, the interexchange facilities of the local telephone companies, including both transmission and switching facilities, were used in conjunction with Long Lines facilities whenever efficiency required. The local exchange facilities and switching machines belonging to the local companies were also used at each end of a regular long distance call.

This same nationwide network was used as well by AT & T to provide other intercity telephone services, including point-to-point private lines, foreign exchange lines ("FX") and common control switching arrangements ("CCSA"). Point-to-point private lines (also called tie lines) are connections between two locations that do not require the use of local switching machines because the lines are available to the customer on a continuing and exclusive basis. FX and CCSA, although classified for tariff purposes as private line services, do require interconnection with local switching machines.10

In 1963, Microwave Communications, Inc., the predecessor corporation to MCI,11 requested permission from the Federal Communications Commission ("FCC") to construct and operate a long distance telephone system between Chicago and St. Louis. The proposed system consisted of a terminal in each city and microwave radio relay towers connecting the terminals. Through this system, MCI intended to provide long distance, private line telephone service to business and industrial subscribers whose needs justified the exclusive or semi-exclusive use of a long distance telephone line. MCI also sought interconnections from its terminals to ordinary local telephone facilities, principally telephone wires running in conduits beneath the street. These interconnections were essential to MCI's ability to do business, since they provided the telephone or computer linkage between MCI's terminals and its individual customers in each city.

In 1969, after lengthy administrative proceedings in which AT & T and the other general service carriers opposed MCI's application, the FCC approved MCI's proposal. Microwave Communications, Inc., 18 F.C.C.2d 953, 966 (1969); 21 F.C.C.2d 190 (1970).12 The FCC's decision specifically authorized MCI to provide only point-to-point private line service not requiring connection to the nationwide switched network--that is, tie lines that would connect two or more locations without the use of switching machines. 18 F.C.C.2d at 953-54. The FCC also retained jurisdiction to order appropriate local interconnections.

The MCI decision resulted in a deluge of new applications to the FCC for authority to construct and operate facilities for specialized common carrier services. MCI filed applications for authority to provide specialized services among more than 100 cities. Other companies filed similar applications, creating a situation in which, in many instances, more than one carrier was seeking to provide specialized services over the same route. To deal with this situation, the FCC instituted a broad rulemaking inquiry designed to permit consideration in one proceeding of the policy questions raised by these numerous applications. Specialized Common Carriers, 24 F.C.C.2d 318 (1970) (Notice of Inquiry).

In June 1971, the FCC handed down its Specialized Common Carriers decision, approving in principle the entry of specialized carriers into the long distance telecommunications field, and declaring as a matter of policy that there should be open competition in the specialized services to which the decision applied. 29 F.C.C.2d 870 (1970). Because AT & T, reversing its earlier position, agreed to negotiate with MCI and other new entrants for local interconnections, the FCC elected to defer consideration of MCI's claim that AT & T was misusing its power over local telephone service to gain a competitive advantage over potential specialized competitors.

The FCC's Specialized Common Carriers decision was hardly a model of clarity.13 The decision did not define the specialized services to which it referred, nor did it define the corresponding obligations that the FCC expected the general carriers (primarily AT & T) to assume in order to assist the new carriers. AT & T contended, both at the time of the FCC decision and throughout the pendency of this lawsuit, that the Specialized Common Carriers decision authorized only point-to-point private line services not requiring switched network connections, and that the obligations of the Bell System extended only to providing local distribution facilities for these point-to-point private line services. MCI, by contrast, has consistently taken the position that the Specialized Common Carriers decision authorized it to provide FX and CCSA type services, as well as point-to-point private lines, and that AT & T had a corresponding obligation to provide it with the switched network connections required for these services. MCI also contended, both before and after the Specialized Common Carriers decision, that AT & T was obligated to provide it with local distribution facilities at the same rate at which AT & T provided such facilities to Western Union, under a longstanding contract between those two carriers. AT & T disagreed, claiming that the contract then in effect with Western Union did not reflect AT & T's current costs, and that the price charged to MCI for local distribution facilities should be set so as to recover AT & T's costs on a current basis.

In September 1971, AT & T entered into interim contracts with MCI defining the kinds of interconnections that AT & T would provide for MCI's initial Chicago-St. Louis route and establishing the price for those interconnections. These contracts did not permit switched network connections for FX or CCSA type services, nor was the price set by the contracts for local distribution facilities comparable to that charged to Western Union.

During this same time period, the original MCI investors joined forces with William McGowan, an experienced business executive and engineer, to form a venture that envisioned the eventual construction and operation of a nationwide long distance telephone system. After scrutiny of the market it believed had been opened by the Specialized Common Carriers decision, MCI created a plan contemplating sales of 74,000 circuits (leased telephone lines) having an average length of 500 miles per circuit, or approximately 37 million circuit miles14 by the end of 1975. According to this plan, MCI expected its revenues to average $1.00 per circuit mile excluding AT & T's local connection charges, which MCI intended to pass on to its customers. Projected annual revenues for 1975 were approximately $350 million. Armed with these projections, MCI proceeded to raise $110 million by June 1972, making it one of the largest start-up ventures in the history of Wall Street. The funds were raised after review and analysis by leading lenders and large equipment suppliers who were either lending the funds or underwriting or guaranteeing the financing.

MCI commenced operations over its Chicago-St. Louis route on January 1, 1972. In the fall of 1972, MCI began construction of the first segment of its nationwide system, extending east and south from the original Chicago-St. Louis route. MCI initially expected to complete the first portion of its national network and commence customer service over major parts of the system by late summer 1973. Expansion to a second and a third group of smaller cities was to follow over the next three years. MCI planned to fund these capital expenditures from its initial $110 million capitalization, from substantial additional anticipated financing and from operating revenues.

During late 1972, while construction was progressing, MCI entered into negotiations with AT & T over the provision by AT & T of interconnections and local distribution facilities on the expanded MCI system. Because MCI had previously experienced difficulty obtaining satisfactory interconnections for its Chicago-St. Louis segment, MCI hired an experienced lawyer-negotiator to secure a national interconnection agreement with AT & T that would permit MCI to serve the entire market it believed the FCC had opened. These negotiations began in September 1972, and continued with little progress for the next nine months.

During this same period, MCI appealed to the FCC for help in breaking down what it viewed as AT & T's unreasonable negotiating stance. Through a series of informal complaints and conferences with FCC staff, MCI charged that AT & T was treating it unfairly, on the question of interconnections, in at least three respects:

(1) MCI claimed that AT & T was unlawfully denying it interconnections to the switched network for FX and CCSA services and for point-to-point service to customers located outside a local distribution area,15 including multipoint service;16

(2) MCI claimed that it was being charged excessive and discriminatory prices for the local distribution facilities provided by the Bell System; and

(3) MCI claimed that it was being harassed by Bell System employees in the provision of local distribution facilities through delays, improper installation, improper maintenance and other similar practices.

AT & T denied each of these charges. Both in its direct dealings with MCI and in its responses to FCC staff members, AT & T adhered to the position that the Specialized Common Carriers decision authorized only private line service not requiring switched network connections. AT & T also contended that it was providing MCI with all the interconnections to which MCI was entitled and that the prices it was charging for those interconnections were not excessive or unfair.

In August 1973, with negotiations still pending, and without informing MCI, AT & T decided to file with forty-nine of the state utility commissions interconnection tariffs that would be equally applicable to all carriers--including MCI and Western Union. By filing interconnection tariffs with the state commissions rather than with the FCC, AT & T made it more difficult for MCI to oppose the tariffs, since, in the words of one AT & T official, the interconnection "controversy would spread to 49 jurisdictions." PX 2148 at 2031. Even after making this unilateral tariff decision, AT & T continued to "negotiate" with MCI. After MCI accidentally learned of the state tariff plan, however, AT & T formally broke off all contract negotiations.

In early October 1973, several top MCI officials met with Bernard Strassburg, Chief of the FCC Common Carrier Bureau, to discuss a plan designed to resolve the interconnection controversies between MCI and AT & T. Pursuant to this plan, FCC Chairman Burch, on October 4, 1973, issued a letter on behalf of the Commission, rejecting AT & T's resort to state regulatory agencies as unlawful and asserting exclusive FCC jurisdiction over the interconnection dispute. Shortly thereafter, MCI wrote to Mr. Strassburg, inquiring as to the nature and scope of the services that MCI was authorized to provide and for which AT & T was obliged to supply interconnections under the Specialized Common Carriers decision. Mr. Strassburg replied by letter dated October 19, 1973, that these services included FX and CCSA, as well as services outside local distribution areas and multipoint services. On November 2, 1973, MCI filed a complaint in federal district court under section 406 of the Communications Act asking that AT & T be ordered to provide interconnections for these services.

On December 31, 1973, the United States District Court for the Eastern District of Pennsylvania issued a preliminary injunction ordering AT & T to provide all of the interconnections sought by MCI, on the theory that such interconnections were contemplated and required by the FCC's Specialized Common Carriers decision. MCI Communications Corp. v. AT & T, 369 F.Supp. 1004 (E.D.Pa.1973). AT & T provided the required interconnections, but immediately appealed the district court's injunction. Meanwhile, the FCC, on December 13, 1973, issued its own order requiring AT & T to show cause why it should not be held to have violated the Specialized Common Carriers decision by refusing to provide the interconnections requested by MCI.

On April 15, 1974, the Third Circuit reversed the preliminary injunction issued against AT & T. MCI Communications Corp. v. AT & T, 496 F.2d 214 (3d Cir.1974). On April 16, 1974, despite assurances that the FCC's "show cause" decision was expected "any day now," and despite FCC warnings that disconnection of MCI's customers would violate the Communications Act, AT & T ordered its local operating companies to disconnect MCI's customers on twenty-four hours notice. MCI alleged that the resulting disconnections caused turmoil among its customers and seriously damaged its reputation for reliable service. On April 23, 1974--eight days after the Third Circuit had vacated the injunction obtained by MCI--the FCC issued a decision ordering AT & T to provide the disputed interconnections.17 Bell System Tariff Offerings of Local Distribution Facilities for Use by Other Common Carriers, 46 F.C.C.2d 413, aff'd sub nom. Bell Telephone Co. v. FCC, 503 F.2d 1250 (3d Cir.1974), cert. denied, 422 U.S. 1026, 95 S.Ct. 2620, 45 L.Ed.2d 684 (1975). The FCC held that it had intended to include both FX and CCSA services within the terms "specialized" or "private line" services as those terms were used in the Specialized Common Carriers decision. 46 F.C.C.2d at 425-27. AT & T provided the requested interconnections within ten days of the FCC's order.

In October 1974, MCI filed a tariff with the FCC for what the tariff referred to as metered use private line services, principally a service called "Execunet." Although the FCC did not immediately perceive it as such, this tariff was apparently designed to permit MCI to provide ordinary switched long distance service to users in any city to which its microwave system extended. See MCI Telecommunications Corp., 60 F.C.C.2d 25, 40-43 (1976) (the "Execunet decision"). When the FCC discovered the nature and purpose of the new tariff, it declared the tariff unlawful and ordered MCI to discontinue providing ordinary long distance message service on the ground that the Specialized Common Carriers decision limited MCI's authorization to the provision of private line services. 60 F.C.C.2d at 35-44, 58.

MCI appealed the FCC's Execunet decision to the Court of Appeals for the District of Columbia Circuit and, in July 1977, the Court of Appeals set the decision aside. MCI Telecommunications Corp. v. FCC, 561 F.2d 365 (D.C.Cir.1977), cert. denied, 434 U.S. 1040, 98 S.Ct. 781, 54 L.Ed.2d 790 (1978). In its opinion, the Court of Appeals assumed, without deciding, that "a service like Execunet was not within the contemplation of the [FCC] when it made the Specialized Common Carriers decision," 561 F.2d at 378, but held that the FCC had not conducted a sufficient hearing--either during the Specialized Common Carriers proceeding or at any subsequent time--to justify any limitation on the operating authority of MCI and the other new specialized carriers. Id. at 378-80.

This decision by the District of Columbia Circuit--handed down long after the events involved in the instant case occurred--rendered virtually meaningless the debate between MCI and AT & T over the proper interpretation and definition of the specialized private line services to which the Specialized Common Carriers decision applied. AT & T also claims that it was only by virtue of this Court of Appeals decision that MCI was able to achieve profitability since, according to AT & T, MCI's costs for private line services (including FX and CCSA) substantially exceeded the rates AT & T was then charging its large users under the Telpak tariff. See infra, pp. 1099-1100.

D. The Pricing Controversies Between MCI and AT & T

From the time of MCI's entry into the telecommunications field, AT & T's prices for specialized long distance services had been a significant source of controversy. Initially the principal controversy centered on AT & T's Telpak tariff. The Telpak tariff, which accounted for most of AT & T's private line circuits at the time MCI commenced operations, offered private line service to large users under two schedules: (1) the user could obtain the right to up to 60 circuits between any two points for $30 per mile per month, or an average of $.50 per circuit mile per month if all circuits were being used; or (2) the user could obtain the right to up to 240 circuits between any two points for $85 per mile per month, or an average of $.35 per circuit mile per month if all 240 circuits were being used. PX 821.

AT & T originally instituted its Telpak tariff in 1961 as a competitive response to the FCC's decision to permit large telephone users to construct and operate their own private microwave systems.18 At the time MCI entered the industry, in 1969, a number of microwave manufacturers were contending in proceedings before the FCC that Telpak rates were too low and unfairly hindered efforts to interest large users in building their own microwave systems. At the same time, however, a number of large users, including the federal government, were resisting any efforts to increase the Telpak tariff and, indeed, were contending that Telpak rates were already too high.

In 1968, shortly before MCI obtained its first authorization to enter the telecommunications industry, AT & T was permitted to increase its Telpak rates on an interim basis. During the period 1969-1972, AT & T was able--over the strenuous objections of some Telpak users--to obtain FCC approval for two additional rate increases. Although MCI contended strongly before the FCC that AT & T's Telpak tariff did not cover its fully distributed costs and was therefore predatory, the FCC, in 1977, ultimately rejected all of the attacks upon the Telpak tariff.19

Concurrent with MCI's entry into the telecommunications field, AT & T also initiated studies to consider nationwide deaveraging of its rates for individual private line service. Pursuant to these studies, AT & T formulated a plan known as the Hi-Lo tariff, which provided for the deaveraging of AT & T's individual private line service into two principal rate categories.20 Under Hi-Lo, AT & T would lower its rates on certain "high density" long distance routes, many of which MCI planned to serve. At the same time, AT & T would increase its rates between so-called "low-density" cities, most of which MCI was not planning to serve. In February 1973, the month after MCI had announced its plans and prices for nationwide service, AT & T announced Hi-Lo to the public and sought permission from the FCC to file the new tariff. AT & T did not actually receive permission to file its Hi-Lo tariff until November 15, 1973, and the new tariff finally became effective on June 13, 1974.

Faced with unproductive negotiations, a "chilled" market caused by AT & T's early announcement of Hi-Lo, and curtailed sales commitments stemming in part from customer awareness of MCI's interconnection difficulties, MCI in mid-1973 began to pare down its construction program. Because the company's revenues were substantially lower than originally anticipated, MCI decided to defer construction on fifteen of the thirty-four routes contained in its original plan. In addition, MCI terminated almost one-third of its employees and renegotiated its bank loans to secure permission to use loan proceeds for working capital rather than for additional construction. Although MCI survived and eventually prospered, it alleges in the instant lawsuit that by the time the interconnection dispute was finally resolved, in May 1975, it had a far smaller system, slower growth rate and related lower net cash flows and profits than it would have had absent AT & T's unlawful interference.

At trial, MCI's proof of damages was based almost entirely on a lost profits study authored by MCI's former controller, Mr. Uhl. This study compared the profits that a hypothetical MCI--undamaged by AT & T's allegedly unlawful actions--would have enjoyed with MCI's actual and projected profit figures for the years 1973-1984.21 The revenues posited for the "undamaged" MCI were based upon projections made by MCI in 1971-1972 and previously used for financing purposes. Among other presumptions, these revenue projections assumed that AT & T's Telpak service--which the jury in this case found to be lawfully priced and marketed--would not be in existence during the relevant time period. Costs for the "undamaged" MCI were derived from MCI's actual operating experience. These revenue and cost projections were then used to compute MCI's "lost profits," measured in net cash flow, for each of the years 1973-1994.22 These computations resulted in an aggregated before-tax damage claim of $9XX-XXX-XXX.

AT & T, at trial, sharply disputed the accuracy of MCI's revenue projections. AT & T argued that MCI's own lost profits study demonstrated that MCI could never have achieved profitability in the private line business, even including FX and CCSA services, since MCI's costs for such services substantially exceeded the rates AT & T was then charging its large business users under the Telpak tariff. According to AT & T, MCI's lost profits study showed MCI's costs to be $.63 per circuit mile per month assuming that it could obtain local distribution facilities at the Western Union contract rates and $.74 per circuit mile per month, if it had to pay for those facilities on the basis of the current prices charged by AT & T. On either basis, AT & T argued that MCI's costs were substantially in excess of the Telpak rates and, hence, that MCI could not have undercut these rates and still have covered its costs.23 AT & T also argued that because its ordinary long distance rates are averaged on a nationwide basis, and because state and federal regulatory policy has traditionally required AT & T to set its long distance rates high enough to subsidize its less profitable local telephone service, MCI and other specialized carriers, by competing exclusively in the most lucrative long distance markets, could easily undercut AT & T's artificially elevated long distance rates.

A. The Federal Regulatory Scheme for Telecommunications

The first venture of the federal government into the regulation of telecommunications was section 7 of the Mann-Elkins Act of 1910,24 which added telephone and telegraph companies to the list of common carriers regulated by the Interstate Commerce Commission ("ICC"). The Mann-Elkins Act imposed upon the newly-designated common carriers the obligation to provide service upon request at just and reasonable rates, without unjust discrimination or undue preference.25 The Act did not, however, subject the telecommunications industry to the broad tariff and regulatory jurisdiction enjoyed by the ICC over railroads. See Essential Communications Systems v. AT & T, 610 F.2d 1114, 1117-19 (3d Cir.1979) (detailing early regulation of telecommunication and railroad industries).

Competition among telephone services in the same geographic area was, in the early part of the century, a fact of life. Thus, the enactment, in 1914, of the Clayton Act's antimerger provisions26 presented a serious obstacle to the development of an integrated national telephone network. The Willis-Graham Act addressed this problem by authorizing the ICC to approve the consolidation of telephone company properties into single companies if such consolidation was "of advantage to the persons to whom service is to be rendered and in the public interest." Willis-Graham Act of 1921, ch. 20, 42 Stat. 27 (1921) (current version at 47 U.S.C. Sec. 221(a) (1976)). The statute granted express immunity from the antitrust laws for such consolidations. Id.

Thus, as of 1921, federal law recognized the telecommunications industry as a common carrier, subject to the consumer protection and non-discrimination provisions of the Mann-Elkins Act and exempt from antitrust liability for consolidations of competing local service systems. In other respects, however, the industry was subject to the antitrust laws. Indeed, in 1914, a government antitrust suit produced a consent decree against AT & T. See Essential Communications, 610 F.2d at 1119 & n. 19. Aside from the ICC's jurisdiction to enforce AT & T's common carrier obligations, AT & T was free to determine its own rates, return on investment and service obligations. Federal law did not even impose upon AT & T an obligation to interconnect with other communications common carriers, although AT & T's local subsidiaries were subject to regulation at the state level. Id. at 1119.

In 1934, Congress enacted the Federal Communications Act, 47 U.S.C. Sec. 151 et seq. (1976), which constitutes the primary federal regulatory mechanism for the telecommunications industry today. The 1934 Act severed regulation of the telephone, telegraph and radio industries from the ICC, and vested regulatory jurisdiction over those industries in the newly created Federal Communications Commission. The Act carried forward, almost verbatim, many provisions of the Mann-Elkins Act of 1910--for example, the just and reasonable tariff requirement and the prohibition against unjust or unreasonable discrimination.27 The 1934 Act also imposed certain new obligations on the telecommunications industry--for example, the requirement that regulated carriers interconnect or establish through routes with other common carriers. See 47 U.S.C. Sec. 201(a) (1976).

With respect to tariffs, the 1934 Act continued the prior practice that tariffs be generated, at least in the first instance, by the carriers themselves. Under section 203(a) of the Act, these tariffs must be filed with the FCC, and carriers must give the FCC and the public ninety days notice of any proposed changes. 47 U.S.C. Sec. 203(a) (1976); 47 U.S.C.A. Sec. 203(b) (West Supp.1982). No charge may be demanded or collected, or any service rendered, except in accordance with a filed tariff. Id. Sec. 203(c). Section 204 of the Act further authorizes the FCC, either sua sponte or upon request, to conduct a hearing concerning the lawfulness of the rates embodied in a proposed tariff and to suspend operation of the tariff for up to five months. Id. Sec. 204. If the Commission determines that the new tariff does not meet the requirements of the Act, it may prescribe a "just and reasonable" substitute, or set maximum and/or minimum charges to be observed. Id. Sec. 205; see American Broadcasting Companies v. FCC, 643 F.2d 818, 822 (D.C.Cir.1980). Any carrier which knowingly fails to obey an FCC order issued under this section is liable for a fine of $1000 per violation per day. In addition, any common carrier which does or causes to be done any act prohibited or declared unlawful by the Communications Act shall be liable "to the person or persons so injured thereby for the full amount of damages," plus attorneys' fees. 47 U.S.C. Sec. 206 (1976).

AT & T contends that the district court should have dismissed this suit on its motion because the FCC's regulatory control over AT & T's conduct renders AT & T immune from antitrust liability.28 The trial court denied the motion in a well-reasoned memorandum opinion. MCI Communications Corp. v. AT & T, 462 F.Supp. 1072 (N.D.Ill.1978). Judge Grady traced the legislative history of the Federal Communications Act, and concluded that while AT & T is subject to considerable regulatory control and supervision, there is no indication that the Act was meant to immunize a carrier such as AT & T from the antitrust laws. 462 F.Supp. at 1086-87. Moreover, he concluded, the regulatory scheme to which AT & T is subject is not so wholly inconsistent with the antitrust laws as to require immunity. AT & T is not subject to conflicting requirements, nor would it be held liable for decisions which were not its own business judgment. The district court noted that the FCC did not sanction AT & T's conduct with regard to interconnections nor dictate its tariffs. Thus, while certain actions might ultimately have been subject to agency review, the initial decisions were the product of AT & T's private business judgment, and were not so heavily regulated as to remove them from AT & T's control.

On appeal, AT & T contends that the district court's decision incorrectly focused on blanket immunity rather than immunity for the particular actions of which MCI complained. Thus, AT & T argues that the critical question left unconsidered by the district court is "whether the charges in this case do in fact relate to matters basic to the pervasive regulatory scheme to which AT & T is subject." Appellant's Br. at 188. Our reading of the district court's opinion, however, convinces us that it did not, as AT & T insists, miss the point now raised on appeal. While the district court did address the question of "blanket immunity" (i.e., whether regulation by the FCC under the public interest standard contained in the Communications Act is wholly inconsistent with the antitrust laws), 462 F.Supp. at 1078, 1080-82, it also fully considered AT & T's "fall back position ... that even though all of AT & T's conduct may not be immunized, the FCC, in its pervasive regulation, has approved each of the allegedly anticompetitive activities of which MCI complains and that therefore AT & T should obtain at least ad hoc immunity from antitrust laws." Id. at 1078, 1082-1102. For the reasons largely set forth in the district court's memorandum opinion denying AT & T's motion to dismiss, we reject AT & T's assertion of implied immunity.

As the district court recognized, the Communications Act of 1934 does not expressly grant AT & T immunity from the antitrust laws for the conduct challenged in the instant case. Nor does the legislative history of the Communications Act indicate how Congress intended that the Act and the antitrust laws were to be reconciled. See United States v. AT & T, 461 F.Supp. 1314, 1321 (D.D.C.1978); Comment, AT & T and the Antitrust Laws: A Strict Test for Implied Immunity, 85 Yale L.J. 254, 269 (1975). It is well established, however, that regulated industries "are not per se exempt from the Sherman Act." Georgia v. Pennsylvania R.R., 324 U.S. 439, 456, 65 S.Ct. 716, 725, 89 L.Ed. 1051 (1945). "Repeal of the antitrust laws by implication is not favored and not casually to be allowed. Only where there is a 'plain repugnancy between the antitrust and regulatory provisions' will repeal be implied." Gordon v. New York Stock Exchange, 422 U.S. 659, 682, 95 S.Ct. 2598, 2611, 45 L.Ed.2d 463 (1975) (quoting United States v. Philadelphia National Bank, 374 U.S. 321, 350-51, 83 S.Ct. 1715, 1734, 10 L.Ed.2d 915 (1963)). As a further limitation, repeal is to be regarded as implied only where necessary to make the regulatory scheme work, and even then, only to the minimum extent necessary. Silver v. New York Stock Exchange, 373 U.S. 341, 357, 83 S.Ct. 1246, 1257, 10 L.Ed.2d 389 (1963); see National Gerimedical Hospital & Gerontology Center v. Blue Cross, 452 U.S. 378, 101 S.Ct. 2415, 69 L.Ed.2d 89 (1981).

Application of these general principles to a particular claim of implied immunity requires an evaluation of the specific regulatory scheme involved and the administrative authority exercised pursuant to that scheme. Northeastern Telephone Co. v. AT & T, 651 F.2d 76, 83 (2d Cir.1981), cert. denied, 455 U.S. 943, 102 S.Ct. 1438, 71 L.Ed.2d 654 (1982); see National Gerimedical Hospital & Gerontology Center v. Blue Cross. Thus, in our case, the inquiry must focus upon (1) whether the activities that are the subject of MCI's complaint were required or approved by the Federal Communications Commission, pursuant to its statutory authority, in a way that is incompatible with antitrust enforcement, see, e.g., Gordon v. New York Stock Exchange, 422 U.S. 659, 95 S.Ct. 2598, 45 L.Ed.2d 463 (1975); Pan American World Airways, Inc. v. United States, 371 U.S. 296, 83 S.Ct. 476, 9 L.Ed.2d 325 (1963), or (2) whether these activities are so pervasively regulated "that Congress must be assumed to have forsworn the paradigm of competition." Northeastern Telephone, 651 F.2d at 82; see United States v. AT & T, 461 F.Supp. 1314, 1324 (D.D.C.1978).

With respect to interconnections, we conclude, as did the district court, that the FCC's regulatory authority under the Communications Act does not preclude application of the Sherman Act. See 462 F.Supp. at 1089-96. The mere pervasiveness of a regulatory scheme does not immunize an industry from antitrust liability for conduct that is voluntarily initiated. Otter Tail Power Co. v. United States, 410 U.S. 366, 374, 93 S.Ct. 1022, 1028, 35 L.Ed.2d 359 (1973); see Comment, The Application of Antitrust Law to Telecommunications, 69 Calif.L.Rev. 497, 509 (1981). Although the FCC has authority to compel interconnection under section 201(a) of the Act, the initial decision whether to interconnect rests with the utility, and the record shows that the FCC did not control or approve of AT & T's actions here. Nor has the FCC supervised AT & T's interconnection practices so closely that the FCC's approval could be inferred. Cf. Gordon v. New York Stock Exchange, 422 U.S. 659, 95 S.Ct. 2598, 45 L.Ed.2d 463 (1975).

Other circuits that have considered AT & T's implied immunity in interconnection-type disputes have uniformly rejected arguments the same as or similar to those made by AT & T in the instant case. See, e.g., Northeastern Telephone Co. v. AT & T, 651 F.2d 76 (2d Cir.1981), cert. denied, 455 U.S. 943, 102 S.Ct. 1438, 71 L.Ed.2d 654 (1982); Phonetele, Inc. v. AT & T, 664 F.2d 716 (9th Cir.1981), cert. denied, --- U.S. ----, 103 S.Ct. 785, 74 L.Ed.2d 992 (1983); Mid-Texas Communications Systems v. AT & T, 615 F.2d 1372, 1377-82 (5th Cir.), cert. denied, 449 U.S. 912, 101 S.Ct. 286, 66 L.Ed.2d 140 (1980); Sound, Inc. v. AT & T, 631 F.2d 1324, 1327-31 (8th Cir.1980) (citing with approval Judge Grady's memorandum opinion); Essential Communications Systems v. AT & T, 610 F.2d 1114 (3d Cir.1979); see also United States v. AT & T, 461 F.Supp. at 1320-30. But see Southern Pacific Communications Co. v. AT & T, 556 F.Supp. 825 (D.D.C. 1982). We agree with the reasoning of these decisions and are not persuaded that a contrary result is warranted here.

AT & T relies heavily on Hughes Tool Co. v. Trans World Airlines, Inc., 409 U.S. 363, 93 S.Ct. 647, 34 L.Ed.2d 577 (1973), and Pan American World Airways, Inc. v. United States, 371 U.S. 296, 83 S.Ct. 476, 9 L.Ed.2d 325 (1963), to support its claim that "matters at the heart of a pervasive scheme of common carrier, or public utility, regulation [here, presumably, AT & T's interconnection and pricing policies] are immune from antitrust liability." Appellant's Br. at 183. In both of these cases, however, the Supreme Court found that the transactions challenged as violative of the antitrust laws fell precisely within the detailed scheme of administrative oversight established by Congress. Thus, in Hughes Tool, the Court held that where the Civil Aeronautics Board (CAB) had specifically authorized certain transactions between a parent and its subsidiary, those transactions were immunized from antitrust liability by section 414 of the Federal Aviation Act, 49 U.S.C. Sec. 1378 (1976). Similarly, in Pan American Airways, the Court held that section 411 of the Federal Aviation Act granted to the CAB the very jurisdiction over the division of territories and allocation of air carrier routes that was the subject of the government's antitrust complaint. In the instant case, by contrast, neither AT & T's interconnection decisions nor its price structure policies are dictated, in the first instance, by the FCC (although, of course, AT & T's overall rate of return is subject to continuing surveillance). Moreover, to the extent that any FCC decisions are relevant to AT & T's claim of implied immunity, those decisions disapprove of, rather than condone, AT & T's actions. Thus, this is not a case like Hughes Tool or Pan American Airways, where the refusal to grant antitrust immunity could subject AT & T to conflicting and potentially irreconcilable liability standards. See also Phonetele, Inc., 664 F.2d at 732-34.

AT & T also cites the case of FCC v. RCA Communications, Inc., 346 U.S. 86, 73 S.Ct. 998, 97 L.Ed. 1470 (1953), for the proposition that the public interest standard embodied in the Communications Act is inconsistent and thus presumably irreconcilable with the policy of the antitrust laws favoring competition. However, the Eighth Circuit, in Sound, Inc. v. AT & T, 631 F.2d 1324 (8th Cir.1980), recently rejected precisely this irreconcilability argument. In Sound, Inc., AT & T argued that it was exempt, by virtue, inter alia, of the public interest standard contained in the Communications Act, from antitrust liability arising out of its rate structure and marketing practices for terminal telephone equipment. In rejecting AT & T's assertion that the public interest standard of the Communications Act was necessarily inconsistent with the pro-competition standard of the antitrust laws, the Eighth Circuit noted that the FCC had exercised its supervisory authority so as to encourage rather than discourage competition in the terminal equipment market. In light of this policy, the court concluded that "the maintenance of an antitrust suit will not conflict with the operation of the regulatory scheme authorized by Congress but will supplement that scheme." 631 F.2d at 1330. Similarly, in the instant case, the interconnection policies adopted by the FCC during the time period relevant to this litigation appear designed to promote rather than inhibit competition in the specialized telecommunications field. Thus, the allowance of antitrust liability is likely to complement rather than undermine the applicable statutory scheme.

AT & T's assertion of implied immunity with respect to MCI's predatory pricing allegations presents a closer question. Because section 201(b) of the Communications Act requires that AT & T's rates be "just and reasonable," and because both AT & T's rates and rate making methodology are subject to continuing supervision by the FCC, it is probable that AT & T enjoys less flexibility in setting rates than it does, for example, in making initial interconnection decisions. Moreover, it can be argued that the hearing and enforcement provisions of the Communications Act itself afford competitors such as MCI an adequate opportunity to contest and seek relief from tariffs they consider unreasonable or unfair.29 Although these arguments are not entirely without merit, we believe that, under the particular circumstances of this case, AT & T is not entitled to antitrust immunity for the competitive rate filings which form the basis of MCI's predatory pricing claims.

Although the Communications Act grants the FCC potentially broad authority over interstate and foreign telephone rates, in practice, this authority is considerably more circumscribed. First, as the district court in this case noted, the Act gives the carrier sole responsibility for filing a tariff, and a carrier may file a new or revised tariff at any time. See 47 U.S.C. Sec. 204 (1976). Thus, it is AT & T, not the FCC, that has the primary responsibility for initiating and setting both regular and private line telephone rates. See Sound, Inc., 631 F.2d at 1330. "When [such decisions] are governed in the first instance by business judgment and not regulatory coercion, courts must be hesitant to conclude that Congress intended to override the fundamental national policies embodied in the antitrust laws." Otter Tail, 410 U.S. at 374, 93 S.Ct. at 1028.30

Moreover, although the Communications Act gives the FCC the right to conduct hearings on proposed tariffs, a new tariff automatically goes into effect after 90 days unless acted upon by the FCC in its discretion. See 47 U.S.C. Sec. 203(b)(1) (Supp.1981). Thus, the FCC does not expressly approve or adopt as agency policy every tariff it permits to become effective. "By permitting a tariff to go into effect, the FCC does not assert that it has examined the content of the tariff and found it necessary or appropriate to effectuate the regulatory program, nor does it have an obligation under the Act to make such a finding." Phonetele, 644 F.2d at 733; see Essential Communications, 610 F.2d at 1124; MCI Telecommunications Corp. v. FCC, 561 F.2d 365, 374 (D.C.Cir.1977), cert. denied, 434 U.S. 1040, 98 S.Ct. 781, 54 L.Ed.2d 790 (1978).

The less than comprehensive nature of the FCC's authority over tariffs is further reinforced by the huge volume of tariff filings received by the Commission. During the twelve month period between September 1974 and August 1975, for example, the FCC received 1,371 tariff filings, totaling 11,491 pages. Because of this volume, it was able to investigate only a small percentage of the tariffs filed. See United States v. AT & T, 461 F.Supp. at 1326. Recognizing these practical limitations on its regulatory jurisdiction, the FCC has acknowledged, in an antitrust case involving implied immunity questions similar to those at issue here, that "rate filings generally proceed from the carrier's independent judgment ..." Id. at 1326 (quoting Memorandum of FCC, filed December 30, 1975, pp. 19-20). Moreover, the FCC has consistently maintained--in contrast to the SEC in the stock exchange cases relied upon by AT & T--that antitrust enforcement is not precluded in this area.31 United States v. AT & T, 461 F.Supp. at 1326. Finally, as is the case in the interconnection context, the actual FCC decisions relevant to the pricing policies challenged as predatory in the instant case have tended to disapprove of, rather than support, those policies.32 We thus conclude that where, as here, the pricing decisions complained of are more the result of business judgment than regulatory coercion, and the FCC has neither dictated nor approved of those decisions, the challenged rate filings are not immune from antitrust scrutiny.33 See City of Kirkwood v. Union Electric Co., 671 F.2d 1173, 1176-79 (8th Cir.1982), cert. denied, --- U.S. ----, 103 S.Ct. 814, 74 L.Ed.2d 1013 (1983) (No. 81-2278) (no immunity for rate filing under similar provisions of Federal Power Act); City of Mishawaka v. Indiana & Michigan Electric Co., 560 F.2d 1314, 1318-21 (7th Cir.1977), cert. denied, 436 U.S. 922, 98 S.Ct. 2274, 56 L.Ed.2d 765 (1978) (denying immunity for price squeeze claim arising out of relationship between electric utility's filed wholesale and retail rates); cf. Cantor v. Detroit Edison Co., 428 U.S. 579, 96 S.Ct. 3110, 49 L.Ed.2d 1141 (1976) (denying state action immunity for light-bulb-exchange program contained in tariff approved by state public utility commission).

Our conclusion that AT & T is not entitled to antitrust immunity in the instant case does not mean that AT & T's status as a regulated common carrier is irrelevant to our evaluation of AT & T's conduct. On the contrary, an industry's regulated status is an important "fact of market life," the impact of which on pricing and other competitive decisions "is too obvious to be ignored." ITT v. General Telephone and Electronics Corp., 518 F.2d 913, 935-36 (9th Cir.1975) (footnote omitted). For this reason, the Supreme Court has repeatedly recognized that consideration of federal and state regulation may be proper even after the issue of antitrust immunity has been resolved. United States v. Marine Bancorporation, 418 U.S. 602, 627, 94 S.Ct. 2856, 2872, 41 L.Ed.2d 978 (1975) (application of antitrust doctrine to bank mergers "must take into account the unique federal and state restraints on [defendant's conduct]. Failure to do so would produce misconceptions that go to the heart of the doctrine itself"); see Silver v. New York Stock Exchange, 373 U.S. 341, 360-61, 83 S.Ct. 1246, 1258-1259, 10 L.Ed.2d 389 (1963) (although applicable statutory scheme not sufficiently pervasive to create antitrust immunity, particular acts of self regulation--even if in restraint of trade--may be justified with reference to that scheme); Otter Tail, 410 U.S. at 381, 93 S.Ct. at 1031 (court, in fashioning antitrust remedy, "should [not] be impervious to [regulated utility's] assertion that compulsory interconnection or wheeling will erode its integrated system and threaten its capacity to serve adequately the public").

Similarly, several recent decisions of the courts of appeals involving regulated industries have emphasized the "continuing significance of regulation" in evaluating alleged antitrust violations. Mid-Texas Communications Systems v. AT & T, 615 F.2d 1372, 1385 (5th Cir.1980), cert. denied, 449 U.S. 912, 101 S.Ct. 286, 66 L.Ed.2d 140 (1980) (antitrust laws "are not so inflexible as to deny consideration of government regulation."); Almeda Mall, Inc. v. Houston Lighting & Power Co., 615 F.2d 343, 354 (5th Cir.), cert. denied, 449 U.S. 870, 101 S.Ct. 208, 66 L.Ed.2d 90 (1980) ("Monopolization cases involving ... regulated industries are special in nature and require close scrutiny."); Jacobi v. Bache & Co., 520 F.2d 1231, 1237-39 (2d Cir.1975), cert. denied, 423 U.S. 1053, 96 S.Ct. 784, 46 L.Ed.2d 642 (1976) (rejecting application of per se liability rule in light of regulation of stock exchange); ITT, 518 F.2d at 935-36 (impact of regulations must be assessed as fact of market life). As Professors Areeda & Turner have stated:

[A]ntitrust courts can and do consider the particular circumstances of an industry and therefore adjust their usual rules to the existence, extent, and nature of regulation. Just as the administrative agency must consider the competitive premises of the antitrust laws, the antitrust court must consider the peculiarities of an industry as recognized in a regulatory statute.

1 P. Areeda & D. Turner, Antitrust Law p 223d (1978).

Whether in a regulated context or not, the broad outline of the offense of monopolization is well understood. Most recently, the Supreme Court has stated:

The offense of monopoly under Sec. 2 of the Sherman Act has two elements: (1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.

United States v. Grinnell, 384 U.S. 563, 570-71, 86 S.Ct. 1698, 1703-1704, 16 L.Ed.2d 778 (1966); see Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 274-76 (2d Cir.1979), cert. denied, 444 U.S. 1093, 100 S.Ct. 1061, 62 L.Ed.2d 783 (1980). Cases dealing with non-regulated industries have developed a number of analytic tools designed to aid courts in identifying each of these elements. In many instances, however, these tools are of only limited value in resolving monopolization charges against regulated monopolies. See Watson & Brunner, Monopolization by Regulated "Monopolies": The Search for Substantive Standards, 22 Antitrust Bull. 559, 563 (1977). In particular, the presence of a substantial degree of regulation, although not sufficient to confer antitrust immunity, may affect both the shape of "monopoly power" and the precise dimensions of the "willful acquisition or maintenance" of that power. Id.

According to the Supreme Court, monopoly power may be defined as "the power to control prices or exclude competition" in a relevant market. United States v. E.I. duPont de Nemours & Co., 351 U.S. 377, 391, 76 S.Ct. 994, 1004, 100 L.Ed. 1264 (1956). In many cases involving unregulated industries, however, courts have eschewed examination of the ostensible monopolist's actual degree of control over prices or competition, and have relied solely on statistical data concerning the accused firm's share of the market. Where that data reveals a market share of more than seventy to eighty percent, the courts have inferred the existence of monopoly power. See, e.g., United States v. Grinnell, 384 U.S. at 571, 86 S.Ct. at 1704; American Tobacco Co. v. United States, 328 U.S. 781, 797, 66 S.Ct. 1125, 1133, 90 L.Ed. 1575 (1946); Standard Oil Co. v. United States, 221 U.S. 1, 33, 31 S.Ct. 502, 505, 55 L.Ed. 619 (1911).

Such a heavy reliance on market share statistics is likely to be an inaccurate or misleading indicator of "monopoly power" in a regulated setting. In many regulated industries, each purveyor of service, regardless of absolute size, is in a monopoly position with regard to its customers. Indeed, while a regulated firm's dominant share of the market typically explains why it is subject to regulation, the firm's statistical dominance may also be the result of regulation. See United States v. Marine Bancorporation, 418 U.S. at 633, 94 S.Ct. at 2875. For these reasons, the size of a regulated company's market share should constitute, at most, a point of departure in assessing the existence of monopoly power. Ultimately, that analysis must focus directly on the ability of the regulated company to control prices or exclude competition--an assessment which, in turn, requires close scrutiny of the regulatory scheme in question.34

In the instant case, the district court properly instructed the jury that, in determining whether AT & T possessed monopoly power in the relevant market,

you may consider the effect of the FCC's exercise of regulatory authority over prices and entry, including interconnection. Similarly, you may consider the effect of the exercise by state regulatory agencies of regulatory authority over prices and entry in connection with the provision of local services and facilities. That AT & T may have had the largest share or the entire share of the telephone business in certain areas would not be sufficient to establish that AT & T possessed monopoly power if in fact regulation by regulatory agencies prevented AT & T from having the power to restrict entry or control prices.

App. 1200.

Although the district court's instructions in this area might have been more helpful if they had described, in more detail, the specific regulatory scheme to which AT & T was subject, see Mid-Texas, 615 F.2d at 1386-87, we believe the instructions, taken as a whole, adequately apprised the jury of its duty "to take into account the unique federal and state regulatory restraints" to which AT & T was subject. Id. at 1387. We, therefore, reject AT & T's contention that the trial court's instructions on this issue left the jury without any meaningful way to assess the impact of regulation on the existence or non-existence of AT & T's monopoly power and constituted reversible error.

AT & T's status as a regulated public utility also bears on the second element of a monopolization offense: the willful acquisition or maintenance of monopoly power. The precise dimensions of the "willfulness" standard have been the subject of considerable litigation and varying formulations even in cases involving unregulated industries. Some courts, building upon Judge Learned Hand's noted opinion in United States v. Aluminum Co. of America, 148 F.2d 416 (2d Cir.1945), have concluded that monopolistic conduct can be presumed from the possession of monopoly power unless the accused firm affirmatively demonstrates that its monopoly position has been "thrust upon it." Id. at 432; see American Tobacco Co. v. United States, 328 U.S. at 813-14, 66 S.Ct. at 1140-1141. Under this analysis, if the ordinary business conduct of a dominant firm leads to the acquisition or maintenance of monopoly power, that conduct is presumed to reflect the requisite willful monopolistic intent. Whatever merit this presumption may have in other contexts,35 we believe it is a particularly inappropriate means of identifying monopolistic conduct by a regulated utility or common carrier. For these industries, anticipating and meeting all reasonable demands for service is often an explicit statutory obligation. See, e.g., 47 U.S.C. Sec. 201(a) (1976) ("It shall be the duty of every common carrier ... to furnish such communication service upon reasonable request therefor."). To apply the Alcoa presumption to such conduct would be tantamount to holding that adherence to a firm's regulatory obligation could, by itself, constitute improper willfulness in a section 2 monopolization case.

This circuit has already declined to endorse such an anomalous result. In City of Mishawaka v. American Electric Power Co., 616 F.2d 976, 985 (7th Cir.1980), cert. denied, 449 U.S. 1096, 101 S.Ct. 892, 66 L.Ed.2d 824 (1981), we specifically held that "[i]n the particular circumstances of a regulated utility ... entitled to recover its cost of services and provide its investors with a reasonable rate of return, we believe that something more than general intent should be required to establish a Sherman Act violation." See also Watson & Brunner, supra, at 574-79 (willfulness by a regulated monopoly should be demonstrable only by evidence of predatory conduct or other exclusionary acts contrary to public policy). We reaffirm our holding in Mishawaka and, therefore, reject MCI's contention on cross-appeal that the trial court erred in requiring MCI to prove that each allegedly anticompetitive act or practice attributed to AT & T was done with the intent to maintain a monopoly in the relevant market.36

The impact of regulation was also an important element of AT & T's defense in the instant case. Particularly with regard to the interconnection controversy, AT & T argued that its dealings with MCI were reasonable and that they represented a good faith attempt to comply with AT & T's regulatory obligations under section 201 of the Communications Act. AT & T claims that the trial court's instructions improperly prevented the jury from considering this defense, in that the instructions were fatally "silent concerning the overall structure of the Communications Act, the public interest standards under which the provisions of that Act are administered by the FCC and to which common carriers are required to conform their conduct, and the requirements set forth in the Act relating to the particular interconnection and pricing controversies presented to the jury for resolution." Appellant's Br. at 138.

MCI, by contrast, argues in its cross-appeal that the district court gave too much credence to AT & T's regulatory defense. In particular, MCI claims that the district court improperly held it to an "over-rigorous burden of proof" by instructing the jury that, if AT & T believed in good faith that interconnection with MCI would have violated established regulatory policies, then AT & T's refusal to interconnect could not be considered anticompetitive conduct. We reject both parties' contentions. The district court in this case properly allowed AT & T to assert a defense based on good faith adherence to its regulatory obligations. See Mid-Texas, 615 F.2d at 1388-90. The district court also properly articulated this defense in its instructions to the jury. Thus the district court instructed the jury that

MCI must prove more, however, than the fact that AT & T refused to provide the interconnections. As you know, AT & T contends that it refused to provide the connections because it believed that it had not been ordered to do so, that MCI was not authorized to provide the service, and that it would have violated established regulatory policies for MCI to receive the connections. If AT & T refused the interconnections because of such reasons, believing in good faith that they justified the refusal, then the refusal to provide the interconnections was not anti-competitive conduct and cannot be considered conduct engaged in for the purpose of maintaining a monopoly.

MCI has the burden of proving that in refusing the FX and CCSA interconnections AT & T acted with anti-competitive intent, for the purpose of maintaining a monopoly, rather than for what it in good faith regarded as legitimate reasons.

App. 1201.

Similarly, with respect to the charge that AT & T unlawfully pre-announced its Hi-Lo tariff, the jury was told to consider AT & T's contention that the time interval involved was reasonable and required by applicable regulations. In addition, the district court instructed the jury that:

With respect to those facilities and interconnections which AT & T did not provide, its position is that its failure to do so was based upon a good faith belief that it would have violated established regulatory policies and therefore that it acted reasonably in all the circumstances.37

App. 1200.

We believe these instructions adequately conveyed to the jury the substance of AT & T's regulatory defense and, thus, allowed the jury to "consider the effect of regulation in ascertaining whether Bell misused its monopoly power." Mid-Texas, 615 F.2d at 1389. We reject AT & T's contention that the trial court's failure to provide a more detailed exposition of the standards contained in the Communications Act constitutes reversible error. We also reject MCI's counter-argument that the district court's instructions in this area improperly placed upon MCI the burden of disproving AT & T's subjective good faith. See California Computer Products, Inc. v. IBM Corp., 613 F.2d 727, 736 (9th Cir.1979) (holding that a verdict must be directed in favor of defendant when plaintiff's evidence is insufficient to establish that defendant acted unreasonably). In the particular context of an industry subject to extensive and rapidly changing regulatory demands, we believe that an antitrust defendant is entitled both to raise and to have the jury consider its good faith adherence to regulatory obligations as a legitimate antitrust defense. See Mid-Texas, 615 F.2d at 1389-90; City of Mishawaka, 616 F.2d at 985.

Finally, we believe the fact of FCC regulation is relevant to our analysis of antitrust principles in another, more subtle way. AT & T, as the dominant firm in a regulated industry recently opened in part to competition, is subject to dual, and sometimes conflicting, principles of regulatory and antitrust law. As already indicated, we believe the trial court properly reconciled these bodies of law by allowing AT & T to present evidence as to its good faith belief in its compliance with regulatory requirements. In addition, the fact of FCC regulation to some extent affects our view of the appropriate purposes and proper scope of antitrust law in the present context--specifically, whether we should focus our examination on economic efficiency and consumer benefit or whether we should more expansively consider the political and social consequences of bigness or concentration of economic power. Compare R. Bork, The Antitrust Paradox (1978) and R. Posner, Antitrust Law (1976) with L. Sullivan, Handbook of the Law of Antitrust Sec. 2 (1977) and Pitofsky, The Political Content of Antitrust, 127 U.Pa.L.Rev. 1051 (1979) and Schwartz, "Justice" and Other Non-Economic Goals of Antitrust, 127 U.Pa.L.Rev. 1076 (1979).

Certain factors may tend to distinguish this from ordinary monopolization cases. AT & T is a public utility subject to public regulation, occupying a unique place in the American industrial scene. To the extent that it may have enjoyed economies of scale and significant technological resources, the political and regulatory judgment, until recently, has been to tolerate the political and social consequences of its size in the ostensible interest of reliable, effective and economic telecommunications service. Now this regulatory judgment has been drastically modified, and competition--with all its economic, political and social consequences--is transforming the telecommunications industry.

Certainly this transformation, carried out at the behest of regulatory authorities, is meeting the broadest objectives of the antitrust laws at least as effectively as they might be pursued by this court in this case. The FCC has exercised its powers under the Communications Act and has instituted sweeping pro-competitive changes in the telecommunications industry to accommodate the broad demands of national communications policy. We also note the role of the Justice Department, AT & T itself, and the federal district court in the consent decree entered recently between AT & T and the government in the District Court for the District of Columbia. See United States v. AT & T, 552 F.Supp. 131 (1982). The massive restructuring of AT & T accomplished in that decree is an additional avenue through which the issues of the concentration of economic power in the Bell System, as well as its political power, are being addressed.

We acknowledge with approval the populist origins of the antitrust laws as well as the preeminent role of the Sherman Act as a charter of economic freedom.38 But we also believe that, as we have pointed out, larger concerns about broad pro-competitive policy, economic concentration and political power have been, and are being at this very moment, effectively addressed by the regulators, and possibly by the Congress. Hence, we have tended to believe it appropriate to focus at this time and in this case upon the specific issues of economic efficiency and consumer benefit which are directly presented. Thus, our resolution of the allegations of predatory pricing and unlawful failure to interconnect MCI to Bell's local distribution facilities has centered on the questions whether prices cover costs and whether the denied facilities are essential. We are, of course, not insensitive to broader social and political issues, but as indicated, we think that our principal task is to deal in depth with the specific questions presented.

At trial MCI alleged that AT & T had engaged in predatory pricing of both its Telpak and Hi-Lo services for long distance business communications. The jury found that Telpak was lawfully priced, but that Hi-Lo was priced below its fully distributed costs and was predatory. We disapprove this finding with respect to Hi-Lo because of erroneous instructions, the use of an improper cost standard and insufficiency of the evidence. We also disapprove the jury's finding that AT & T unlawfully pre-announced its Hi-Lo tariff. Further, we reject MCI's cross-appeal on Telpak's marketing plan and sustain the jury's finding that Telpak was lawfully priced and marketed.

One of the crucial issues presented at trial concerned the proper standard for determining predatory pricing. Both parties presented expert testimony on this issue. AT & T argued that unless its prices for a particular service failed to cover that service's long-run incremental costs the price could not be found predatory. MCI contended that proof of price below fully distributed cost was sufficient to establish predation.

At trial Judge Grady refused to instruct the jury as to which cost measure was the correct legal standard to determine predatory pricing. Instead, he left the choice of a cost-based standard for predation--in this case fully distributed costs ("FDC") or long-run incremental costs ("LRIC")--for the jury to decide as a question of fact. Judge Grady instructed the jury:

[Y]ou're going to have to decide whether it should be fully distributed costs on the one hand, or incremental costs on the other hand; and in doing that you'll have to look at all the evidence and decide which is the cost that truly reflects the actual cost of producing the service.

....

The test for determining whether Hi-Lo was predatory is the same as for Telpak. Again, it is a question of whether the price covered what you consider the applicable cost. If it did, you may not infer predatory intent. If it did not, you may infer predatory intent.

Tr. 11486-87.39 As a result, the special verdict required the jury to check which cost standard it felt was appropriate and then decide whether AT & T's prices were below that measure of cost: either LRIC or FDC.

This we hold to be error. The choice of a cost-based standard for evaluating claims of predatory pricing is a question of law to be decided by the trial judge. Thus, while several courts have stated that the appropriate cost-based standard for predation may differ depending on the facts of the case, see, e.g., Chillicothe Sand & Gravel Co. v. Martin Marietta Corp., 615 F.2d 427 (7th Cir.1980), both courts and commentators are united in regarding the selection of that standard as a question of law. Indeed, the entire judicial and academic struggle to enunciate an appropriate definition of predatory pricing reflects the legal rather than factual nature of the question. Since a finding of below-cost pricing permits the jury to infer, or even presume, anticompetitive intent, it is imperative that the judge instruct the jury on the relevant cost standard to compare with defendant's prices. See 2 P. Areeda & D. Turner, supra, at p 315.

MCI relies on Greenville Publishing Co. v. Daily Reflector, Inc., 496 F.2d 391 (4th Cir.1974), to support the proposition that the jury may select the appropriate cost standard to evaluate a predatory pricing claim. MCI's reliance here reflects an overly broad interpretation of that case. In Greenville Publishing the Fourth Circuit reversed a grant of summary judgment for the defendant in a case charging monopolization and attempted monopolization. On the issue of predatory pricing the court took note of affidavits by the defendant purporting to show that the operation of the advertising guide in question was profitable and that prices covered average variable costs. Plaintiffs challenged both the actual calculation of these costs and the failure of the defendant to include in its cost calculations "any portion of the company's fixed expenses or personnel costs." Id. at 397 & n. 10.

The court in Greenville Publishing reversed the grant of summary judgment in favor of the defendant stating "[t]he sum of this evidence presents an issue of disputed fact." Id. at 398. It is misleading, however, in the context of the instant case, to place much reliance on this sentence. The court in Greenville Publishing was not concerned with which entity--judge or jury--is empowered to select the proper cost-based standard for determining predation. Rather, the Greenville Publishing court was addressing the much more general issue of the propriety of summary judgment in a complex antitrust case. At the summary judgment stage, the plaintiffs in Greenville Publishing had presented no evidence on the issue of anticompetitive intent other than the pricing policies of the defendant. Hence, the propriety of summary judgment on plaintiffs' monopolization and attempted monopolization claims turned entirely on whether any inferences of intent could be drawn from the relationship between the defendant's prices and costs. The Fourth Circuit's refusal to uphold the grant of summary judgment in Greenville Publishing merely represents the traditional view that summary judgment is generally inappropriate in complex antitrust cases where intent may be difficult to discern. Id. at 398 (citing Poller v. Columbia Broadcasting System, 368 U.S. 464, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962)).

There is no support in the cases for the proposition that a jury may simply choose the cost-based standard it feels is most appropriate. Indeed, the only other purportedly apposite case cited by MCI in its brief, the district court's opinion in Northeastern Telephone Co. v. AT & T, 497 F.Supp. 230 (D.Conn.1980), has been reversed on this very point, with the Second Circuit stating that the cost standard used to determine whether a monopolist's prices were predatory was a legal question. 651 F.2d 76, 87 (2d Cir.1981), cert. denied, 455 U.S. 943, 102 S.Ct. 1438, 71 L.Ed.2d 654 (1982), rev'g in part 497 F.Supp. 230, 240-41 (D.Conn.1980). Judge Grady himself acknowledged that it is inappropriate for the jury to consider all possible economic theories of predation in ruling that MCI's originally proffered profit-maximizing theory was inadequate as a matter of law.

Liability for predatory pricing represents an exception to the general antitrust regime which contemplates that no limits on price competition shall be imposed. Predatory pricing is prohibited because of the fear that a monopoly or dominant firm will deliberately sacrifice present revenues for the purpose of driving rivals from the market and then recoup its losses through higher profits earned in the absence of competition. See Northeastern Telephone Co. v. AT & T, 651 F.2d 76, 86 (2d Cir.1981), cert. denied, 455 U.S. 943, 102 S.Ct. 1438, 71 L.Ed.2d 654 (1982); Areeda & Turner, Predatory Pricing and Related Practices Under Section 2 of the Sherman Act, 88 Harv.L.Rev. 697, 698 (1975). [Hereinafter cited as Areeda & Turner, Predatory Pricing ].

There is at present, in cases such as the one before us, no reliable way to determine whether predatory pricing has occurred without some comparison between the prices charged and a properly defined measure of the cost of production. A subjective test based wholly upon intent is almost incapable of distinguishing between pro- and anticompetitive price cuts by a monopolist. Areeda, Predatory Pricing (1980), 49 Antitrust L.J. 897, 899 (1980); R. Posner, supra, at 188. Nor is a subjective test capable of identifying which pricing strategies represent rational business decisions and which have no legitimate business purpose and are designed only to injure competition.

In addition, a test based wholly on intent is unworkable.40 Even if it were possible to identify those persons within a firm whose intentions are relevant, the meaning of the evidence will usually be obscure. After all, competition consists of winning business from rivals. The intent to preserve or expand one's market share is presumptively lawful. To encourage judges and juries to rely overly on nonprobative data allegedly bearing on a firm's "state of mind" invites the twin mischiefs of (1) burdening litigation with thousands of documents about the firm's motives and calculations; and (2) encouraging inconsistent and quixotic results. Areeda, Predatory Pricing (1980), 49 Antitrust L.J. 897, 899 (1980); see R. Posner, supra, at 189-90.41

In the absence of an objective standard, firms making pricing decisions in the presence of competition would be unable to ascertain what price reductions may be legally undertaken. Because the antitrust laws are designed to encourage vigorous competition, as well as to promote economic efficiency and maximize consumer welfare, such uncertainty seriously undermines the goals of antitrust enforcement. As one commentator has recently emphasized:

It is imperative that courts timely establish objective and understandable pricing standards which bring into sharp focus the line which separates commendable price reductions from predatory pricing practices. Such standards are necessary for the guidance of b