The U.S. Supreme Court has agreed to hear an antitrust case that alleges AT&T squeezed out small Internet service providers by charging too much for wholesale access to its phone network.

In 2003, linkLine Communications and other small California ISPs sued predecessors of AT&T in a federal district court in Los Angeles and said they were forcing small competitors out of business by setting wholesale prices too high.

"It's one of those cases where the wholesale price is higher than the retail price, which makes competition virtually impossible," said Maxwell Blecher of the law firm Blecher & Collins, which is representing the plaintiffs.

The U.S. District Court for the Central District of California never ruled on the substance of the suit but determined it could be brought as an antitrust claim rather than an action under the Telecommunications Act of 1996, Blecher said. Both parties then asked the U.S. Court of Appeals for the Ninth Circuit to affirm that determination, which it did. AT&T appealed the case to the Supreme Court, and in May, the solicitor general of the U.S. filed a brief in support of having it heard there. On Monday, the Supreme Court agreed to decide the issue.

LinkLine will ask the case to be sent back to the district court, Blecher said. The solicitor general and AT&T are arguing incorrectly that there are conflicts between some appeals court decisions in this area of the law that the Supreme Court needs to resolve, he said. The issue is whether this type of dispute, in a regulated industry, is covered by antitrust law, he said.

It's also likely the Supreme Court will tackle the question of whether AT&T could violate antitrust law without setting its retail prices below its own cost, Blecher said. That should be left to the district court judge, Stephen Wilson of the U.S. District Court for the Central District of California, because Wilson hasn't yet been asked to address that question, Blecher said.

"We are pleased that the U.S. Supreme Court has agreed to hear our appeal," AT&T said in a prepared statement.

Following a first briefing in August, the case will probably be heard at the Supreme Court in December or January, Blecher said.

AT&T is likely to prevail in today's conservative Supreme Court, said telecommunications attorney Matthew Cantor of Constantine Cannon LLP in New York.

"They will hold that this is just a matter of the smaller guys not being as efficient as AT&T," Cantor said. "Accordingly, since the antitrust laws want to encourage efficiency and low prices, what AT&T did is not problematic."