SBC Communications Inc.'s ads, which depict consumers coping with peak-usage cable modem slowdowns, are false and likely to injure competitors, a federal judge in St. Louis said.
Even though she acknowledged the ads were "very funny and very memorable," U.S. District Judge Catherine Perry ordered them off the air and out of print because "the central message of the ad campaign is simply not true."
The Oct. 16 order only affects St. Louis, home to Charter Communications Inc., which sued the telco over the spots. But Charter, heartened by the preliminary injunction, said it might follow up with similar lawsuits in other jurisdictions.
SBC officials expressed disappointment, but said they would abide by the order and pull the ads.
"While we respect her decision, we look forward to presenting our case going forward," said SBC spokesman Kevin Belgrade. The telco will continue to "educate the consumer," he added.
"We're up against an unregulated monopoly, which often resorts to tactics which can be perceived as not helping consumers, whereas we face regulation on our high-speed product," Belgrade said.
Charter senior vice president, counsel and general secretary Curt Shaw scoffed and said it was disingenuous for SBC to say it was informing consumers when the data it offered was termed false and misleading by a federal judge.
Charter complained directly to SBC in July, when the "cable-modem slowdown" campaign began. The ads in question promoted SBC and its subsidiaries, including Pacific Bell, Ameritech and Southern New England Telephone Co.
In TV spots, parents are shown waking middle-school aged children in the wee hours of the morning and getting them to log onto the Internet at a time when the modem is up to speed. The kids are shown preparing coffee to keep themselves awake.
The message: cable modems share network capacity, and speeds slow during peak usage, 7 p.m. to 10 p.m.
SBC did not back down, and Charter sued in August.
The judge held a two-day hearing to take testimony from the litigants. According to her 28-page ruling, information emerged that was embarrassing to both companies.
Charter had to concede that its St. Louis network had suffered primetime slowdowns in January and February. But executives convinced the judge the slowdowns were the result of bad network management and not attributable to the network architecture.
Charter failed to seek out additional capacity when the high-speed network was at 95-percent capacity, an operational fault it later rectified.
SBC's case also appeared to be weakened by its own evidence. Its cable-slowdown assertions were based on a report by Keynote Systems Inc., a California Internet-performance consulting company. In a San Mateo, Calif., study that compared AT&T Broadband's Excite@Home service and Pacific Bell's digital subscriber line service for one month, Keynote found that cable-modem speeds did slow during prime usage times.
But Keystone executive Tammy Tu testified that the trend reversed itself in later months, a development SBC did not acknowledge.
Indeed, the court decision noted that SBC's ad agency, Goodby Silverstein & Partners, was concerned enough about the product claims in the ad to ask to be indemnified against lawsuits.
SBC argued the ads were "little more than puffery," but the judge disagreed, saying "the central message is untrue."
She directed the two parties to attempt to settle the dispute. Failing that, the issue would be subjected to a full trial.
Charter will "carefully consider legal action in other Charter markets," Shaw said.
Such talk fits into a pattern of escalating aggression against what the company sees as its rivals' deceptions. Charter recently sued EchoStar Communications Corp. over its $9-per-month promotion.
EchoStar counter-attacked, dropping flyers at Charter subscriber homes in Southern California, including Shaw's letter and painting Charter as an oppressive monopoly.
"That's a desperate response to stop the bleeding," Shaw said of the flyers. "They're losing customers to us."
SLAPPED BY FCC
The St. Louis decision wasn't the only setback suffered by SBC last week. The Federal Communications Commission issued SBC a "notice of apparent liability" for submitting incorrect information in applications to provide long-distance services in Kansas and Oklahoma. The notice came with a $2.5-million fine.
In a statement, SBC senior vice president of federal policy Priscilla Hill-Ardoin said the misinformation was "an honest mistake," with no intent to mislead the commission. She said SBC would file a written response and was confident the FCC would review and adjust its order.
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