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AT&T's Lawsuit Only Magnifies Spotty Service

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Company claims Verizon's ads are misleading.

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While AT&T (T) and Apple (AAPL) may compose some attractive ads showcasing the iPhone's slickest features, Verizon (VZ) can make the two companies stand and take notice by touting one superior aspect: coverage.

AT&T is suing Verizon over its recent campaign titled "There's a Map for That" -- a tongue-in-cheek take on the oft-repeated line "There's an app for that" in iPhone commercials. AT&T is accusing the company of false advertising based on the ad's comparison of 3G coverage in either service. Whereas Verizon's coverage map is a sea of red, AT&T's barely freckles the country. The title underneath states that Verizon offers five times as much 3G coverage throughout the US.



Although it doesn't deny its 3G coverage is severely lacking -- Engadget cites its complaint which says it has "no quarrel with Verizon advertising its larger 3G network" -- AT&T claims the map comparison implies its service provides no coverage whatsoever in the blank, uncolored areas. The company asserts that its capable -- though inferior -- EDGE network will allow calls to be made in the majority of those areas. As a result, AT&T is filing a motion to have the ads taken off the air.

AT&T had this to say in the lawsuit:

In essence, we believe the ads mislead consumers into believing that AT&T doesn't offer ANY wireless service in the vast majority of the country. In fact, AT&T's wireless network blankets the US, reaching approximately 296 million people. Additionally, our 3G service is available in over 9,600 cities and towns. Verizon's misleading advertising tactics appear to be a response to AT&T's strong leadership in smartphones. We have twice the number of smartphone customers... and we've beaten them two quarters in a row on net post-paid subscribers. We also had lower churn -- a sign that customers are quite happy with the service they receive.


Given how many people have complained (see Economic Snapshot: AT&T Still iPhone's Biggest Flaw, and also here, and here) about AT&T's spotty coverage, it probably has more to do with Apple's exclusivity contract with its iPhone.

Even before the lawsuit, Verizon had altered its ads to appease a cranky AT&T. The ads omitted the phrase "out of touch" and added "voice and data services available outside of 3G areas" as a small disclaimer on the bottom of the screen. But even that didn't keep AT&T from talking with its lawyers.

Overall, this appears to be a very needless lawsuit. Verizon covers all the legal bases in the ad and is well within its rights. AT&T's knee-jerk reaction to factual evidence just makes the company look like whiny and overly litigious spoilsports.

No positions in stocks mentioned.
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