With 3G ad lawsuits pulled, so too are more punches to AT&T's eye

Attorneys for AT&T and Verizon Wireless agreed today to drop two federal lawsuits over Verizon advertising about its 3G network.

As a result, AT&T avoids giving itself an even bigger black eye than it has gotten from many iPhone users, who have complained about inadequate network coverage from the company, which is the iPhone 's exclusive carrier.

Analysts said AT&T's failure in November to win a temporary restraining order from a U.S. district court judge in Atlanta were a sign of how thin AT&T's central argument was. AT&T was claiming Verizon's "there's a map for that" ads were misleading by showing 3G coverage maps that used white space outside of AT&T's 3G coverage areas which implied there was no coverage whatsoever outside of the 3G areas.

Verizon did respond to a request by AT&T to clarify that issue, and started using words at the end of its slew of different ads that read, "voice and data services available outside 3G coverage area."

After that language was added, AT&T's main issue at court seemed even thinner, analysts noted.

IDC analyst Scott Ellison today said that AT&T's position was simply "not defensible" especially since regulators and judges are well aware of AT&T's network deficiencies. Ellison had previously said AT&T has "immolated itself with network capacity issues" especially in crowded urban areas.

The thinness of AT&T's case in the Atlanta court indicated that AT&T "didn't have a prayer of winning," added analyst Jack Gold of J. Gold associates.

While the federal case in Atlanta drew all the attention, there was a second lawsuit that was dismissed today by both companies, according to court records. The second was before a federal district court in New York, filed originally in July.

In the New York case, Verizon was arguing that its advertising slogan of having "America's Most Reliable 3G Network" did not violate a federal law for advertising truthfulness. Verizon filed the lawsuit against AT&T on July 27 after AT&T had filed a challenge on July 1 of Verizon's advertising slogan (and related ones) before the national advertising division of the Council for Better Business Bureaus.

Even though it avoided a second black eye or further injury to itself by withdrawing its lawsuit filed in Georgia, AT&T filing of that lawsuit helped provoke what may be recorded as one of the fiercest, and funniest, spates of TV ads ever.

After Verizon's first ads aired in October, AT&T reacted by airing its own TV ads with actor Luke Wilson defending its network coverage, and Apple even backed AT&T's network capability for the iPhone in separate ads.

More recently, Verizon kept up the pace and attacks on AT&T with several 3G coverage ads on a Christmas theme, most notably one that invokes "Misfit Toys" and a "Dolly for Sue", who say that the iPhone with AT&T 3G will fit in well in their dysfunctional world. Following up the Christmas ad series, Verizon last week released another that features reindeer .

If the ads didn't help keep lawyers and advertisers for both companies busy and employed, they kept many people laughing, including Ellison, who found the humor has worked strategically in the fierce battle between the nation's two largest carriers.

"It's hard to argue that "A Dolly for Sue" on the "Island of Misfit Toys" Verizon commercial is defaming your brand, especially when judges and regulators are iPhone users too and well aware of AT&T's network coverage issues, "Ellison said in an email. "AT&T had already lost the PR war before Verizon got so creative and charming in its advertising; withdrawing the lawsuit simply recognizes that."

Indeed, the lawsuits and the ads show just how competitive the nation's two largest carriers are. And in another sense, they also underscore how rabid customers are for smartphones and good network coverage.

The whole battle has also underscored an even more sobering reality about the need to continually beef-up wireless networks to give an expanding number of smartphone users reliable use of more bandwidth-hungry applications.

That reality is, basically, that as devices demand more wireless bandwidth, the carriers are going to be racing for many years to come to keep apace with the user demand.

Today, it might be Verizon boasting of five times the 3G coverage area of AT&T, but if Verizon gets to sell the iPhone some day, atop of multiple wireless devices and netbooks, one has to wonder when its customers are going to face service disruptions.

In other words, today's actions might seem like a victory for Verizon, but given the level of U.S. competition, will Verizon be able to crow as loudly three or five years from now?

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