telecom@eecs.nwu.edu (TELECOM Moderator) (10/12/89)
AT&T is using false and malicious advertising to protect its long-distance business, MCI Communications Corp. charges in a lawsuit filed Tuesday. MCI, whose 10 percent market share makes it a distant number two to AT&T's 75 percent, says its giant rival is resorting to false claims in the hope of stemming the loss of 100,000 customers to MCI each week. AT&T, however, says it will defend itself with a countersuit. According to AT&T spokesman Herb Linnen: "We welcome the opportunity to discuss who is misleading whom...we have been quite concerned for some time now about MCI's misleading print and broadcast advertising. We have taken our complaints directly to MCI without success." He added, "AT&T stands behind its advertising." This latest litigation is simply the latest chapter in MCI's long and very bitter battle with AT&T, which began in the 1970's when MCI successfully broke AT&T's long-distance monopoly by offering 'Execunet', the first long-distance service bypassing AT&T offered to the public. The two companies have battled each other at the Federal Communications Commission, which authorizes the rates for each, ever since. This is the first time since AT&T's divestiture that the arguments have been taken into a courtroom. In an interview, MCI Chairman William McGowan said that "AT&T ads are sleazy", and he noted that the nine month old campaign grew increasingly negative, forcing MCI into the courts. AT&T responded saying that MCI is resorting to the courts since "...they just can't hack it in the marketplace...." McGowan responded that he believes a lawsuit is the only way to fight a company which is spending two million dollars a day on advertising. He said, "Our budget is big -- $51 million -- but how do you compete with someone who is nine or ten times your size in advertising?" MCI is still studying the impact of the latest round of AT&T ads, but McGowan said he is sure MCI should have gained "a lot more" than 100,000 customers per week if not for the advertising. The advertising has not affected professional telecommunications managers, but does have an impact on individual and small business customers, he said. The MCI suit, filed in U.S. District Court in Washington, DC, alleges that AT&T's advertising campaign "maliciously attacked MCI's honesty and the value of MCI's products and service by falsely and deceptively representing that it is superior to its competitors in general, and MCI in particular, in terms of trustworthiness, quality and price. MCI's suit cites AT&T ads that assert MCI's rates are cheaper than AT&T's only when calls are made over 900 miles away and after 7 p.m. MCI's suit also takes umbrage at AT&T's advertisement which states that MCI customers "might have better luck calling Mars than trying to reach MCI representatives for an explanation of their bills." The ads, the suit charges, also claim non-AT&T companies provide slow telephone connections; that other companies do not operate worldwide like AT&T; and that competing 800, facsimile and WATS services are inferior. The suit says AT&T "has wrongfully profited and MCI has been damaged by being wrongfully thwarted from maximizing its sales potential." The suit asks the court to order AT&T to ***discontinue advertising its services for a period of one year*** and that advertisements after that time be approved by the court and carry a notice to that effect in the advertisement itself. Additionally, it asks for profits "wrongfully amassed" by AT&T on the sale of its products and services during the past year, plus interest and legal fees. McGowan was particularly irked by a claim that MCI's fax service has 57 percent more problems than AT&T faxes. He said that number was arrived at by figuring the difference between AT&T service -- with 4.9 percent errors -- and MCI, with 7.7 percent errors. Rather than reporting the 2.8 percent difference, the ad claims a 57 percent higher rate -- the percentage increase between 4.9 percent and 7.7 percent. "Talk about misleading," McGowan said. "Yes, talk about misleading," said Herb Linnen. "They've survived this long in part based on the deceptions they've used on a public not well educated on the technical aspects of telephony....we'll clear this up once and for all in court with a countersuit." Patrick Townson