WebTV Settles Deceptive Advertising Charges

Responding to a Federal Trade Commission complaint about the misleading nature of its advertising, Microsoft’s WebTV Networks division has agreed to pay some customers back for long-distance charges, and will undertake a campaign to educate consumers about the pros and cons of accessing the Internet through a non-computer device.

“It’s safe to say that most consumers want to know what a product can or can’t do before they buy it,” said Jodie Bernstein, director of the FTC’s Bureau of Consumer Protection. “It’s also safe to say that not all Internet access products are created equal. Web TV’s consumer education campaign will give consumers the information they need to make an appropriate purchasing decision.”

The Web TV settlement puts an end to two charges that the FTC had leveled against WebTV. The first involved WebTV ads that billed its service as “complete” Internet access, when, in fact, users of the system cannot access all of the features — streaming media, Java applications, and downloading software, for example — that a person using a computer may enjoy. In addition, the FTC said WebTV hadn’t clearly explained that some users would incur long distance telephone charges, if they lived outside an area where WebTV has dial-up service. These disclosures will appear in the software itself, and on any introductory kit provided to users.

Under the terms of the agreement, WebTV must refrain from making deceptive advertising claims about the performance of the service, must conspicuously disclose the long distance telephone situation, and must reimburse certain former WebTV subscribers for long distance charges.

In addition, the company has agreed to initiate a consumer education campaign — through magazines, retail stores, and on the Web — to inform consumers about the advantages and disadvantages of using Internet access devices like WebTV, rather than computers.

Though not necessarily intended, the campaign — if successful — may help usher in an era in which more people access the Internet from “appliances,” rather than computers. Then again, it may turn consumers away from such devices. A number of Internet companies and their leaders — notably Sun Microsystems founder and chief executive officer Scott McNealy — have advocated the adoption of less-costly means of accessing the Internet, in hopes of spurring more widespread use of the Net.

WebTV Networks, based in Mountain View, California, offer a TV set-top box and an Internet service which, together, allow users to connect to the Internet through a television set — without a computer. It licenses its technology to Sony, Philips Electronics and Mitsubishi, which manufacture the boxes, called “WebTV Receivers.” The company sells the Internet service, called the “WebTV Network,” for a flat monthly fee.

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