As part of the settlement announced Wednesday, WebTV must refrain from advertising its product as capable of accessing all Internet content, unless it becomes true. The settlement also mandates that ads must specify that consumers can face long-distance charges when using the service.
"We contended that none of the advertising was problematic, but we've agreed to the decree with the FTC. As far as we're concerned we're pleased to have the matter behind us," Microsoft spokesman Vivek Varma said.
Varma pointed out that most of the advertisements in question ran during 1997 and 1998. Microsoft acquired the company in 1997. "None of our current advertising has been charged to be improper," he said.
The company did not admit wrongdoing as part of the settlement. However, the FTC offered several examples of the problems with WebTV's past ads.
"Some people, who are just looking for a basic connection to the Internet and email, they got that. What they didn't get was the stuff that was a little more sophisticated," said Joel Winston, assistant director for advertising practices at the FTC. "When WebTV was first introduced, it was really targeted at Internet novices, so we think it's unlikely that people would have understood that the content you're getting through your WebTV is not the same as you get through your PC."
According to the government, WebTV users are more limited in their Internet use and are unable to access streaming video, as well as games or chat rooms based on Java software. Furthermore, the FTC notes, WebTV users cannot download, store or run software available on the Internet. In certain cases, they also may not be able to display Web pages, open email attachments or play music files online.
The FTC also criticized WebTV for failing to disclose that consumers could be charged long-distance fees for accessing the Internet from their televisions.
"There were suggestions in the advertisement that all you really needed to get your unlimited Internet access was to pay the monthly Internet service and the cost of the box," Winston said. "In some ads, they even touted the savings of communicating by email instead of telephone."
WebTV's future ads must include "clear and conspicuous" disclosure that consumers could be charged long-distance fees for accessing the Web via their televisions, according to the settlement. Customers who canceled their WebTV service within 90 days of subscription and cited long-distance fees as the reason must also be reimbursed.
Also as part of the settlement, WebTV will be required to launch a consumer education campaign that advises consumers on how to compare the benefits of Internet access devices vs. personal computers. Advertisements for the campaign will appear in Good Housekeeping, Modern Maturity and Newsweek. In addition, a consumer brochure titled "Getting Online: Using Internet Access Products" will be available at retail locations that sell WebTV and on the company's Web site.
"While we may disagree with some aspects of the commission's analysis, Microsoft's WebTV is pleased to offer consumers the additional disclosure," Varma said.
The educational advertisements will alert consumers to the fact that Internet appliances may be simpler to use and cheaper, but they can offer less-sophisticated Internet access.
"We think it's important to get this message out now, with the explosion of Internet access devices. There are still a lot of people out there who don't understand the trade-offs," Winston said.
"We're very pleased that WebTV is stepping forward and has agreed to put out this message."