Australia's two largest telcos have kicked off a second court battle over mobile advertising, with Optus this time taking aim at Telstra's "unlimited" ads and seeking permanent injunctive relief preventing Telstra from using the word.
During a hearing in the Australian Federal Court on Friday, Telstra's billboard and online ads that state, "One word from Australia's best mobile network: Unlimited" came under fire.
According to counsel for Optus, Richard Lancaster SC, Telstra's usage of the word "unlimited" is misleading, because there are limits placed on the offering. Ordinary consumers would be likely to think unlimited applies to characteristics across data speed, data volume, geographical reach, and availability across devices, he argued.
However, he said Telstra's "very best" product has normal mobile speeds for the first 40GB each month, after which speeds are throttled, meaning customers cannot continue streaming videos in HD. It is also limited by not being available on tablets, he added, and by Telstra's mobile coverage gaps across the nation.
"Data is king -- speed of data, volume of data that is accessible on these plans -- and unlimited is a powerful word," Lancaster said, adding that Telstra's ads cause "a misleading impression intentionally created to draw consumers into the marketing web".
The lack of qualification of the word "unlimited" means the ad campaign is "misleading and false", he said.
"Its lack of specificity is in fact a huge part of the problem, because it invites consumers to think about what is important to them about a mobile network ... and telling them those are unlimited," Lancaster said.
Speaking from her personal reaction to the word "unlimited", Justice Gleeson said she immediately inferred that it meant an unlimited network geographically with an absence of blackspots. Her second impression was that it would enable customers to stream videos wherever they go without issue.
Dispelling these impressions would require effort from the consumer to travel to a Telstra store and speak to an employee, Gleeson J pointed out, which she said could "pique fury".
"The idea that someone will then go and explore this through the internet is not such an imposition on the consumer; what I find more troubling is that someone would schlep to a Telstra shop to find out ... that in fact there was nothing relevant for them," Gleeson J said.
Throttling speeds after using the initial 40GB of data each month also leads to "usage that makes you miserable", the judge said, questioning whether Telstra wants "miserable customers".
Counsel for Telstra argued that the ads are not misleading because a reasonable reading of them would not expect the word "unlimited" to be applied to every single feature of every single product on offer from the telco.
"The way in which the ad is structured, it doesn't say, 'One word about Telstra's mobile network'. It says, 'One word from Australia's best mobile network'. It could just as easily be saying, 'One word from Telstra'. The impression that that sets up is this is the person who's speaking," counsel for Telstra said.
"Telstra's saying, 'One word from us, which is unlimited'. They're not saying, 'Here's a description of every single feature of every single product or service that we might offer'."
The ads simply prompt the consumer "to obtain additional information", he added, by piquing interest or curiosity to find out what is unlimited.
"The field of telecommunications is absolutely awash with unlimited advertising, and all that's happening is into that space has stepped Telstra to say, 'Here's a word from us: Unlimited. Come and find out more'," counsel for Telstra said.
"Our case is that it's an unreasonable and strained interpretation to use the word 'from' and turn it into an 'about'. That word standing alone, together with a prompt to say, 'If you want to find out more you can either visit us today, or if you're online and seeing things on social media you can learn more just by clicking, or you can go to the Telstra website again just by clicking'.
"To say that an ad in that form is describing every characteristic of every product and service on offer from Telstra we say is strained, and of the sort of reaction that should be excluded from the reasonable potential customer."
Being cross-examined during Friday's hearing, Optus VP of Retail and Channel Sales Maurice McCarthy responded to how Optus also places restrictions on its own "unlimited" offerings, such as how unlimited international MMS and SMS is confined to select countries.
A cross-examination of Telstra executive director of Marketing Jeremy Nicholas conceded that the advertising refers to some aspects of some services that have an unlimited quality.
Lancaster pointed to the Telecommunications Consumer Protection (TCP) Code while cross-examining Nicholas, saying important qualifications and restrictions must be included in advertising to prevent consumers from being misled.
Gleeson J has reserved her judgment until May 23.
The Federal Court hearing in Sydney followed Telstra earlier this week obtaining an interlocutory injunction from the Supreme Court of Victoria to prevent Optus from continuing to run ads claiming it has the best mobile network in Australia.
Optus was required to "take all necessary steps to withdraw any advertisements or promotional material containing the alleged representation", after Justice Robson found the ads may be misleading or deceptive.
"I am satisfied that there is a serious question to be tried in relation to the allegations of misleading or deceptive conduct on the part of Optus," Robson J said, with the full Victorian Supreme Court hearing to take place on Tuesday next week.
Optus' online ads and billboards across New South Wales, Victoria, and Queensland had used slogans such as "Empires end. That's what they do", and "The Optus Mobile Network has been ranked the best overall in voice and data", referring to last year's P3 Mobile Benchmark report, which saw Optus defeat Telstra by three points.
An Optus spokesperson responded by saying the P3 benchmark test "is worth celebrating and communicating", adding that Telstra has "lost its sense of humour".
Optus has since changed its online advertising to read, "Australia's winning mobile network".
In a Q3 financial update earlier this week, Telstra said it expects its full-year FY18 earnings before interest, tax, depreciation, and amortisation (EBITDA) to be at the bottom of the AU$10.1 billion to AU$10.6 billion guidance range; and income to be around the middle of the AU$27.6 billion to AU$29.5 billion range.
Telstra added 60,000 net post-paid subscribers during Q3.
On Thursday, Optus reported total net profit of AU$817 million for FY18, with EBITDA of AU$2.8 billion. During the year, Optus brought in operating revenues of AU$8.7 billion.
Optus also announced reaching 10.1 million mobile customers.
Telstra has gained an interlocutory injunction against Optus' potentially misleading ads that claim it operates Australia's best mobile network.
Optus now has 453,000 NBN customers and more than 10 million mobile subscribers, with CEO Allen Lew telling ZDNet that the telco is also examining the 3.6GHz spectrum band for possible 5G use.
Telstra has provided a financial update for Q3 as CEO Andy Penn speaks in the US about the NBN- and 5G-related challenges facing the telecommunications industry.
Mobile device computing policy (Tech Pro Research)
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