Can Government Force Truth in Telecom Marketing?

The 4G wars are under way, and everyone's in on the action. The first-mover advantage that Clearwire (Nasdaq: CLWR  ) and bosom buddy Sprint Nextel (NYSE: S  ) enjoyed in 2010 with their WiMAX data network has evaporated. Verizon (NYSE: VZ  ) has introduced a high-speed LTE network, AT&T (NYSE: T  ) is building one of its own while employing the hybrid HSPA+ technology in the meantime, and T-Mobile plans to stick with HSPA+ for the long haul -- assuming it doesn't get gobbled up by Ma Bell first, that is.

All three technologies are cheerfully marketed under the 4G banner because, you know, they're faster than the last-generation 3G stuff. It's nowhere near qualifying for true 4G status as defined by the International Telecommunications Union, though. Consumers would be less deceived by a brand like 3.5G or 3G+, because true 4G networks won't just be a smidge faster, but also more reliable, responsive, and fault-tolerant.

The networks will never step back on their own, since the 4G marketing wars are in full swing already. But the government might soon make them admit to their truth-stretching. In a bill just introduced to Congress, Rep. Anna Eshoo (D-Calif.) outlines some new truth-in-advertising guidelines for the wireless industry.

Regulation can be stifling, but this bill ain't about forcing carriers into specific technologies or standards. Instead, Eshoo asks for fuller explanations of minimum guaranteed network speeds (not the maximum theoretical speeds currently in vogue), reliability ratings, detailed pricing, and unusual network policies.

That last point might discourage carriers from throttling network speeds for Netflix (Nasdaq: NFLX  ) video streams, Vonage (NYSE: VG  ) voice connections, and other high-bandwidth services that could threaten the network's own offerings. After all, they'd have to disclose this discrimination at the point of sale, in marketing messages, and many other places.

If adopted and enforced, this bill would take some of the hype out of 4G networks and help consumers make a fully informed choice between carriers and plans. All four of the major networks are likely to lobby against it, complaining that it squashes innovation and censors free speech or some such. But it's all about saving face and continuing the deceptive practices that have already turned into industry standards.

In the long run, even the networks will benefit from sticking to the facts. What if the American definition of network generations slides entirely out of touch with the rest of the world? It'd be hard to sell a 7G world phone for international travelers if the rest of the planet calls the same technology 5G. They'll work together, but it sounds like they won't -- a self-made marketing problem down the road.

I hope this measure passes so we can get back to business. This marketing hoopla is a needless distraction for consumers, investors, and mobile providers alike.

Whatever the industry calls its next-generation networks, the ongoing data explosion ensures that more and faster version will keep coming. In this free report, we show you how to profit from the high-speed connections happening behind the scenes. Click here to grab your copy -- it's entirely free and packed with essential information.

Fool contributor Anders Bylund owns shares of Netflix, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Netflix and AT&T. Motley Fool newsletter services have recommended buying puts in Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Our Foolish disclosure policy is cheering Rep. Eshoo from the sidelines.


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