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Verizon (VZ) Asked to Alter FiOS Advertisement by NARB

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Verizon Communications Inc.’s (VZ - Free Report) claims of providing the highest Internet speeds in the industry were recently questioned by advertisement watchdog, the National Advertising Review Board (NARB), following a complaint by Comcast Corporation (CMCSA - Free Report) . As per the NARB, the advertisement in question didn’t convey facts, seeing that it is Comcast Gigabit which offers the fastest Internet service. Nevertheless, the regulatory body has refrained from using words like misleading or deceptive related to the advertisements. The NARB panel further recommended the company to revise its claim of providing high picture quality services.

AT&T Inc. (T - Free Report) was in a similar situation in 2014, when it was asked by the NARB to stop claiming that U-verse offered the fastest Internet service.

Customer Opinion versus Measured Data

Verizon’s claims were actually based on PC Magazine's Reader's Choice Survey. However, the NARB panel noted that the ads made it seem like Verizon provided the fastest Internet speeds in the market. Visuals supporting the ad did not state its basis of customer perception anywhere either. In fact, a head-to-head comparison of the various Internet service providers (ISP) reveals a completely different picture. Verizon responded by saying that it will consider the panel’s recommendations in future advertisements.

Who Provides the Fastest Internet Now?

As per a recent testing conducted by the Federal Communications Commission in customers’ homes, Comcast’s Internet service outperformed Verizon’s FiOS offering. While Verizon’s top advertised speeds are 500Mbps, Comcast offers Gigabit Internet via fiber that boasts Internet speeds as high as 2Gbps .

The Bottom Line

Verizon has a history of claiming superiority of its FiOS offering over other Internet providers. Last year, it took Cablevision Systems Corporation to court to challenge the latter’s claim of a faster Internet service than FiOS. Although this time, Verizon isn’t specifically required to abide by the NARB panel’s recommendations, such allegations tend to confuse consumer sentiments and may therefore, hurt the company’s reputation, going ahead.

Both Verizon and Comcast currently carry a Zacks Rank #3 (Hold).

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