“AT&T did not file this lawsuit because Verizon’s ‘There’s A Map For That advertisements are untrue; AT&T sued because Verizon’s ads are true and the truth hurts.”

– Excerpt from Verizon’s response to AT&T’s complaints about its new ad campaign

Verizon was right. The truth does hurt. And it is especially painful when it’s meted out by a court of law. A U.S. District judge on Wednesday denied AT&T’s request to force Verizon to pull its “There’s A Map For That” and “Island of Misfit Toys” commercials, saying that while the ads might be “sneaky,” they are not deceptive.

“People might misunderstand [Verizon’s commercials],” said U.S. District Judge Timothy Batten, “but that doesn’t mean they’re misleading.”

He gave AT&T (T) another chance to make its case at a Dec. 16 hearing, but given his dim initial view of the company’s complaint, the carrier seems unlikely to prevail.

AT&T plans to press on with the case anyway. “While we are disappointed with the court’s decision on our request for a temporary restraining order, we still feel strongly that Verizon’s ads mislead consumers into thinking that AT&T doesn’t offer wireless service in large portions of the country, which is clearly not the case,” AT&T spokesman Mark Siegel said in an email. “We look forward to presenting our case to the court in the near future.”

In the meantime, AT&T has begun running some attack ads of its own. Sadly, the first effort is not nearly so clever as Verizon’s (VZ) and features far too much Luke Wilson and far too little humor.

PREVIOUSLY:

• Verizon to AT&T: Do Yourself a Favor and Shut Up
• Frosty’s Winter Litigation Wonderland: AT&T Demands Verizon Pull Holiday iPhone Ads [With Full Complaint]
• Verizon Banishes iPhone to Island of Misfit Toys
• Verizon on AT&T Suit: There’s a Word for That. “Junk.”
• Verizon to iPhone Users: “Want Five Times More 3G Coverage? There’s a Map for That.”

So begins Verizon’s (VZ) response to AT&T’s (T) complaints about its new ad campaign, and as you can see below, it pulls no punches. For 53 pages–all of them very obviously drafted with publication in mind–the new filing mercilessly thrashes AT&T, proving over and over again that the carrier’s carping over Verizon’s ads has transformed a no-win situation into a horrific PR disaster that only highlights AT&T’s shortcomings.

“In the final analysis, AT&T seeks emergency relief because Verizon’s side-by-side, apples-to-apples comparison of its own 3G coverage with AT&T’s confirms what the marketplace has been saying for months: AT&T failed to invest adequately in the necessary infrastructure to expand its 3G coverage to support its growth in smartphone business and the usefulness of its service to smartphone users has suffered accordingly. AT&T may not like the message that the ads send, but this Court should reject its efforts to silence the messenger.”

Brutal.

As I said earlier this month, if AT&T’s lawsuit over Verizon’s allegedly misleading “there’s a map for that” wasn’t a public relations mistake to begin with, it will be by the time Verizon gets through. And, indeed, the lawsuit already is a mistake. Below, Verizon’s reply in full:

PREVIOUSLY:

• Frosty’s Winter Litigation Wonderland: AT&T Demands Verizon Pull Holiday iPhone Ads [With Full Complaint]
• Verizon Banishes iPhone to Island of Misfit Toys
• Verizon on AT&T Suit: There’s a Word for That. “Junk.”
• Verizon to iPhone Users: “Want Five Times More 3G Coverage? There’s a Map for That.”

verizonresponse –

“This is a decision that is exclusively in Apple’s court,” said Seidenberg. “Obviously we would be interested if they thought it would make sense for them to have us as a partner. And so we will leave it with them on that score….We want to broaden the base of choice for customers, and hopefully along the way, Apple, as well as others, will decide to jump on the bandwagon.”

That’s the argument put forth by Piper Jaffray analyst Chris Larsen in a research note to investors Monday. Larsen feels that the cost to Apple (AAPL) of developing a CDMA version of the iPhone for Verizon’s (VZ) network and the subsidies the company might lose by ending its exclusivity deal with AT&T (T) would be a small price to pay for the spike in iPhone sales they would create.

“Although the iPhone is a strong player in the smartphone market, expanding its multi-vendor strategy could allow it to dominate the industry, as it does with the iPod,” Larsen writes. “The U.S. market is the world’s largest smartphone market, but we believe there is a land grab in the U.S. for smartphone share.”

Expanding his argument, Larson adds, “Apple’s exclusivity with AT&T has left the door open for strong competition from competitors, such as Research In Motion’s Blackberries, Palm’s webOS smartphones and Google’s Android operating system on multiple smartphones from OEMs such as Motorola, HTC, Samsung, LG, and others. Making the iPhone available to the other 150+ million subscribers (~2/3s of subscribers) not on AT&T’s network could result in iPod like adoption.”

Keeping the iPhone exclusive–while it might enable Apple to do more innovative things, as COO Tim Cook noted yesterday during the company’s quarterly earnings call–would also give those rival devices and platforms more time to catch up. If Apple really hopes to keep its lead in the U.S. market, it must do away with exclusivity deals, the same way it’s doing away with them abroad.

That’s bad news for AT&T. Because, as I’ve noted here before, a move to nonexclusivity in the U.S. would brutalize the carrier’s subscriber base. Analysts have long said that a material number of AT&T iPhone users would flock to Verizon’s superior network given the chance.

Larsen agrees. “A move to non-exclusivity in the U.S. could have a material impact on the U.S. wireless carriers,” he writes. “AT&T could lose meaningful smartphone share, while we think all the other carriers would gain share. We believe Verizon would be the largest beneficiary of non-exclusivity and the development of a CDMA iPhone.”

Continuing, Larson explains, “With 35% of AT&T’s iPhone sales coming from new customers, we feel it is reasonable to assume the company’s total iPhone sales could decline by 30% or more and that Verizon could pick up the bulk of this lost share (why switch to AT&T for iPhone if you haven’t left by now and the device is now available through your carrier; Verizon’s network quality could be a reason to switch from AT&T).”

“iDon’t have a real keyboard
iDon’t run simultaneous apps
iDon’t take night shots
iDon’t allow open development
iDon’t customize
iDon’t run widgets
iDon’t have interchangeable batteries
Everything iDon’t
DROID DOES”

Shown on Fox and CBS (CBS) during a pair of NFL football games Sunday afternoon, the ad clearly positions Droid as the mythical iPhone killer. And while that might seem foolhardy, perhaps even hubristic, those who’ve seen the Motorola (MOT)-designed device say it’s at the very least a worthy iPhone rival.

Says Boy Genius: “[This is] the Android device to beat, and easily the most impressive. From what we’ve been told, Google had a direct hand in the Motorola Droid. Something to the point of almost dictating every move Motorola made when designing and making the phone….the Droid, even in its non-final form, is the most impressive phone we’ve used since the iPhone. It’s positively amazing.”

A gushing endorsement of an unreleased device and as such, to be taken with a grain of salt. That said, it’s hard to believe Verizon (VZ) would go all out here without good reason. And make no mistake, the company is going all out, even to the point of licensing the “Droid” trademark from Lucasfilm.

This past weekend’s TV commercial and a Droid teaser site are clearly the beginning of a major marketing push intended to position Droid as the Apple (AAPL) iPhone’s better, or at least its equal. Little wonder then that Google (GOOG) CEO Eric Schmidt was so upbeat about Android’s future during the search engine company’s earnings call last week.

“Android adoption is literally about to explode,” Schmidt said. “You have all the necessary conditions, you have the vendors, you have the distribution and so forth. This is a very critical period with all of everything being delivered.”

PREVIOUSLY:

• Verizon to iPhone Users: “Want Five Times More 3G Coverage? There’s a Map for That.”
• Perhaps by “Devices Like the Pre,” Verizon CEO Meant the iPhone?
• Analyst: AT&T Screwed Without iPhone Exclusivity
• Q: Should Apple Bring the iPhone to Verizon? A: Yes.
• Apple, Verizon and the iPhone LiTE

“We still have a backlog of subscribers but it’s not unmanageable and we get shipments every week. We’ll be short for a while but we’re catching up.”

– Sprint Nextel CFO Bob Brust, June 24, 2009

[This post was updated at 12:36 with comment from Sprint.]

Sprint best step up its marketing efforts for the Pre because according to Pali Research, demand for Palm’s new device is slowing, and quickly.

During the week ending June 26, Pali estimates that Sprint sold 50,000-60,000 Pre handsets. In the weeks that followed, Sprint sold “less than 40,000,” and then, “over 30,000”–again, according to Pali. Now the research outfit says Pre sales have declined by another 5,000 units.

“We really aren’t sure what Sprint is waiting for in stepping up the ad campaign but Palm Pre sales have continued to slow over the past two weeks and we believe Sprint is currently selling roughly 25,000 per week, down from over 30,000 two weeks ago and over 50,000 in late June,” Pali analyst Walter Piecyk said in a research note this morning. “Advertising could increase in the coming weeks but we are headed into August and there is a new BlackBerry now vying for the attention of wireless customers.”

And don’t forget that $99 Apple iPhone 3G.

Piecyk concludes by suggesting that Sprint (S), by failing to market the hell out of the Pre, is fumbling the best opportunity to come its way in a while.

“Slowing sales cannot be helping CEO Dan Hesse’s ability to extend the exclusive period for the Pre as Palm (PALM) likely views a Verizon launch as something that could materially stimulate sales,” Piecyk said.

“Hesse has never been one to resort to price cuts but we wonder if dropping the Pre to $99 could reignite sales,” the analyst continued. “…Sprint’s future is certainly not tied to the Pre but this is a great product that could highlight their data network. We believe they are squandering this opportunity over the past few weeks. Sprint is still not in a strong enough position to let good opportunities pass them by.”

And what does Sprint think of that assessment? Not much. Reached for comment, a spokesperson told me: “we are very pleased with the performance of the Pre and the excitement it’s drawn; we are selling all the quantities that are being delivered to us and we are ramping up advertising this month — did you see the full-page ads this week comparing the value and performance of the Pre to the iPhone? — and we are expanding availability of the handset at Best Buy, Radio Shack and online, with future expansion of availability planned. As Dan Hesse noted in California today, it takes a number of months — through a whole ramped-up sales cycle — to determine the real performance of a handset in the marketplace. Folks like to speculate and toss around ideas on the internet all the time, but the truth is Sprint is very happy with how the Pre is doing.”

“The ‘PC Hunter’ ads, the ‘PC Rookie’ ads clearly have been winners in the marketplace,” Turner said. “And you know why I know they’re working? Because two weeks ago we got a call from the Apple legal department saying, ‘Hey’–this is a true story–saying, ‘Hey, you need to stop running those ads–we lowered our prices.’ They took like $100 off or something. I did cartwheels down the hallway. At first I said, ‘Is this a joke? Who are you?’ Not understanding what an opportunity. And so we’re just going to keep running them and running them and running them.”

But only after tweaking the ad in question to reflect Apple’s recently lowered prices, Ad Age reports.

Microsoft’s (MSFT) Laptop Hunters ad, which once depicted the supremely annoying “Lauren” opting for a $972 Dell (DELL) laptop over a $2,000 MacBook Pro now features no reference to that machine at all. Which is appropriate, since it was replaced with a new $1700 model in early June. And now, rather than harping on that $2000 price point, “Lauren” simply suggests that Mac users are “paying a lot for the brand.”

Not nearly as much as Microsoft is paying for these silly commercials. Anyway …

“We slightly adjusted the ads to reflect the updated pricing of the Mac laptop shown in the TV advertisement,” Microsoft told Ad Age. “This does not change the focus of the campaign, which is to showcase the value and choice of the PC.”

The new ad:

<br/><a href="http://video.msn.com/video.aspx?vid=6c7197c6-e6ac-4070-8aa0-e76ec5634ebe" target="_new" title="Laptop Hunters $1700 - Lauren and Sue get a Dell XPS 13">Video: Laptop Hunters $1700 &#8211; Lauren and Sue get a Dell XPS 13</a>

The old ad:

<a href="http://video.msn.com/?mkt=en-us&#038;playlist=videoByUuids:uuids:0170090f-53b2-40fc-89a4-c759cb088e0a&#038;showPlaylist=true" target="_new" title="Laptop Hunters $1700 – Lauren and Sue get a Dell XPS 13">Video: Laptop Hunters $1700 – Lauren and Sue get a Dell XPS 13</a>

“PC unit growth was stronger than we expected in all markets but Eastern Europe in the first quarter of 2009. In particular, consumer shipments were much stronger than we anticipated,” said Gartner’s George Shiffler. “However, professional shipments continued to struggle, and we think much of the growth in consumer units was due to vendors and the channel restocking inventories rather than an upsurge in demand.”

Well, hopefully that will all change after the October launch of Windows 7, right?

Nope. Not according to Gartner (IT), anyway. Unless Microsoft (MSFT) is planning another $300 million ad campaign featuring Jerry Seinfeld.

“Unless Microsoft mounts a major marketing campaign in support of Windows 7, we think consumers will simply adopt the new operating system as they would normally buy new PCs and/or replace old ones,” Shiffler said. “As for professional users, we still expect them to put off adopting the new OS for at least a year until they have fully tested their applications against it.”

“I’m just not cool enough to be a Mac person.”

– Lauren from Microsoft’s new “Laptop Hunters” commercial

With Microsoft’s February share of the search market weighing in at a paltry 8.2 percent and declining, the company has gone to extraordinary lengths to reverse the public’s indifference to its search offering. It tried a loyalty program called Cashback–“We are ‘The Search That Pays You Back!’” It tried a rewards program called SearchPerks, as well–“Start earning tickets towards exciting prizes whenever you search the Web!” Neither seems to have done much good.

Now, as it prepares to rebrand its search engine under a new name–Kumo–Microsoft (MSFT) is redoubling its marketing efforts with more proven methods. The company has hired ad agency JWT to create an estimated $80 million to $100 million ad campaign covering TV, online, print and radio. “According to one person close the situation, the forthcoming campaign will be careful to not position ‘Kumo’ as a competitor to Yahoo or Google and instead cast it as a reimagined search engine that ups the game by yielding fewer but more-focused results,” reports Ad Age, adding that such a strategy “is probably a good–if not the only–way to go.”

That said, if Kumo purports to be a “reimagined” search engine, it does seem to be lacking a bit in imagination. Certainly from what we’ve seen of it, Kumo doesn’t seem all that different from Google (GOOG). In fact, with its spartan design and goofy name, it arguably shares more similarities with the search sovereign than before. But then, perhaps, that’s the point. Perhaps what Microsoft is doing here is not reimagining Live Search as an entirely new game-changing service, but reimagining it as Google in hopes that we’ll forget its sad history as a failed Microsoft search product and reimagine it as a successful one.

Ironic, isn’t it, that Apple (AAPL) would slag Microsoft’s (MSFT) use of its ad budget by producing a new ad of its own expressly for that purpose? Still, Apple does have a point. As I noted here back in July, proposing to fix technology problems with advertising is rarely a wise idea.

Previously:

• “Vista” Means Always Having to Say You’re Sorry
• Seriously, Windows Is Just Another Way of Saying We Have Each Other?
• Which Do You Like Better, Steve: “No Mac for You!” or “Vista–Not That There’s Anything Wrong With That”?
• The Simple Life: Gates and Seinfeld, the Hilton and Richie of Tech
• Hi. I’m a PC … and I Was Made on a Mac

[Image Credit: Worth1000]