Webtv Networks, Inc.

Text (OCR of the scan at left; may contain errors)

IN THE MATTER OF WEBTV NETWORKS, INC.

CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATIONS OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket C-3988; File No. 9723162 Complaint, December 8, 2000--Decision, December 8, 2000 This consent order addresses Webtv Networks’ promotion of the Webtv system, consisting of a set-top box and an Internet service, which, together allow users to connect to the Internet through a telephone line and a television. The complaint alleges that the Respondent falsely claimed that the Webtv system was the equivalent of a personal computer providing access to all of the Internet’s content and that upgrades would keep users current with the latest Internet technology. The complaint also alleged that Webtv failed to adequately disclose that a significant percentage of U.S. consumers would incur long distance telephone charges while connected to the Internet through the Webtv service. The consent order prohibits the Respondent from making the previously made false representations that Webtv system provides access to all internet content; that the Webtv system was the equivalent to a personal computer in terms of web access; and that upgrades to their system would keep users current with the latest internet technology, as well as any other misrepresentation about access to internet or the functionality of any internet related product or service. The order also prohibits the Respondent from representing the price of internet access without a clear and conspicuous disclosure of all material information regarding that price and all related charges including potential long distance charges. Additionally, the order requires the disclosure of information regarding long distance charges to include that users are likely to incur the charges, how they can determine if they will incur these charges, a source of information about how, if possible, to avoid these charges.

Participants For the Commission: Dean C. Forbes, L. Mark Eichorn, Tara A. Hurley, Toby Milgrom Levin, Joel Winston, C. Lee Peeler, and BE.

For the Respondents: Charles Buffon, Covington & Burling and Scott Maples, Webtv Networks.

WEBTV NETWORKS, INC. 1013 Complaint COMPLAINT The Federal Trade Commission, having reason to believe that Webtv Networks, Inc., a corporation (“respondent”), has violated the provisions of the Federal Trade Commission Act, and it appearing to the Commission that this proceeding is in the public interest, alleges:

1. Respondent Webtv Networks, Inc. is a California corporation with its principal office or place of business at 1065 La Avenida, Mountain View, CA 94043.

2. Respondent has patents pending for the technology and design of Webtv set-top boxes, devices used in conjunction with a telephone line, a television, and respondent’s Internet service to connect to the Internet. Respondent licenses the Webtv set-top box technologies to various companies, including Sony, Philips Electronics, and Mitsubishi, which manufacture and sell Webtv set-top boxes. Respondent sells the Internet service called Webtv Network, for which it charges a monthly fee. 3. The acts and practices of respondent alleged in this complaint have been in or affecting commerce, as “commerce” is defined in Section 4 of the Federal Trade Commission Act. 4. Respondent has disseminated or has caused to be disseminated advertisements and promotional materials for the Webtv Network Internet service and Webtv set-top boxes, including but not limited to the attached Exhibits A through G. These advertisements and promotional materials contain the following statements:

A. (Exhibit A: advertising template) “Webtv service offers • Complete and affordable Internet access VOLUME 130 Complaint . . . .

[Fine print disclosure]: Webtv Network service is not available as a local call everywhere. Toll charges may apply.”

B. (Exhibit B: brochure) “And you’ll pay a flat fee of $19.95 a month with no extra charges for long distance e-mail.** . . . .

With Webtv you can turn your TV into a powerful rocket ship any time you feel like exploring new places and ideas. There=s virtually no place on earth you can’t travel to; no person, place or thing you can=t easily find out more about. . . . Webtv even offers free automatic service upgrades that keep the Network as up to date as possible. . . . .

[Fine print disclosure on back of brochure]: **Webtv Network service is not available as a local call everywhere. Toll charges may apply.”

C. (Exhibit C: brochure) “[Consumer] [Bill M] ‘Now that Webtv came along, heck, who needs a computer. For almost a fraction of the cost, I can visit any city in the world, learn facts and even send e-mail. And best of all, I won’t have to worry about software upgrades since Webtv handles that.’” D. (Exhibit D: promotional video) “[Will Shriner]: With Webtv, the Internet is finally fast, easy, and affordable. You don’t need a computer. There WEBTV NETWORKS, INC. 1015 Complaint is no software to install. Plus you always get free automatic upgrades.

. . . .

For entertainment, information, communication, and help just getting things done, Webtv is all you need. . . . .

To stay connected with family and friends, Webtv offers e-mail. You can even make new friends all over the world without paying expensive long distance phone bills. [Visual disclosure (fine print)]: Webtv Network service is not available as a local call everywhere. Toll charges may apply.

. . . .

Its only $19.95. Surf the Net as often as you want on Webtv.

[Visual disclosure (large)]: Monthly subscription only $19.95 [Visual disclosure (fine print)]: Webtv Network Service is not available as a local call everywhere. Toll charges may apply.]”

E. (Exhibit E: letter to consumers accompanying promotional video) (emphasis in original) “Webtv brings all the incredible entertainment and information of the Internet right to your TV. VOLUME 130 Complaint . . . .

Buy your Webtv Internet Terminal at your local consumer electronics store for about $250. Then, pay a flat rate of only $19.95 a month to enjoy easy access to the Internet right on your TV.* . . . .

But ultimately, the best reason of all to subscribe to Webtv is that it opens up new worlds of entertainment, information and fun like nothing else can. With easy access to the Internet on your TV, you can visit thousands of fascinating web sites, quickly research almost any topic, person, place or thing that catches your fancy, even receive e-mail with people across the street or across the ocean.

. . . .

The Internet is one of the most important innovations of our time, and its incredible content should be readily available to anyone and everyone. With a Webtv Internet Terminal from Sony or Philips Magnavox and a low-cost subscription to Webtv*, it finally is. . . . .

[Fine print disclosure on back of letter]: *Webtv Network Service is not available as a local call everywhere. Toll charges may apply.”

F. (Exhibit F: television infomercial) “[Moderator/Announcer (Wil Shriner)]: You have heard of e-mail? That’s electronic mail that lets you send and receive messages anywhere in the world, without the hassle of stamps or the cost of long distance calls. WEBTV NETWORKS, INC. 1017 Complaint . . . .

[Announcer (Unidentified)]: And you don’t need a computer. . . . Whether it’s entertainment, communication or education, it's all on Webtv.

. . . .

[Visual disclosure (large)]: Only 19.95 a month. [Announcer (Unidentified)]: Then, get hooked up to the Webtv Network and surf all you want for only $19.95 a month.

[Visual disclosure (fine print, no corresponding audio)] Webtv Network Service is not available as a local call everywhere. Toll charges may apply.

. . . .

[Shriner]: Great. So, Christina, you know, one of the things I like to do is chat. You can go on and you can find anything you want to talk about, any subject matter, you go into a chat room. I understand you like that as well. [Consumer (Christina)]: Yeah, I do, because it saves a lot of money on phone bills. I call up my friend in Washington, talk for about a minute or two and tell him to go downstairs in his dorm, go online, and we start chatting.

. . . .

[Shriner]: I mean, having Webtv is like having a huge resource library, the Internet, the World Wide Web, all of that is available for you right now.

. . . .

VOLUME 130 Complaint [Consumer (Anita)]: Whatever you are into, it’s there. . . . .

[Shriner]: . . . So, Pete and Cammi have an interesting story. They knew each other, then they moved apart, and now they have come back together to get married, all with the help of Webtv. . . . So, you both have Webtv boxes. . . . The living 500 miles apart, does it make you feel closer? . . . . How much money do you think you’ve saved on phone bills? [Consumers (Pete and Cammi)] [Cammi]: Oh, on our phone bill? Hundreds of dollars.”

G. (Exhibit G: Web page) “6. Why Webtv instead of a computer? Webtv offers a variety of special entertainment features you can't get on a computer, only TV. Unlike a computer, Webtv comes with free service upgrades so you don't have to worry about new software. . . . . . . .

25. What is the cost of service, and what are the terms of commitment? The Webtv Network is a flat rate of $19.95 per month and Webtv Plus Network is $24.95 a month. . . . . . . .

40. Looks like Webtv now supports a lot of Internet standards. Is this significant? WEBTV NETWORKS, INC. 1019 Complaint Absolutely. The Internet changes constantly, and Webtv is committed to enhancing the user experience by regularly delivering new functionality. WebTV's free periodic service upgrades keep the Webtv Network current with Internet standards. . . .” 5. Through the means described in Paragraph 4, respondent has represented, expressly or by implication, that: A. The Webtv set-top box is equivalent to a personal computer with respect to its Internet-related performance; B. The Webtv set-top box and respondent’s Internet service provides access to all of the Internet’s content, including all of the entertainment and information available on the Internet; and C. Respondent’s upgrades to the Webtv set-top box and respondent’s Internet service keeps users current with the latest Internet technology.

6. In truth and in fact:

A. The Webtv set-top box is not equivalent to a personal computer with respect to its Internet-related performance. For example, Webtv set-top box users are unable to download, store, or run software available on the Internet, display certain Web pages or play certain Web files, or open email attachments in certain common formats; B. The Webtv set-top box and respondent’s Internet service do not provide access to all of the Internet’s content, including all of the entertainment and information available on the Internet. For example, Webtv users are unable to access files on Web sites that use popular formats or programming languages, including popular Internet technologies for Web site audio, video, VOLUME 130 Complaint interactivity, and multimedia used for online entertainment and information communication; and C. Respondent’s upgrades to the Webtv set-top box and respondent’s Internet service have not kept users current with the latest Internet technology. For example, upgrades have failed to provide certain commonly used Internet technologies for audio, video, interactivity, and multimedia.

Therefore, the representations set forth in Paragraph 5 were, and are, false or misleading.

7. In its advertising and sale of the Webtv Network Internet service and its advertising of Webtv set-top boxes, respondent has represented, expressly or by implication, that the total cost to consumers of using the Webtv Network Internet service and the Webtv set-top box is the initial purchase price of the Webtv set-top box hardware plus the flat monthly subscription fee for its Webtv Network Internet service. Respondent has failed to disclose adequately before purchase that a significant percentage of U.S. consumers will incur toll charges while connected via the Webtv Network Internet service to the Internet. This fact would be material to those consumers in their purchase or use of the service or product. The failure to adequately disclose this fact, in light of the representation made, was, and is, a deceptive practice.8. The acts and practices of respondent as alleged in this complaint constitute unfair or deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act.

THEREFORE, the Federal Trade Commission this eighth day of December, 2000, has issued this complaint against respondent. By the Commission.

WEBTV NETWORKS, INC. 1021 Complaint Exhibits Exhibit A There’s more to see, enjoy and do on TV Weber™ service offers: 3 ‘Complete and affordable internat arcess ‘The abilty to send email over yyour TV. Up-to six email ml per Y basi yie - ‘© Personalized intormaborr on demand such as stocks, sports, weather and news storias.

® Around Town'™ koal directo ‘of movie listings, restaurant © reviews, concerts * Compatibility with select printers. {peinvier not included) © Surfwatch™ and Kid Friendly Parental internet satoguatcs © Easy-to-use universal remote FT Meee aac set auncabie an a wii PHILIPS[ ened 4 Pedorartt cites roosts ssepuret ara or (Past sauder XXX) ‘Watch What's Possible! tatety meoguset Graal Webtv bara, fe Generic Webtv/Classic ~ 1/2 page ad 9.22.96 - Printed at 100% VOLUME 130 Complaint Exhibits Exhibit B WEBTV NETWORKS, INC. 1023 Complaint Exhibits Enjoy Immediate access ¢s in-depth information ‘on any subject you can imagine.

Say you read a magazine ad about a product or place youre interested in knowing more about, At the bottom Sep the enclosed Webtv. Denman stration Card for the. addresses of of the ad is a www address, Now you can visit that web we consumer lero sas site on your TV and find out everything you need to Sia pirate aachl know.* Or you're watching a baseball game and want to so eg a el ng oan ee check a player's current stats. With the touch of a button, you can switch to the Internet and. uncover a wealth of information in just moments. With Weber, the possibilities are endless! ‘easy and fun Weber Is to use — and find out instanuy if you've got the winning rumber to $10,000 in cash or to one of the other great prizes In the Webtv Instant Win Sweepstakes! Your TV makes a great shopping cart for online savings and convenience.

ZA = Discover the convenience of using Webtv to shop for everything from travel bargains to hit CDs to sports Turn your TV into equipment to furniture and more. Plus, use the Internet to research a product by checking out consumer report a post office when information before you spend a penny. Webtv also makes you send and it easy and fun to find new vacation destinations, You can receive e-mail. pull up pictures and information on cities, resorts, even hotel rooms. Then, you can make your travel and room h Ever think you'd use your TV to reservations onlinal keep in touch with friends and family around the work? Now you can. With Webtv e-mail, you can send a letter to almost anyone online anywhere in the world and have it delivered within moments.

You'll even get six separate e-mail addresses for different members of your household. And you'll pay a flat foe of just $19.95 a month with no extra charges for long distance e-mail With Webtv email, your enjoy spontaneity and savings! VOLUME 130 Complaint Exhibits WEBTV NETWORKS, INC. 1025 Complaint Exhibits Find out if you have the winning number Check out Webtv™ to the $10,000 Grand Prize! for yourself at your You've already been assigned a number — and it may be the winning one to $10,000 in cash, To find out, go to the consumer electronics store in your area {you'll find the local con m er names and addresses of two on the Demonstration Card enclosed), try Webtv for sum yourself — and find out instantly if you've won $10,000 in cash, a $2,500 consumer electronics store electronics shopping spree or a FREE Webtv Internet Terminal with six months free c Webtv Network service. But to find out, you must go in and ery Webtv for yourself! (See the back of this brochure for complete details.) VOLUME 130 Complaint Exhibits Exhibit C WEBTV NETWORKS, INC. 1027 Complaint Exhibits Exhibit D A VIDEO GUIDE TO Webtv (transcription) ANNOUNCER: You've got a television set. You've got a telephone. So, why is your life Wil Shriner:

1st woman:

2nd woman:

Ist woman:

Ist girl:

lst woman:

Man:

2nd girl:

3rd woman:

2nd man:

3rd man:

4th woman:

3rd girl:

4th man:

like this when it could be like this? [Various Internet screens depicted] Hi everybody! I’m Wil Shriner and you just saw a fraction of what’s available on the Internet with the Webtv network. So, if you want to bring your television to a whole new level, stick around. I’m going to tell you everything you need to know about Webtv and how to get a world of entertainment and information in your home right away. All you need is your television and a current phone line. Then, with a Webtv Internet terminal and a subscription to the Webtv network, you and your family can access the Internet: I would strongly recommend it to anyone strongly. It’s easy. If you can use a remote, you can use Webtv. It’s fun.

It’s just like getting an education with fun. And you can also get a lot accomplished. Hotel reservations, car rentals, I can do with Webtv. I can go from watching TV, to chatting on the Internet, looking up the websites on TV shows, music.

Stocks.

Sports.

E-Mail.

Recipes.

Beanie Babies.

Information about things you might want to buy. 1 EXHIBIT VOLUME 130 Complaint Exhibits WEBTV NETWORKS, INC. 1029 Complaint Exhibits accounts. And you'll also love how you can do everything with your remote. If you’re planning on sending a lot of E-mail, you may wanna purchase one of these -- the optional wireless keyboard. You can sit across the room, on the couch, in bed, wherever, and find out what everybody’s been talkin’ about. Now, this is the homepage. From here you can send E-Mail, go to your favorite websites, type in a word for a broad search, or explore by subject. Let’s see how. From the "Explore" page, you can click on all these different categories to easily find out about anything you’re interested in. For example, highlight the word “entertainment,” and click on your remote. Now look at all these cool categories. You want to check out TV Guide? Or maybe you prefer to go to a museum. From "Explore," we can link to the Smithsonian. From the "Search" page, you can also search for more information by typing in a word or phrase. Now, say you want information on the Grand Canyon. Just type it in and voila! Everything you want to know, from guided tours to history to photographs. Besides using "Explore" or "Search," another way to go anywhere on the entire Internet is to use "Go To." So if you see a" WWW.something address" like this Honda commercial, you can switch to Webtv, type it in, and you are there. You can save any site as a favorite with the touch of a button so it’s always easy to find right from your home page. You just have to try Webtv. Even people who have never used a computer find it incredibly simple. Now, people with computers say it’s easier and it’s faster, and kids love it. And for you moms and dads concerned about what your kids can access, Webtv comes with "Surf Watch” so you can limit what your young surfers see on the Internet. (phone rings) Oh, that reminds me. If you’ve got call waiting, WebTV’s line-share feature lets you still receive calls while you’re using Webtv. (answers phone) Hello, no, no I won’t be needing the paper anymore. It was always in the bushes and, besides, I’ve got a Webtv.

Look, I could pick up a Webtv right where I left off and continue surfing. Now, the "Around Town" feature lets you check out the scene in your town. Here’s a five-day weather forecast, information on restaurants, and movie show times. You can even buy your tickets right here. If instead of the movies you want to go on vacation, you can see if you’ll need to bring an umbrella. Just change the zip code to check out any city you like. And there’s also a national telephone directory so you can look up virtually anyone in the U.S. To stay connected with family and friends, Webtv offers E-Mail. You can even make new friends all over the world without paying expensive long-distance phone bills. {Small print disclosure: 3 secs: "Webtv Network service is not available as local call everywhere. Toll charges may apply"] VOLUME 130 Complaint Exhibits Woman:

1st woman:

3rd woman:

Next woman:

Man:

Woman:

Wil Shriner:

WEBTV NETWORKS, INC. 1031 Complaint Exhibits All of the garden sites.

We’ve actually been looking for homes. I got into a website called, called the Kelly Bluebook to find out how much my car was worth.

I like to look at a lot of, of fashion magazines. It helps me to catch up on current events. It’s easier to read, it’s easy to access. There’s no reason not to get Webtv. Well, as you’ve seen, Webtv has something for everyone, but see for yourself. Visit your nearest consumer electronics store. You'll find the closest location to you in the materials that came with this video. In the same package you'll find your demonstration card with your personal identification code. You may have already won $10,000, a free Webtv Intermet terminal, or other fabulous prizes. At your local electronics store, you can check out the world of Webtv. Now you'll be amazed at how much fun it is. To find out if you’ve won our sweepstakes, follow the simple steps on your demonstration card. Your demonstration card walks you through every step. Just type in "Webtv WIN" to find out if you’ve already won our $10,000 grand prize or one of our many other great prizes. Keep your demonstration card, then when you purchase Webtv you can call the 800 number to redeem a special offer from Webtv networks. So, what are you waiting for? Stop by and check us out. Happy surfing! Maybe we’ll meet in a chat room some time. Until then, this is Wil Shriner for Webtv Networks. I’ll see you on-line.

VOLUME 130 Complaint Exhibits Exhibit E WEBTV NETWORKS, INC.

Complaint Exhibits The Internet is one of the most important innovations of our time, and its incredible content should be readily available to anyone and everyone. With a Weber Internet Terminal from Sony or Philips Magnavox and a low-cost subscription to Webtv *. it finally is. Visit one of the consumer electronics stores listed to check out Weber¥ for yourself — and, of course, take your Personal Identification Code to find out on the spot if you've won $10,000 in cash, or one of our other valuable prizes, (See sweepstakes rules for complete details.) It's fast, fun and easy! Stop in now and find out for yourself how exciting and easy Webb¥ is to use — . icher! Sincerely, Chip Herman Vice President. Marketing PS. Remember, too, that when you buy a Webtv lntemet Terminal and subscribe to the Webtv Network now, we'll send you the optional Wireless Keyboard absolutely FREE — a value of up to $79! NOTE: To receive your FREE Wireless Keyboard, = = i inal, Then, give us your Personal Identification Code and your new Webtv e-mail address, and we'll send your Wireless Keyboard to you. Remember, this offer is only available from Webtv Networks. Inc, and is not valid at retail locations or in conjunction with any other offers. Webtv" instant Win Sweepstakes Official Rules No Purchase Necessary How fo enter Brig the WeNvTY Stcrepatates Enary Cate with wane WebEy Perinat Ideneifiration Cade ber cee of the partic| pating retailers for thee Weber Nencorks Dermonsiration. [Wiur leer has doe panes ane] arldrentes of Beeel paruiapaseng reratlers.| Or. i yan prefer. om Fa 3° plin card fuasebprives “WelTA 74 Prune Win Seonepounkes” wills your WehTy Peraueat Mewufienion Code bwhicl con fe found or cho Webb¥ Seemepotikes Cure Cart), along with your nase, address, city. sta. Fips code atl daviinte phan cqumber, and mad your enter be Webtv" aware 2 4 PC} Bony OB, Samia Manica, CA TODS | A All ecuries mena he received by 12/31/97. So phoquespied on mechusicalle repecduced Tooiries wall he aceepired. Sponane net respomsitie Ber Deas, Lave, miatirecied, i gible, incwmnplewe oF damaged enuries, oF powiagedue nail or pritierevror The pre-election of the winning Webtv Persoiial Idewiificarian Codes will be condicued diver the aupreviion of an ieee: peadens judging oyganialon whose decisis abe final ane binding, Prlbnems Gee (1) Grane! Prize: $10,000 -Gash, Five (5) Fira Prince; $2,500 ‘Carpumer Elecconic Shopping Spree, Fifw (MN) Second Prize: Webtv Internet Terminal and 6 Mowths of Free Webtv Neework Sercice (appreccimase revisil value $400). o-caals subsainution for fares oe wtcane peine The pried are oot Wanslersile Payment of federal, siste, Bind jecal gates, af move till be the ebligasion of the wjikners, Cede of wareng 30M L. ‘Grond prize wines, first prise wiswers, ond sevend prize feiomers vill be puufied wisn 3 businews dave of fraw eo clair tacit pre, Wirrners must promide theit social seruriny muniber and sign = aifie- eis afeligibiliny amd release of Hiabiliey./ publicing which iu be reuarried witha 14 dareafeer mailing so ibe winner: Cink accepianer ef prize. Tinser Grama someon permssion te ave his or her tame, addres, bingraptical dar and photograpli or likeness bor any pprutciboeal perrpaaees without: additonal cesnpensation, to the exaeiat permed Gy lave Unclaimed prates will nent be awarded. In the event mice springs den these desggecued herein are claimed, a random theawing from snag afl valid clammy will be Tuekel wo ancare] the: pres set fri abore, ny welhamer azrecs Tre MEATY Memorks, [ac., ts judging organizasan, and ver reypective alfllanes sel eaapleropns asall have naa liabiligr i eoemnectin swith the acce prance, qualin oe ast of Prizes. Hatry ino dhe Webtv [nvaen Win Sweepstakes ronstietes acvepassce nd CiTieiad Buea Vor veberre poohibieed ‘entries brewese the exclusive propersyaf Weber Nemoorks, Ine. and will nat be rence. Lafoemetine provided bp eaurans may ie aed for sels purposes as Webtv Memvarks, Ine. may ders appropriate For a winnat’s Gist, seed a sel-addrensccl, staneped envelope before ie io: Webtv™ bnstans Win Sweepaishes, PO. Bax [EEG Seok Mona, CA MMGI0G) A De nat semd other correspondence tn this box nucsber, Eligibility: Sweepemakes open io ressedenis ff dhe 50 U.S. aares amd the Disgviet of Columbia only, 2 eran aad older vo whom Chis milioeg is acdzemscel Empknees of Webtv Nencorks Lne., iis aliliaied companies and agescies aed members of imened ite Families oe ticruseholds of such empiorer are nor ehgible, 11997 We TW Memwads. [nc MEST W™™ retest the TuehTW™ Inernce Terminal, which. along with che SHETW ‘Meranrk™, ate urdemarks of esTW Networks fic. Sone and Phils Mageaees are trademarks of their respective curmparies <WekTTe Netware sercice 6 nos available ata lewal eall everputhere. Tell charges may apple VOLUME 130 Complaint Exhibits Exhibit F

VOLUME 130 Complaint Exhibits WEBTV NETWORKS, INC. 1037 Complaint Exhibits PROCEEDINGS [ANNOUNCER (Unidentified)]: The following is a paid presentation for Webtv Networks, Incorporated. (Visual disclosure (large)]: Webtv.

[ANNOUNCER (Wil Shriner)]: Hi, I'm Wil Shriner, coming to you from living rooms all across the country. Why? Because this and this and this and this is where people, just like you and me, surf the worldwide web with the Webtv Network. With what? Webtv Networks, the company that brings your TV to life with the internet. You know, the internet, where you can communicate with people you know and make friends with people you'd never meet otherwise. You have heard of e-mail? That's electronic mail that lets you send and receive messages anywhere in the world without the hassle of stamps or the cost of long distance calls. And you know what else you can do on your TV and Webtv? Get up-to-the-minute news, sports and financial information; check out all sorts of entertainment, like celebrity sites of your favorite stars; take care of personal business, like making travel plans, banking or buying movie tickets right from your television. You get the idea.

{Visual disclosure (large)]: Webtv.

For The Record, Inc.

Waldorf, Maryland (301) 870-8025 VOLUME 130 Complaint Exhibits Ll L7 WEBTV NETWORKS, INC. 1039 Complaint Exhibits line. I also travel quite a bit out of town, so I use it to find out the best air fares and the best restaurants.

[CONSUMER (Unidentified Female)]: I use my Webtv for searching all of the garden sites. [CONSUMER (Unidentified Male)]: I hold a black belt in Tae Kwan Do right now, and I like to go on the Webtv and look at different styles.

(CONSUMER (Unidentified Female)]: I especially like to look at a lot of fashion magazines on the Webtv, because that way I don't have to go out and buy them. [CONSUMER (Unidentified Male)]: I hawe been able to travel to other countries, Spain, in Costa Rica, in some of the Caribbean Islands.

[CONSUMER (Unidentified Female)]: I like the feature from Webtv for the live camera for the St. Louis home page, because it shows the arch and everything. It doesn't make me feel so much homesick. [CONSUMER (Unidentified Male)]: It's opened up a new world to me, a world I didn't even know exist, honestly.

[ANNOUNCER (Wil Shriner)]: It's Webtv, easy to use, affordable and the most dependable way to surf the net. All you need is your television and your current phone line. Then you buy this little box called an For The Record, Ine.

Waldorf, Maryland (301)870-8025 VOLUME 130 Complaint Exhibits iL 1s WEBTV NETWORKS, INC. 1041 Complaint Exhibits and body and on and on. I mean, whatever you felt like looking at, it was so easy to get to. [SHRINER]: What convinced you to get Webtv? (CONSUMERS (Anita and Joe] [Joe]: I think the main thing is, is that we didn't have to get a computer.

[CONSUMERS (Anita and Joe)] [Anita]: When you get home, I don't want to get on my computer. It's much more comfortable to sit on the couch and to be able to play with Webtv. It's just -- it's -- it's more fun. [CONSUMERS (Anita and Joe) [Joe]: It's just another way of using the TV that I think is very comfortable.

[SHRINER]: Tony, how do you fit into this? [CONSUMERS (Anita, Joe and Tony)] [Tony]: Anita's my daughter.

[SHRINER]: Your daughter. How do you guys use Webtv? (CONSUMERS (Anita, Joe and Tony)] [Tony]: Well, I have six children and ten grandchildren, so it keeps me in touch with the kids, their birthdays and the little parties they are having, but the e-mail back and forth between the children and myself is really a great communications tool.

[SHRINER]: Now, when you send an e-mail for For The Record, Ine.

Waldorf, Maryland (301) 870-8025 VOLUME 130 Complaint Exhibits il WEBTV NETWORKS, INC. 1043 Complaint Exhibits Have you tried SurfWatch, Joe, Anita? [CONSUMERS (Anita, Joe and Tony)] [Joe]: Yeah, we have. It's a good way to protect, you know, what our kids are watching.

[CONSUMERS (Anita, Joe and Tony)] [Anita]: Makes you feel comfortable, the fact that there are things on the internet that we don't want them getting access to. [SHRINER]: Now, do you have SurfWatch for grandpa? [CONSUMERS (Anita, Joe and Tony)] [Anita]: We should. A lot of things you shouldn't be looking at. We love Webtv.

[SHRINER]: No, come on, really.

[CONSUMERS (Anita, Joe and Tony)] [Anita]: Really, it is -- there is so much value. You have no idea what you're getting until you start playing with it. I mean, it's like taking your favorite magazine, your favorite newspapers and half a library and combining it all together, and that's only the beginning.

[SHRINER]: A family that stays in touch through Webtv.

[CONSUMERS (Anita, Joe and Tony)] [Anita]: We love our Webtv.

[CONSUMERS (Anita, Joe and Tony)] [Tony]: We For The Record, Inc.

Waldorf, Maryland (301) 870-8025 VOLUME 130 Complaint Exhibits WEBTV NETWORKS, INC. 1045 Complaint Exhibits and running.

[TERRENCE]: : Go ahead, grab a seat.

[SHRINER]: Why did you pick Webtv? [TERRENCE]: I knew I wanted to get on the internet, and I didn't want to go through the expense of getting a computer, and so I went with Webtv, because it was so simple. You hook it up in about five minutes, ten minutes you're rolling. It's just very simple. {SHRINER]: What kind of stuff do you like to do? [TERRENCE]: Basically what I like to do is I like to just jump in and get on the sports page. {SHRINER]: Do you find yourself going back and forth between regular TV sports and then Webtv? [TERRENCE]: Absolutely, dude, I mean, you know, you are watching the game, and at any time, you can just stop. You can click from Webtv. You can get additional information from players, games, scores and highlights from the sports page, any kind of fact that you want you can get right there while it's fresh in your mind with the click of a button. So, you have more control over what you actually watch.

[SHRINER]: There is a spot for favorite sites. What have you got on your favorite sites? [TERRENCE]: My favorite sites, I have -- I have For The Record, Inc.

Waldorf, Maryland (301) 870-8025 VOLUME 130 Complaint Exhibits WEBTV NETWORKS, INC. 1047 Complaint Exhibits want to find out how it's changed your life. [KAREN]: Oh, it's changed my life quite a bit. [SHRINER]: Sit down and find out how you're using Webtv.

So, Karen, I understand the biggest influence Webtv has had on your life is e-mail. [KAREN]: The e-mail is phenomenal. I -- that is basically what led mé into getting Webtv. My best friend, we met in nursing school, and she lives in Charleston, South Carolina, and now we have a relationship where we talk every day. I come home -it's real exciting, you come home, the red light's on, you go, "Mail!"

[SHRINER]: Oh, look, you've got an e-mail here from your friend. "Congratulations on your new sports car." Let's write her back. Just scroll down and hit "reply." Just going to type ina little note here. "I'm with my new best friend Wil Shriner." Isn't it easy to send e-mail with Webtv? [KAREN]: It's great.

[SHRINER]: Now, I'll just hit "send," and it's eff to your friend.

You know, the old ways of sending a letter was kind of like snail mail. Let's just recreate the old way you used to send a letter.

For The Record, Inc.

Waldorf, Maryland (301) 870-8025 VOLUME 130 Complaint Exhibits il l7 2i WEBTV NETWORKS, INC. 1049 Complaint Exhibits is [ANNOUNCER (Unidentified)]: TV just got better with Webtv. It's so easy.

(Visual disclosure (fine print, no corresponding audio)]: This is a paid ad for Webtv Networks, Inc. [CONSUMER (Theresa)] [THERESA]: So simple to use. If you can use a remote, you can use Webtv. [ANNOUNCER (Unidentified)]: Fast.

(Visual disclosure (large)]: Webtv.

{CONSUMER (Terrence) [TERRENCE]: You hook it up in five minutes, ten minutes, you're rolling. [ANNOUNCER (Unidentified)]: Fun way to surf the net.

{Visual disclosure (large)]: Webtv.

[CONSUMER (Young Female) [YOUNG FEMALE]: Just like getting an education with fun.

[ANNOUNCER (Unidentified)]: And you don't need a computer. Webtv works with your TV and current phone line. Whether it's entertainment, communication or education, it's all on Webtv. Beginning with the Webtv home page, your starting point for WebTV's exclusive services, like Webtv e-mail, where you can send and receive messages virtually anywhere in the world. And WebTV's Explore, an exclusive directory of amazing places to go on the internet, covering every topic imaginable; or WebTV's Search, so you can find For The Record, Inc.

Waldorf, Maryland (301) 870-8025 VOLUME 130 Complaint Exhibits WEBTV NETWORKS, INC. 1051 Complaint Exhibits for a fraction of the cost of a computer. (Visual disclosure (large)]: Only $19.95 a month.

[ANNOUNCER (Unidentified)]: Then, get hooked up to the Webtv Network and surf all you want for only $19.95 a month.

(Visual disclosure (fine print, no corresponding audio)]: Webtv Network Service is not available as a lecal call everywhere. Toll charges may apply. [CONSUMER (Pete) [PETE]: You can literally get connected to anybody in the world.

(CONSUMER (Anita) [ANITA]: Whatever you're into, it's there.

[CONSUMER (Theresa) [THERESA]: There is no reason not to get Webtv.

[Visual disclosure (large)]: Free Video. [ANNOUNCER (Unidentified)]: Call now and we'll rush you a free video that will show you how easy and affordable it is to get Webtv in your home right away and how you could win $10,000 in the instant-win sweepstakes.

[Visual disclosure (large)]: $10,000 Grand Prize, call for details.

[ANNOUNCER (Unidentified)]: So, call the toll-free number on your screen right now and bring your For The Record, Inc.

Waldorf, Maryland (301)870-8025 VOLUME 130 Complaint Exhibits WEBTV NETWORKS, INC. 1053 Complaint Exhibits [CONSUMER (Unidentified Male) [MALE]: Our TV has a picture-in-picture function on it. So, we are able to watch the games and we will be checking out the statistics as they are -- as the game is in progress and maybe as other games are in progress. [CONSUMER (Unidentified Female) [FEMALE]: It's definitely had an impact on the family. Now we're sitting together, not just, like, couch potatoes in front of the television letting it entertain us, but we are actually working together as a group. (ANNOUNCER (Wil Shriner)]: Hey, welcome back. Now, you see these TVs behind me? They used to be regular TVs, but they are something much more, because they are connected to the Webtv Network. Now, if you're just joining us, the future is here, and the buzz in homes all over the country is Webtv, the easy, fast, fun way for everyone to get on the internet. I am joined by a delightful woman who is 930 years young. This is Evelyn, but that's not her real name. Her real name is Cyber-Gram. Is that right? (CONSUMER (Evelyn) [EVELYN]: Yes.

[SHRINER]: How do you like Webtv so far? [EVELYN]: I just love Webtv. It has just opened a whole wide world for me that has been marvelous.

For The Record, Inc.

Waldorf, Maryland (301) 870-8025 VOLUME 130 Complaint Exhibits il WEBTV NETWORKS, INC. 1055 Complaint Exhibits has just made such a difference in people's lives, because it has allowed them to be at home where their body needs to be but let their mind find the world once again.

[ANNOUNCER (Wil Shriner)]: Are you still wondering what all those "www.somethings" are? Well, with the Webtv Network, they become places to go, things to do, stuff to buy, people to meet.

[Visual disclosure (large)]: Webtv.

[ANNOUNCER (Wil Shriner)]: We thought we'd check with a typical teenager and see how she's using her Webtv.

Hi, Christina, Wil with Webtv.

[CONSUMER (Christina)] [CHRISTINA]: Hi, come on in.

[SHRINER]: Great.

So, Christina, you know, one of the things I like to do is chat. You can go on and you can find anything you want to talk about, any subject matter, you go into a chat room. I understand you like that, as well.

[CHRISTINA]: Yeah, I do, because it saves a lot of money on phone bills. I call up my friend in Washington, talk for about a minute or two and tell him to go downstairs in his dorm, go online, and we start For The Record, Inc.

Waldorf, Maryland (301) 870-8025 VOLUME 130 Complaint Exhibits WEBTV NETWORKS, INC. 1057 Complaint Exhibits [CHRISTINA]: Monet.

[SHRINER]: Pronounced Monet.

Wow, look at all these web sites we found. Hey, look at this, there are paintings and -- well, his biography, let's take a look.

Let's see, there he is. He could use a little - trim on that beard, I think. All right, let's check out some of his paintings. Go to, say, "Women in the Garden." Okay, there's women in a garden. Oh, yeah, yeah, the famous "Waterlilies," right there. This is so easy. Could you imagine doing it the old-fashioned way? [CHRISTINA]: No.

[SHRINER]: I mean, having Webtv is like having a huge resource library, the internet, the worldwide web, all of that is available for you right now. Let's just for kicks do it the old-fashioned way. [CHRISTINA]: Do we have to? {SHRINER]: Yeah, come on.

So, we go to the library, and we look up Monet on the computer. Then we have to hunt all over the place for the book, better make sure we return it on time. It is so much easier to get all the information you need with Webtv.

{Visual disclosure (large)]: Steve Perlman, For The Record, Inc.

Waldorf, Maryland (301) 870-8025 VOLUME 130 Complaint Exhibits a5 WEBTV NETWORKS, INC. 1059 Complaint Exhibits Beginning with the Webtv home page, where you can send and receive e-mail messages virtually anywhere in the world.

[Visual disclosure (fine print, no corresponding audio)]: AroundTown is not available in all cities. [ANNOUNCER (Unidentified)]: With Around Town, you can check out the local scene in your neighborhood. And Webtv comes with SurfWatch, so you can control what sites and e-mail are seen by your kids. (Wisual disclosure (large)]: Optional Keyboard. [ANNOUNCER (Unidentified)]: An optional wireless keyboard makes it easy to send lots of e-mail, and soon you'll be able to print e-mail messages or web sites.

[Visual disclosure (large)]: Coming Soon! Optional Printer Adapter and Printer. [Visual disclosure (fine print, no corresponding audio))]: Only $19.95 a month. Webtv Network Service is not available as a local call everywhere. Toll charges may apply.

[ANNOUNCER (Unidentified)]: Get started with a Webtv internet terminal, then get hooked up to the Webtv service for only $19.95 per month.

[Visual disclosure (large)]: Free Video. [ANNOUNCER (Unidentified)]: Call now and we'll For The Record, Inc.

Waldorf, Maryland (301)870-8025 VOLUME 130 Complaint Exhibits il WEBTV NETWORKS, INC. 1061 Complaint Exhibits right in.

[CAMMI]: And they do offer a help line that you can call. I'm proud to say I didn't need to call it, but it's nice to know that it's there, that if you have any problems, you can call it.

[SHRINER]: So, living 500 miles apart, does it make you feel closer? [CAMMI]: It's made it a lot easier. One of the things that's so great for me and I think Pete would agree is that just being able to e-mail back and forth, it -- it makes us feel that much closer. We're, you know, 500 miles away, and one of the nice things when I get home at night and I flip on the TV, if he's been good, my light's blinking and I have an e-mail, which there is something really neat about that. [SHRINER]: How much money do you think you have saved on phone bills? (CAMMI]: Oh, on our phone bill? Hundreds of dollars.

[SHRINER]: So, you have been planning your wedding with Webtv? [CAMMI]: Right. What's great is that I get home from work, I get in my comfy clothes, and I've been able so far to find florists, wedding dress options, musicians. For me, that's huge. That saves a ton of For The Record, Inc.

Waldorf, Maryland (301) 870-8025 VOLUME 130 Complaint Exhibits WEBTV NETWORKS, INC. 1063 Complaint Exhibits My dad is already on the internet, and I can't get my mom on, and I think this will be the thing that will keep us in touch.

(SHRINER]): What happens when the minister says I now pronounce you man and wife? [CAMMI]: This is what happens. (Kisses Pete). [SHRINER]: The Webtv Network, it's the evolution of your television from regular TV to Webtv. [Visual disclosure (large)]: Webtv.

[CONSUMER (Ellis)] [ELLIS]: Hey, Wil, how are you? [SHRINER]: Ellis, good to see you.

[ELLIS]: Good to see you. I got the Webtv on now. Come on in.

[SHRINER]: Hey, all right. Oh, look, I see you have got your Around Town feature up to check out the local weather, movies, restaurants.

So, Ellis, tell us, how do you like your Webtv? [ELLIS]: It's just something so terrific. Everything you want to think about, you can do with this. I am watching regular TV, and then at the same time I can go right to the internet, and I can find additional things that you can't see on TV. For instance, if I'm watching something on sports, I get a ball game score, and then I get to For The Record, Inc.

Waldorf, Maryland (301) 870-8025 VOLUME 130 Complaint Exhibits L7 WEBTV NETWORKS, INC. 1065 Complaint Exhibits set as we knew it as we were growing up is different now. This is interactive. You can do almost anything your mind can think about.

[SHRINER]: All right, Ellis, good to see you. [ELLIS]: Thank you. Thanks, Wil, nice to see you today.

[SHRINER]: There you go, a happy user of Webtv.

With one push of the button, you can go from watching your favorite movie or TV program to visiting the web site of your favorite star, and all you need is the Webtv Network to make it happen.

Visual disclosure (large)]: Webtv.

ANNOUNCER (Wil Shriner)]: Hi, I'm Wil with Webtv.

CONSUMERS (Theresa with family) [THERESA]: Hi, Wil, come on in.

SHRINER]: You sure? So, Theresa, I understand this is really a real Webtv family.

[THERESA]: Yeah, it is.

[SHRINER]: Who's the biggest fan of Webtv? [THERESA'S SON]: I use Webtv a lot. I'ma college-bound junior, and any time I need to research a college or applications or anything, I go in through Webtv.

For The Record, Inc.

Waldorf, Maryland (301) 870-8025 VOLUME 130 Complaint Exhibits WEBTV NETWORKS, INC. 1067 Complaint Exhibits [THERESA]: Why? My brother is a computer tech. He told me it would cost me $800 just to upgrade my computer to get on the internet, not including software and hardware and all that other stuff that I would have to buy. Well, for less than $300, I'm on the internet with Webtv. So, it's perfect. {SHRINER]: Theresa, what kind of sites do the kids like? [THERESA]: Well, like Dr. Seuss, they can go through the books, and there is games on there where they can enter a contest, and it keeps them active, and what helps a lot is they are reading it, so it's improved their reading skills a great deal. [SHRINER]: What do you think of Webtv is of value? [THERESA]: Their grades. These two have jumped from Cs to As. Just that alone was worth it. They do their homework. I don't have to cart them to the library anymore. I've got half the neighborhood coming over and doing their homework on my TV. Before I used to tell them, turn off the TV and go do your homework. Now it's turn on the TV and go do your homework. [ANNOUNCER (Wil Shriner)]: As you can see, Webtv isn't just a remarkable thing to happen to your television. It's remarkable what happens to your life. For The Record, Inc.

Waldorf, Maryland (301) 870-8025 VOLUME 130 Complaint Exhibits WEBTV NETWORKS, INC. 1069 Complaint Exhibits [ANNOUNCER (Unidentified)]: Fun way to surf the net.

[CONSUMER (Young Female) [YOUNG FEMALE]: It's just like getting an education with fun. [ANNOUNCER (Unidentified)]: And you don't need a computer. Webtv works with your TV and current phone line. Whether it's entertainment, communication or education, it's all on Webtv. Beginning with the Webtv home page, your starting point for WebTV's exclusive services, like Webtv e-mail, where you can send and receive messages virtually anywhere in the world. And WebTV's Explore, an exclusive directory of amazing places to go on the internet, covering every topic imaginable. Or Webtv Search, so you can find places to go by subject matter in a flash.

Then, when you find a site you like, stash it in your Webtv favorites.

[Visual disclosure (fine print, no corresponding audio)]: AroundTown is not available in all cities. [ANNOUNCER (Unidentified)]: Click on Around Town for the five-day weather forecast in your city or any city you choose. Find a restaurant or check for starting movie times at a theater near you. Webtv even comes with SurfWatch, so you can control what sites and e-mail are seen by your kids.

For The Record, Inc.

Waldorf, Maryland (301) 870-8025 VOLUME 130 Complaint Exhibits WEBTV NETWORKS, INC. 1071 Complaint Exhibits to the Webtv Network and surf all you want for only $19.95 a month.

[CONSUMER (Pete) [PETE]: You can literally get connected to anybody in the world.

[CONSUMER (Anita) [ANITA]: Whatever you're into, it's there.

[CONSUMER (Theresa) [THERESA]: There is no reagon not to get Webtv.

[Visual disclosure (large)]: Free Video. [ANNOUNCER (Unidentified)]: Call now and we'll rush you a free video that will show you how easy and affordable it is to get Webtv in your home right away and how you could win $10,000 in the instant-win sweepstakes.

[Visual disclosure (large)]: $10,000 Grand Prize, call for details. 30 Day Money Back Guarantee on Webtv Network Service.

[ANNOUNCER (Unidentified)]: So, call the toll-free number on your screen right away and bring your television to a whole new level. Go on, make your TV a Webtv.

[Visual disclosure (large)]: The preceding has been a paid announcement for Webtv Networks, Incorporated.

[ANNOUNCER (Unidentified)]: The preceding has For The Record, Inc.

Waldorf, Maryland (301) 870-8025 VOLUME 130 Complaint Exhibits 1g WEBTV NETWORKS, INC. 1073 Complaint Exhibits CERTIFICATION OF TYPIST DOCKET/FILE NUMBER: 9723162 CASE TITLE: WEBTV NETWORKS, INC.

TAPING DATE: AUGUST 21, 1997 I HEREBY CERTIFY that the transcript contained herein is a full and accurate transcript of the tapes transcribed by me on the above cause before the FEDERAL TRADE COMMISSION to the best of my knowledge and belief. DATED: 5/5/98 ucwrre DD ofare SUSANNE ©. TATE CERTIFICATION OF PROOFREADER I HEREBY CERTIFY that I proofread the transcript for accuracy in spelling, hyphenation, punctuation and format.

DIANE QUADE For The Record, Inc.

Waldorf, Maryland (301)870-8025 VOLUME 130 Complaint Exhibits Exhibit G WEBTV NETWORKS, INC.

Complaint Exhibits software. Most important, Webtv is a fun and affordable way to explore television and the Internet at the same time. 7. What is the Webtv® Plus System? The Webtv Plus system is comprised of the Webtv Plus Receiver, distributed by Sony, Philips and Mitsubishi, and the Webtv Plus Network. The Webtv Plus System provides an Enhanced Television experience by giving people a better way to choose which shows to watch and to enjoy more entertainment, information and services that uniquely complement those shows. The key benefits of the Webtv Plus System: Gives viewers more control over what to watch - Offline TV Listings provide instant access to full 24 hours of TV Listings - Updated daily and customized to local cable and broadcast system Improved Internet experience - A 1.1 GB hard drive enables local storage of information and applications for immediate access to information and features without having to connect to the network service and wait for the information to be downloaded.

- Fast connection speeds through a 56K flex Rockwell modem : Integrated printer port supports popular HP and Canon printers Enhanced TV programming through integration of TV and Internet - WebPIP lets users view Web pages and TV programming simultaneously on the same screen, without a special picture-in-picture TV * TV Crossover Links complement and enhance TV programs by providing an instant way for viewers to access integrated Web sites that are directly related to many of the most popular TV programs. 8. How is the Webtv Plus System different than the original Webtv System? The original Webtv Internet Terminal remains an easy, affordable way to access entertainment and information on your TV using the power of the Internet. The new Webtv Plus system more tightly integrates Internet and television programming to dramatically enhance the TV viewing experience. It is a higher performance system that does all of what Webtv does plus it provides: TV Listings to help users find out what's on TV and go there quickly; WebPIP to give the ability to simultaneously view the Internet and TV; and TV Crossover Links for direct access to entertainment and information that uniquely complements TV shows. VOLUME 130 Complaint Exhibits WEBTV NETWORKS, INC. 1077 Complaint Exhibits What channels will | see? If you don't have cable, Webtv Plus will work with the standard over the air broadcast you receive.

16, Why an IR Blaster in Webtv Plus Receivers? What does it do for me? The IR Blaster feature of the Webtv Plus Receiver enables the receiver to control other devices connected to your television. For example, when you use the Webtv Plus Receiver to tune your TV to a premium cable channel like HBO, the receiver will automatically send the appropriate commands to your cable box -- you don't need to fumble with multiple remote controls. In the future, the IR Blaster functionality will allow you to simply and easily program your VCR using the TV Listings feature.

17. Why did you include a tuner in Webtv Plus Receivers? The built-in, 3-in-1 cable-ready stereo tuner not only gives viewers instant channel tuning on the TV Home page and TY Listings page, it also is a key element of the picture-in-picture feature that allows viewers to simultaneously view TV programs and Web pages. 18. Why a hard drive? Will users be able to download and store files like they do on a computer? The hard drive provides a number of benefits including increased performance, local storage of information received by the Video Modem, and in the future, offline access to key applications such as email and interactive games.

Users cannot download files to the hard drive in the same way that they do on a computer. Webtv Plus provides the management and storage of information for users.

19. Will users be able to read and compose email offline’ Not at this time. This is a capability we're considering for delivery next year.

20. What is video email’? Early next year, Webtv Plus will allow customer to send video from their camcorders and digital cameras to people all over the world. VOLUME 130 Complaint Exhibits WEBTV NETWORKS, INC. 1079 Complaint Exhibits 27. How can I prevent my child from accessing certain sites on the Internet’? There are two Webtv features that restrict access to mature content on the Internet; SurfWatch® and Kid Friendly. Either can be selected for a child's account in order to limit access to mature content on the Internet.

28. What is SurfWatch? SurfWatch is a special content-filtering software available in the Webtv Network and Webtv Plus Network. When activated, SurfWatch software limits access to Web sites that may contain inappropriate content for children. Additional security enables parents to prevent children from sending and/or recerving e-mail. These features are free to all Webtv Network subscribers. 29. What is Kid Friendly? Kid Friendly is a complimentary service from Webtv that makes the Internet a fun and safe environment for children. Here, kids can browse a multitude of Web sites that have all been pre-screened for children's viewing. Complete with games and rich learning material, grown-ups may just get a kick out of Kid Friendly too. 30. How do WebTV's Internet Terminal and the Webtv Plus Receiver compare to a PC? The Webtv Internet Terminal was not designed to replace or compete with a computer. Rather, Webtv gives you the optimal combination and integration of television and the Internet. However, if we compare the speed and quality of Internet access, the Webtv unit is superior in many ways.

First, the Internet Terminal comes equipped with a 33.6 Kbps modem, the Webtv Plus Receiver a 56k capable modem. No software to load and no configuration required means faster operation overall. Webtv caches, transcodes and reorganizes Web data and more efficiently utilizes the telephone line so that in many cases the experience is faster than a PC. Secondly, the Webtv unit was designed to work in concert with the Webtv Network so that the system is optimized for high performance. The Webtv unit also delivers D-1 studio master (broadcast quality) images to any television and uses a state-of-the-art 64-bit MIPS, VOLUME 130 Complaint Exhibits WEBTV NETWORKS, INC. 1081 Complaint Exhibits Yellow (Connected) -- lets the user know when and if the terminal is connected to the Internet. Red (Message) -- notifies the user of unread or new e-mail messages.

36. Can I hook up a printer? Yes. With a recent upgrade, printer drivers were downloaded directly to customers Webtv units providing them with the software needed to activate the printing option. Webtv subscribers with an Internet Terminal need to purchase a printer adapter from Sony or Philips, a 1284-compliant parallel printer cable, and any Hewlett-Packard DeskJet 400 or 600 series color printer. Users will then be able to easily print e-mail, news articles and favorite Web pages in full-color.

The Webtv Plus Receiver provides a built-in parallel port (and thus does not require a printer adapter) with full support of Hewlett-Packard 400- or 600 DeskJet color printers, and later this year will support Canon 200, 600 and 4000 BubbleJet printers. Webtv Networks is the only provider to work closely with leaders HP and Canon for printing solutions for the television. 37. Can I hook up a keyboard to a Webtv unit? An optional wireless keyboard for both Webtv units is available in consumer electronics stores. Also, any standard PS2 compatible keyboard can be plugged into a Webtv Internet Terminal. 38. What is an Electronic Programming Guide? The Webtv Network's Webb V's Electronic Programming Guide gives you information on what's on television through TV Guide® Online. Here you can view broadcast, cable and premium TV listings. Webtv Plus has TV Home, which ts the launch pad for the Webtv Plus Network, and helps you find out what to watch now. TV Listings lets you view what's on right now as well as browse program listings for the next 24 hours. You can also find background information on movies or programs with specific actors that you like. 39, What is the slot on the front of the Webtv for? In the future, this smart-card-reader slot will allow customers the opportunity to purchase goods or services online by using smart cards.

VOLUME 130 Complaint Exhibits WEBTV NETWORKS, INC. 1083 Decision and Order DECISION AND ORDER The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondent named in the caption hereof, and the respondent having been furnished thereafter with a copy of a draft of complaint which the Bureau of Consumer Protection proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge respondent with violation of the Federal Trade Commission Act; and The respondent, its attorneys, and counsel for Federal Trade Commission having thereafter executed an agreement containing a consent order, an admission by the respondent of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondent that the law has been violated as alleged in such complaint, or that the facts as alleged in such complaint, other than jurisdictional facts, are true and waivers and other provisions as required by the Commission=s Rules; and The Commission having thereafter considered the matter and having determined that it had reason to believe that the respondent has violated the said Act, and that complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of thirty (30) days, and having duly considered the comments received, now in further conformity with the procedure prescribed in ' 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following order: 1. Respondent Webtv Networks, Inc., is a corporation organized, existing, and doing business under and by virtue of the laws of the State of California, with its office or principal place of VOLUME 130 Decision and Order business located at 1065 La Avenida, Mountain View, California 94043.

2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondent, and the proceeding is in the proceeding is in the public interest. ORDER DEFINITIONS For purposes of this order, the following definitions shall apply: 1. AInternet access product@ shall mean AWebTV Classic,@ AWebTV Plus,@ any other version(s) of the Webtv set-top box, or any other Internet appliance or access product licensed or sold by respondent for connection to respondent=s Internet access service(s). AInternet access service@ shall mean the AWebTV Network@ service, including the services for the Webtv Classic and Webtv Plus devices, or any other version of respondent=s service for connection to the Internet. 2. AClear(ly) and conspicuous(ly)@ shall mean as follows: A. In an advertisement communicated through an electronic medium (such as television, video, radio, and interactive media such as the Internet and online services), the disclosure shall be presented simultaneously in both the audio and visual portions of the advertisement if the claim triggering the disclosure is presented by both audio and video means. In any claim presented solely through visual or audio means, the disclosure may be made through the same means in which the claim is presented. Any audio disclosure shall be delivered in a volume and cadence sufficient for an ordinary consumer to hear and comprehend it. Any visual disclosure shall be of a size and shade, and shall appear on the screen for a duration, WEBTV NETWORKS, INC. 1085 Decision and Order sufficient for an ordinary consumer to read and comprehend it.

B. In a print advertisement, promotional material, or instructional manual, the disclosure shall be in a type size and location sufficiently noticeable for an ordinary consumer to read and comprehend it, in print that contrasts with the background against which it appears. C. On a product package, the disclosure shall be in a type size and location on the principal display panel sufficiently noticeable for an ordinary consumer to read and comprehend it, in print that contrasts with the background against which it appears.

The disclosure shall be in understandable language and syntax. Nothing contrary to, inconsistent with, or in mitigation of the disclosure shall be used in any advertisement, on any package, or on any log-on screen, dialog box, or other similar device. 3. Unless otherwise specified, Arespondent@ shall mean Webtv Networks, Inc., its successors and assigns and its officers, agents, representatives, and employees. 4. ACommerce@ shall mean as defined in Section 4 of the Federal Trade Commission Act, 15 U.S.C. ' 44. ORDER I.

IT IS ORDERED that respondent, directly or through any corporation, subsidiary, division, or other device, in connection with the manufacturing, packaging, advertising, promotion, offering for sale, sale, or distribution of any Internet access product or any Internet access service, in or affecting commerce, VOLUME 130 Decision and Order shall not make any representation, in any manner, expressly or by implication:

A. That the Internet access product and a computer are equivalent in their ability to provide access to content available on the Internet;

B. That the Internet access product or the Internet access service provides access to all of the Internet=s content, including all of the entertainment and information available on the Internet;

C. Regarding any other characteristic relating to access to the Internet=s content or functionality provided by the Internet access product or the Internet access service; or D. That respondent=s upgrades to the Internet access product or the Internet access service keep users current with all the latest Internet content or functionality, unless the representation is true.

II.

IT IS ORDERED that respondent, directly or through any corporation, subsidiary, division, or other device, in connection with the manufacturing, packaging, advertising, promotion, offering for sale, sale, or distribution of any Internet access product or any Internet access service, in or affecting commerce, shall not make any representation, expressly or by implication, about the cost of such product or service, unless it discloses, clearly and conspicuously, that using such product or service to access the Internet may result in long distance telephone toll charges for consumers, if that is the case, and how consumers can determine whether they would be subject to long distance telephone toll charges for use of such service. III.

WEBTV NETWORKS, INC. 1087 Decision and Order IT IS FURTHER ORDERED that respondent, directly or through any corporation, subsidiary, division, or other device, shall disclose, clearly and conspicuously, on a log-on screen, dialog box, or other similar device, that appears prior to any Internet access product dialing a telephone number for which there is a long distance telephone toll charge: A. either that the user will incur such a charge, or that respondent=s communications system indicates that the user will likely incur such a charge, which will accrue while such product is connected to the Internet access service if that telephone number is dialed; B. how the user can determine whether in fact (s)he will incur such a charge, and the amount of the charge (e.g., notifying the user of the telephone number that such product will dial to connect to such service, and advising the user to contact his or her local and/or long distance telephone service provider(s) to confirm that (s)he will incur such a charge for dialing that telephone number and the amount of such a charge); and C. a source of information about means, if any, of avoiding such a charge.

In accordance with this Part, respondent must employ a procedure designed to ensure that the user expressly consents to proceed to connect on a toll basis, on the same screen as the disclosures required by this Part, before a long distance telephone toll charge is incurred.

IV.

IT IS FURTHER ORDERED that respondent, directly or through any corporation, subsidiary, division, or other device, shall disclose, clearly and conspicuously, in any document stating VOLUME 130 Decision and Order respondent=s Terms of Service, or its equivalent, and in any introductory kit, or its equivalent, that respondent provides to new subscribers upon signing up for any Internet access service, that consumers may incur long distance telephone toll charges as a result of using such service, if that is the case, and how consumers can determine whether they would be subject to long distance telephone toll charges for use of such service. V.

IT IS FURTHER ORDERED that respondent, directly or through any corporation, subsidiary, division, or other device, shall offer reimbursement to certain former subscribers to the Webtv Network Internet access service as provided in this Part. A. Respondent shall reimburse any former Webtv Network Internet access service subscriber, within thirty (30) days of receipt of the subscriber=s AReimbursement Application Form,@ appended to Attachment A to this order, as required under either subpart B or subpart C of this Part, who:

1. prior to March 1, 1999, incurred long distance telephone toll charges through use of the Webtv Classic and/or Webtv Plus Internet access product(s) and Webtv Network Internet access service within sixty (60) days of subscription to such service; 2. has not been previously reimbursed for long distance telephone charges;

3. canceled his or her subscription(s) to such service prior to April 1, 1999, within ninety (90) days after initiating subscription(s) to such service, and identified long distance telephone toll charges as a reason for the cancellation(s); and WEBTV NETWORKS, INC. 1089 Decision and Order 4. within sixty (60) days of receipt of Attachment A provides respondent with proof of the long distance telephone toll charge(s) incurred (e.g., a copy of the subscriber=s telephone bill(s) reflecting the long distance telephone toll charge(s) incurred, a copy of a check or other form of payment for the long distance telephone charges, or a written declaration from the subscriber to respondent indicating the long distance telephone toll charge(s) incurred). Provided, however, that in the event that a former subscriber who applies for reimbursement provides a copy of a check (or checks) or other form of payment for the long distance telephone charges and not a copy of the subscriber=s telephone bill(s) reflecting the long distance telephone toll charge(s) incurred, the subscriber=s reimbursement shall be limited to the amount of the long distance telephone charges incurred but no more than one hundred dollars ($100). Provided, further, that in the event that a former subscriber who applies for reimbursement does not provide any proof (as described above) reflecting the long distance telephone toll charge(s) other than a declaration, the subscriber=s reimbursement shall be limited to fifty dollars ($50). B. Respondent shall send, within ninety (90) days after the date of service of this order, by first class mail, exact copies of the AReimbursement Offer Notification Letter and Application Form,@ attached hereto as Attachment A, to the last known address of any former Webtv Network Internet access service subscriber who, according to WNI=s records, canceled his or her subscription(s) to the Webtv Network Internet access service prior to April 1, 1999, within ninety (90) days after initiating the subscription(s) to such service, and identified long distance telephone toll charges as a reason for the cancellation(s).

VOLUME 130 Decision and Order The front of the envelope transmitting Attachment A shall be in the form set forth in Attachment B to this order. The phrase "ATTENTION: WEBTV LONG DISTANCE CHARGE REFUND NOTICE" shall appear on the front of the envelope in typeface equal or larger in size to 14 point. The words "FORWARD & ADDRESS CORRECTION REQUESTED" shall appear in the upper left-hand corner, one-quarter of an inch beneath the return address. Except as otherwise provided by this order, no information other than that required by this Part shall be included in or added to the above items, nor shall any other material be transmitted therewith. Respondent shall also mail the AReimbursement Offer Notification Letter and Application Form@ to any such former subscriber whose mailing is returned by the U.S. Postal Service as undeliverable and for whom respondent thereafter obtains a corrected address via the National Change of Address (ANCOA@) registry. Respondent shall retain a NCOA licensee to update its list of such former subscribers under this subpart by processing the list through the NCOA database. The mailing required by this subpart shall be made within ten (10) days of respondent's receipt of a corrected address or information identifying each such former subscriber.

C. Respondent shall send, by first class mail, exact copies of the AReimbursement Offer Notification Letter and Application Form,@ attached hereto as Attachment A, to any former Webtv Network Internet access service subscriber who canceled his or her subscription(s) to such service prior to April 1, 1999, within ninety (90) days after initiating subscription(s) to such service, and identified long distance telephone toll charges as a reason for the cancellation(s), and who contacts respondent to request reimbursement within one hundred and eighty (180) days after the date of service of this order. Respondent shall WEBTV NETWORKS, INC. 1091 Decision and Order mail Attachment A to the address provided by such former subscriber within ten (10) days after the date of the request. The front of the envelope transmitting Attachment A shall be in the form set forth in Attachment B to this order.

VOLUME 130 Decision and Order D. Respondent shall send reimbursement checks to former Webtv Network Internet access service subscribers, under either subpart B or subpart C of this Part, who complete and return to respondent the AReimbursement Application Form@ section of Attachment A to this order, postmarked within sixty (60) days of receiving it, and who fulfill the requirements set forth in subpart A of this Part. Respondent shall send each reimbursement check by firstclass mail, postage prepaid, within thirty (30) days of receipt of each former subscriber=s properly completed AReimbursement Application Form.@ The front of the envelope transmitting reimbursement checks shall be in the form set forth in Attachment C to this order. E. Respondent shall notify any former Webtv Network and Webtv Plus Network Internet access service subscriber under subparts B or C of this Part who indicates on the AReimbursement Application Form@ that (s)he is attaching proof of the long distance telephone toll charge(s) incurred and fails to do so, or who fails to otherwise apply properly for a reimbursement, of any error in the former subscriber=s AReimbursement Application Form,@ and shall provide a reasonable opportunity for the former subscriber to rectify any such error. F. Within one (1) year after the date of service of this order, respondent shall furnish to the Commission separate lists of the former Webtv Network and Webtv Plus Network Internet access service subscribers who have applied for reimbursement pursuant to subparts B and C of this Part, the amount of each reimbursement request, and the date of mailing and amount of the reimbursement provided to each applicant.

WEBTV NETWORKS, INC. 1093 Decision and Order G. Respondent shall, for three (3) years after the date of service of this order, maintain and upon request make available to the Federal Trade Commission or its staff for inspection and copying:

1. Sufficient records to identify:

a. The name and last known address of each person sent a notification pursuant to this order and the date the notification was mailed; and b. The name and address of each person who is notified by respondent that his or her reimbursement application is deficient; 2. Sample copies of all letters, descriptions, applications and forms sent to former Webtv Network Internet access service subscribers or others pursuant to this order; and 3. Each and every reimbursement application received. VI.

IT IS FURTHER ORDERED that respondent Webtv Networks, Inc., and its successors and assigns, shall within thirty (30) days after the date of service of this order and for a period of five (5) years after the date of service of this order, send by first class certified mail, return receipt requested, to each current and future:

A. advertising agency and retailer, exact copies of the notice attached hereto as Attachment D and this order. The mailing shall include no other document; and VOLUME 130 Decision and Order B. manufacturer, exact copies of the notice attached hereto as Attachment E and this order. The mailing shall include no other document.

For purposes of this Part, Amanufacturer@ shall mean each company or individual that manufactures, through an agreement with respondent, any Internet access product, for sale. ARetailer@ shall mean each company or individual that sells any Internet access product or Internet access service with whom respondent has a cooperative advertising agreement, including, but not limited to, consumer electronics stores and direct marketing companies.

If consumers may incur long distance telephone charges as a result of using respondent's Internet access service, respondent shall maintain and staff during normal business hours the toll-free telephone number to which consumers are referred in Attachments D and E in a manner adequate to: 1. handle inquiries regarding such charges; 2. inform callers how they can determine whether they will incur such charges and the amount of such charges; and 3. the means, if any, by which consumers can avoid such charges.

VII.

IT IS FURTHER ORDERED THAT respondent Webtv Networks, Inc., and its successors and assigns, shall conduct a consumer education program, as set forth in this Part, about the limitations of Internet access products in their ability to access content available on the Internet.

A. Consumer Brochure WEBTV NETWORKS, INC. 1095 Decision and Order 1. Within sixty (60) days after the date of service of this order, respondent shall produce, print and begin to distribute a color consumer brochure (Athe brochure@) in the form and content set forth in Attachment F to this order.

2. Respondent shall distribute the brochure, in quantities sufficient to meet reasonably anticipated demand, to every Webtv retailer that respondent visits as part of its regular retailer site visits (either directly or through an agency retained by respondent for such purpose). 3. Respondent shall submit a production-ready copy of the brochure to Commission staff at least twenty (20) days prior to the first scheduled distribution of the brochure to retailers.

4. Respondent shall distribute the brochure to Webtv retailers at no cost to such retailers or to the public. Respondent shall use its best efforts to encourage Webtv retailers to make the brochure available in a prominent and readily accessible location in the area of the retail location where the Internet access products are sold.

5. Respondent shall monitor the demand for and supply of the brochure, and shall continue to produce and distribute the brochure as necessary to meet reasonably anticipated demand for a period of one (1) year after the date of service of this order.

6. Respondent shall provide to Commission staff written reports detailing the total number of brochures printed and distributed to Webtv retailers, including any additional distributions of brochures to Webtv retailers subsequent to the initial distribution. Respondent shall submit such reports six (6) months VOLUME 130 Decision and Order and twelve (12) months after the initial distribution of brochures to Webtv retailers.

WEBTV NETWORKS, INC. 1097 Decision and Order B. Internet Availability of the Brochure Within sixty (60) days after the date of service of this order, respondent shall place a hypertext link to the brochure on its AWebTV Products@ index Web pages (i.e., http://www.webtv. com/products/index.html and http://www.webtv.net/products /index.html), or on any other Web page(s) on respondent=s primary Web site(s) for its Internet access product(s) and/or Internet access service(s) (e.g., http://www.webtv.com and http://www.webtv.net) that serves as the index Web page(s) for providing information regarding any characteristic relating to access to the Internet=s content or functionality provided by the Internet access product(s). The hypertext link shall itself be clear and conspicuous, clearly identified as a hypertext link, and clearly labeled to convey the nature and relevance of the information it leads to, and shall take the consumer directly to the brochure on the click-through electronic page or other display window or panel. The brochure and hypertext link shall remain on such Web page(s) for a period of two (2) years from the date they were first placed on the site(s).

C. Print Advertisement Respondent shall place a one-half page print advertisement, in the form and content set forth in Attachment G to this order, and in the publications and according to the dissemination schedule contained in Attachment H to this order. VIII.

IT IS FURTHER ORDERED that respondent Webtv Networks, Inc., and its successors and assigns, shall for five (5) years after the last date of dissemination of any representation covered by this order maintain and upon request make available to the Federal Trade Commission for inspection and copying, all of VOLUME 130 Decision and Order respondent=s advertisements and promotional materials containing any representation covered by this order. IX.

IT IS FURTHER ORDERED that respondent Webtv Networks, Inc., and its successors and assigns, shall deliver a copy of this order to all current and future officers and to all current and future managers having responsibilities with respect to the subject matter of this order. Respondent shall also deliver a copy of this order, or in lieu thereof a detailed, written summary of the requirements of this order, to all employees, agents and representatives having responsibilities with respect to the subject matter of this order. Respondent shall deliver this order, or the written summary, to current personnel within thirty (30) days after the date of service of this order, and to future personnel within thirty (30) days after the person assumes such position or responsibilities.

X.

IT IS FURTHER ORDERED that respondent Webtv Networks, Inc., and its successors and assigns, shall notify the Commission at least thirty (30) days prior to any change in the corporation that may affect compliance obligations arising under this order, including, but not limited to, a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor corporation; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this order; the proposed filing of a bankruptcy petition; or a change in the corporate name or address. Provided, however, that, with respect to any proposed change in the corporation about which respondent learns less than thirty (30) days prior to the date such action is to take place, respondent shall notify the Commission as soon as is practicable after obtaining such knowledge. All notices required by this Part shall be sent by certified mail to the Associate Director, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission, Washington, D.C. 20580.

VOLUME 130 Decision and Order XI.

IT IS FURTHER ORDERED that respondent Webtv Networks, Inc., and its successors and assigns, shall, within sixty (60) days after service of this order, and at such other times as the Federal Trade Commission may require, file with the Commission a report, in writing, setting forth in detail the manner and form in which they have complied with this order. XII.

This order will terminate on December 8, 2020, or twenty (20) years from the most recent date that the United States or the Federal Trade Commission files a complaint (with or without an accompanying consent decree) in federal court alleging any violation of the order, whichever comes later; provided, however, that the filing of such a complaint will not affect the duration of: A. Any Part in this order that terminates in less than twenty (20) years;

B. This order's application to any respondent that is not named as a defendant in such complaint; and C. This order if such complaint is filed after the order has terminated pursuant to this Part.

Provided, further, that if such complaint is dismissed or a federal court rules that the respondent did not violate any provision of the order, and the dismissal or ruling is either not appealed or upheld on appeal, then the order will terminate according to this Part as though the complaint had never been filed, except that the order will not terminate between the date such complaint is filed and the later of the deadline for appealing such dismissal or ruling and the date such dismissal or ruling is upheld on appeal. By the Commission.

WEBTV NETWORKS, INC. 1101 Attachments ATTACHMENT A LETTER TO FORMER WNI CUSTOMERS WHO CANCELED THEIR SERVICE AND NAMED TOLL CHARGES AS A REASON [To be printed on WN] letterhead] [Date] [Name and address of recipient] Re: REIMBURSEMENT OFFER FOR WEBTV SUBSCRIBERS DEADLINE: [Insert date] Dear [recipient’s name]:

You may be eligible for a reimbursement from Webtv Networks, Inc. (“WNT”) for certain long-distance charges.

WNI recently settled a dispute with the Federal Trade Commission that dealt with, among other things, the adequacy of advertising disclosures about the possibility of incurring long-distance charges while connected to the Internet via the Webtv Network Service or Webtv Plus Network Service (“Webtv service”). As part of the settlement, WNI will reimburse certain customers who canceled their service subscriptions for long-distance charges on up to the first two monthly telephone bills they received after subscribing to the Webtv Service.

You are eligible for a reimbursement if you: canceled your Webtv service on or before April 1, 1999; canceled your Webtv service within 90 days of subscribing to the service; identified long-distance charges as a reason for canceling; have not already received a reimbursement for long-distance charges from WNI; AND » provide proof of the long-distance charges (Note: reimbursement is limited to charges on telephone bills received in the first two months after subscribing). vwrvye Here’s how to apply for your reimbursement: 1. Complete the attached form.

2. Attach proof of the long-distance charges. You can either: > Provide a copy of your telephone bill(s) showing the amount of the long-distance charges you paid. If you don’t have a copy of your bill(s), ask your telephone company because they may have a copy on file. OR » Provide proof that you paid the long-distance charges -- for example, a copy of acheck. If you don’t have a copy of your check(s), ask your bank because they VOLUME 130 Attachments may have a copy on file. OR » Provide a written statement indicating the amount of the long-distance charges you paid.

Please Note: If you cannot provide a copy of a telephone bill showing the amount of the long-distance charges you paid, the amount of your reimbursement will be limited. So, you should provide a copy of your telephone bill if you can. If you provide proof of payment such as a copy of a check, your reimbursement will be limited to a maximum of $100. If you only provide a written statement indicating the amount of the longdistance charges you paid, your reimbursement will be limited to a maximum of $50. 3. Return the completed form and your proof of payment to: {Insert fulfillment address here].

YOU MUST APPLY FOR YOUR REIMBURSEMENT WITHIN [INSERT DATE 60 DAYS AFTER MAILING HERE]. We will honor all eligible claims within 30 days after receiving them.

If you have questions, please call us, toll-free, at 1- 800-___- Sincerely, Bruce Leak President and Chief Executive Officer Webtv Networks, Inc.

WEBTV NETWORKS, INC. 1103 Attachments To: Webtv Networks, Inc.

[Address to Be Inserted] From:

(Name) (Mailing Address) (City, State, and Zip Code) (Telephone Number) Please reimburse me in the amount of $ for long-distance charge(s) | incurred after subscribing to the Webtv service. As proof of my claim | am attaching: Oo a copy of my telephone bill(s) showing the amount of the long-distance charges; Oo a copy of a check or other form of payment for the long-distance charges. I recognize that, if I check this box and do not attach a copy of my telephone bill, my reimbursement will be limited to a maximum of $100; or Oo I am not attaching any other proof of claim, but I declare under penalty of perjury, to the best of my knowledge, that | was billed long-distance charges of $ to connect to the Webtv service. I recognize that, if I check this box and do not attach a copy of my telephone bill or other proof of claim, my reimbursement will be limited to a maximum of $50. I confirm that:

- l incurred the long-distance telephone charges based on my use of Webtv; - [ have not previously been reimbursed by Webtv Networks, Inc. for longdistance telephone charges based on my use of Webtv; . One reason that I canceled my subscription to Webtv Networks, Inc. was the long-distance telephone charges I incurred; - I canceled my subscription to Webtv Networks, Inc. within 90 days of initiating such subscriptions and on or before April 1, 1999. I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct to the best of my knowledge. Date Signature Name (printed) VOLUME 130 Attachments ATTACHMENT B REIMBURSEMENT NOTICE LETTER ENVELOPE Webtv Networks, Inc.

[address] FORWARD & ADDRESS CORRECTION REQUESTED Window Envelope [The following statement is to appear in a box, on the left hand side of the envelope in red, in extra large, bold type face] ATTENTION: IMPORTANT WEBTV LONG DISTANCE REIMBURSEMENT PROGRAM INFORMATION INSIDE WEBTV NETWORKS, INC. 1105 Attachments ATTACHMENT C REIMBURSEMENT CHECK ENVELOPE Webtv Networks, Inc.

[address] FORWARD & ADDRESS CORRECTION REQUESTED Window Envelope [indicates a check is enclosed] VOLUME 130 Attachments ATTACHMENT D BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED [To be printed on Webtv Networks, Inc., letterhead] [date] Dear [advertising agency, or retailer with whom WNI has a cooperative advertising agreement]: This letter is to inform you that Webtv Networks, Inc. has settled a civil dispute with the Federal Trade Commission regarding certain advertising claims for the Webtv set-top boxes (“Webtv”) and the accompanying Webtv Network Internet service (“Webtv service”). As part of that settlement, we have agreed to send this letter to advise our advertising agencies and retailers not to use or distribute any advertisements or promotional materials containing any of the claims challenged as deceptive by the FTC, and to clearly and conspicuously place certain information in advertisements and promotional materials that you distribute that states or describes the price of Webtv or the Webtv service. The advertising claims challenged by the FTC The FTC challenged as deceptive certain claims we made in our advertising regarding access to Internet content through the Webtv service. More specifically, the FTC charged that WNI made the following deceptive claims: . Webtv and a computer are equivalent in their ability to provide access to content available on the Internet;

. Webtv or the Webtv service provide access to all of the Internet’s content, including all of the entertainment and information available on the Internet; and . WNI’s upgrades to Webtv or the Webtv service keep users current with the latest Internet technology.

Examples of the advertising language that the FTC challenged include the following: . “Webtv service offers complete and affordable Internet access.” . “Webtv brings all the incredible entertainment and information of the Internet right to your TV.”

. “With Webtv [to access] the Internet... You don’t need a computer. There is no software to install. ... For entertainment, information, communication, and help just getting things done, Webtv is all you need.” WEBTV NETWORKS, INC. 1107 Attachments . “WebTV's free periodic service upgrades keep the Webtv Network current with Internet standards.”

The FTC also alleged that, in advertising the cost of using Webtv, we failed to provide sufficient information regarding long distance telephone toll charges some consumers might incur in connecting to the Internet via the Webtv service. The Consent Order prohibits WNI from making the claims listed above unless they are true. It also requires WNI to make clear and conspicuous disclosures in advertisements and on the log-on screen that using the Webtv service to access the Internet may result in long distance charges, and how consumers can determine whether they would incur such charges. Compliance with the FTC order We deny the FTC's allegations, but in order to avoid protracted litigation we entered into the settlement agreement with the FTC. We request your assistance by asking you to not use or distribute any Webtv or Webtv service advertising or promotional materials (including point of sale material) currently in your possession, or in the future, that make any of the claims the FTC challenged. We also request that you place the following information, in a clear and conspicuous manner, in any advertising or promotional materials that you distribute that states or describes the price of Webtv or the Webtv service: ° Connecting to the Internet through the Webtv Internet service may result in long distance telephone charges; and ° Consumers may contact WebTV’s toll-free 800 number (or other similar Webtv mechanism that is free to consumers) for further information. Thank you for your assistance. If you have any questions about this letter, please call 1- 800-__- Sincerely, [ ] Webtv Networks, Inc.

VOLUME 130 Attachments ATTACHMENT E BY CERTIFIED MAIL, RE RECEIPT RE TED [To be printed on Webtv Networks, Inc., letterhead] [date] Dear [manufacturer]:

This letter is to inform you that Webtv Networks, Inc. has settled a civil dispute with the Federal Trade Commission regarding certain advertising claims for the Webtv set-top boxes (“Webtv”) and the accompanying Webtv Network Internet service (““Webtv service’). As part of that settlement, we have agreed to send this letter to advise manufacturers not to use or distribute any advertisements or promotional materials containing any of the claims challenged as deceptive by the FTC, and to clearly and conspicuously place certain information on all packaging for Webtv, and in advertisements and promotional materials for Webtv and the Webtv service, that you distribute that states or describes the price of Webtv or the Webtv service.

The advertising claims challenged by the FTC The FTC challenged as deceptive certain claims we made in our advertising regarding access to Internet content through the Webtv service. More specifically, the FTC charged that WNI made the following deceptive claims: . Webtv and a computer are equivalent in their ability to provide access to content available on the Internet;

. Webtv or the Webtv service provide access to all of the Internet’s content, including all of the entertainment and information available on the Internet; and . WNI’s upgrades to Webtv or the Webtv service keep users current with the latest Internet technology.

Examples of the advertising language that the FTC challenged include the following: . “Webtv service offers complete and affordable Internet access.” . “Webtv brings all the incredible entertainment and information of the Internet right to your TV.”

. “With Webtv [to access] the Internet... You don’t need a computer. There is no software to install... . For entertainment, information, communication, and help just getting things done, Webtv is all you need.” WEBTV NETWORKS, INC. 1109 Attachments . “WebTV's free periodic service upgrades keep the Webtv Network current with Internet standards.”

The FTC also alleged that, in advertising the cost of using Webtv, we failed to provide sufficient information regarding long distance telephone toll charges some consumers might incur in connecting to the Internet via the Webtv service. The Consent Order prohibits WNI from making the claims listed above unless they are true. It also requires WNI to make clear and conspicuous disclosures in advertisements and on the log-on screen that using the Webtv service to access the Internet may result in long distance charges, and how consumers can determine whether they would incur such charges. Compliance with the FTC order We deny the FTC's allegations, but in order to avoid protracted litigation we entered into the settlement agreement with the FTC. We request your assistance by asking you to not use or distribute any Webtv or Webtv service advertising or promotional materials (including point of sale material) currently in your possession, or in the future, that make any of the claims the FTC challenged. We also request that you place the following information, in a clear and conspicuous manner, on the principal display panel of all packaging for Webtv: ° Connecting to the Internet through the Webtv Internet service may result in long distance telephone charges; and ° Consumers may contact WebTV’s toll-free 800 number (or other similar Webtv mechanism that is free to consumers) for further information. Finally, if you distribute any advertisement or promotional material that states or describes the price of Webtv or the Webtv service, you should include the same information, in a clear and conspicuous manner.

Thank you for your assistance. If you have any questions about this letter, please call 1- 800-___- Sincerely, [ ] Webtv Networks, Inc.

VOLUME 130 Attachments Attachment F Getting Online: Using Internet Access Products Looking to surf the Internet? Email family and friends? Check the weather in Tahiti? There was a time when you needed a personal computer fo get on the Internet. Now, consumers have more choices: seHop receivers, like Webtv? that connect to your television, handheld computers or “personal digital assistants," dedicated email terminals, game consoles, and even some wireless phones. VWhen these products are advertised as providing Internet “access”, find out what “access” means.

In many cases, Internet access products are easier to use and less expensive to purchase than many personal computers, and they provide other unique benefits. But the fact is that these products are not PC's and they don't provide all the same features as a PC. There are important differences.

Before you buy a product that claims to provide Internet access, find out what the product can do and what it can’t. Think about how you plan to use it. Do you want fo see and hear music videos or late-breaking news? Play games alone or with others? Participate in chat rooms? Receive email with photos attached? Connect with your friends through instant messaging? Some Internet access devices may not allow you to do these things. Ask the manufacturer or retailer if the product you're considering can provide the features you're looking for. WEBTV NETWORKS, INC.

Attachments If you're shopping for a product that will give you Internet access, consider these questions and answers: Q.

Q.

Can you do the same things online with an Internet access product that you can with a personal computer? Probably not. In most cases, a computer lets you access more information and entertainment than an Internet access product. An Internet access product, however, may provide all of the features you are looking for. It is important to compare the capabilities of Internet access products to each other and to personal computers. What are the limitations of an Internet access product? Limitations vary, depending on the product and, in some cases, the service it uses to connect to the Internet. For example, a small display screen on a cellular phone won't give you the same view of a website as a computer monitor or TV. Internet access products may not let you play certain games, use some audio or video features, send or receive certain attachments to email messages, or view information in formats like Java or PDF (Portable Document Format). You may be able to access information in a text format only. In addition, you may not be able to download information or software from the Internet to add features to your product the same way you can with a PC. You may have to wait for product upgrades from the manufacturer or Internet service provider. Will your ability to access the Internet be limited in any way using Webtv®? A. Webtv, like all Internet access products, is not a PC. Although it will connect you to the Internet and provide a broad range of features, like email, instant messaging and an enhanced TV experience, it will not let you access all content on the Internet. For more information about the features and limitations of Webtv, call 1-800-726-9387, or visit our website at www.webty.com. We also encourage you to take Webtv for a “test drive" at the store before you buy. VOLUME 130 Attachments Attachment G Know your options for Internet Access Looking to surf the Internet? Email family and friends? Check the weather in Tahiti? There was a time when you needed a personal computer to get on the Internet. Now there are more products that you can use to go online—such as seHop receivers that connect to your television, handheld devices, dedicated email terminals, and some wireless phones. There may be tradeoffs between these devices and a PC in their ability to access material on the Internet. Internet access products may give you an easy-to-use way to get a lot of the content on the Internet and may provide other unique benefits. But these products may not allow you to download software, play some games, watch videos, or send and receive email attachments.

Before you buy, it pays to know what your Internet access product can do—and what it can't. For a free informational brochure call tollHree, 1-800-726-9387, or look for the brochure where Internet access devices are sold.

VOLUME 130 Analysis to Aid Public Comment Analysis of Proposed Consent Order to Aid Public Comment The Federal Trade Commission has accepted, subject to final approval, an agreement containing a consent order from Webtv Networks, Inc. (AWNI@).

The proposed consent order has been placed on the public record for thirty (30) days for receipt of comments by interested persons. Comments received during this period will become part of the public record. After thirty (30) days, the Commission will again review the agreement and the comments received, and will decide whether it should withdraw from the agreement or make final the agreement=s proposed order. WNI advertises and promotes the Webtv system, consisting of a set-top box and an Internet service which, together, allows users to connect to the Internet through a telephone line and a television. WNI licenses the set-top box technology to various companies, including Sony, Philips Electronics, and Mitsubishi, which manufacture and sell the boxes. WNI sells the Internet service for a flat monthly fee.

This matter concerns allegedly false and deceptive advertising for the Webtv system. The Commission=s proposed complaint alleges that WNI falsely claimed that: $ the Webtv system provides access to all of the Internet=s content, including all of the entertainment and information available on the Internet. In fact, Webtv users are unable, for example, to access files on Web sites that use popular formats or programming languages, including technologies for Web site audio, video, interactivity, and multimedia used for online entertainment and information communication.

WEBTV NETWORKS, INC. 1115 Analysis to Aid Public Comment $ the Webtv set-top box is equivalent to a personal computer with respect to its Internet-related performance. In fact, in contrast to a computer, Webtv users are unable, for example, to download, store, or run software available on the Internet; display certain Web pages or play certain Web files; or open email attachments in certain common formats.

$ WNI=s upgrades to the Webtv system keep users current with the latest Internet technology. In fact, those upgrades have failed to provide certain commonly used Internet technologies for audio, video, interactivity, and multimedia.

The complaint also alleges that, in advertising the total cost of using the Webtv system, WNI failed to disclose adequately that a significant percentage of U.S. consumers will incur long distance telephone toll charges while connected to the Internet through the Webtv Internet service. The complaint alleges that this is a deceptive practice.

The proposed consent order contains provisions designed to prevent WNI from engaging in similar acts and practices in the future.

Part I of the proposed order prohibits the three alleged false representations, as well as any false representation related to access to Internet content or functionality of any Internet access product or service.

Part II of the proposed order prohibits WNI from making any representation about the cost of any Internet access product or service unless it discloses certain material information. If using such product or service to access the Internet may result in telephone toll charges, this fact must be disclosed, clearly and conspicuously, along with how consumers can determine whether they would be subject to these charges. VOLUME 130 Analysis to Aid Public Comment Part III of the proposed order requires that WNI make clear and conspicuous disclosures about long distance charges on a logon screen, dialog box, or other similar device that appears prior to any Internet access product dialing a telephone number for which there is a toll charge. The disclosures must state the following: (a) that the user will or will likely incur such a charge while connected to the Internet access service; (b) how the user can determine whether in fact (s)he will incur such a charge, and the amount of the charge; and (c) a source of information about means, if any, of avoiding the charge. Under this provision, WNI must use a procedure designed to ensure that the user expressly consents to connecting on a toll basis, before a toll charge is incurred.

Part IV of the proposed order requires that WNI clearly and conspicuously disclose in its Terms of Service and introductory kit, or the equivalent documents it provides to new subscribers, that users may incur toll charges while using the Internet service, if that is the case, and how users can determine whether they would incur these charges.

Part V of the proposed order requires that WNI offer reimbursement to certain former subscribers to its Internet service for toll charges they incurred. Subscribers eligible for reimbursement are those who: (a) incurred toll charges before March 1, 1999, and within sixty days of subscribing to the service; (b) have not been previously reimbursed; (c) canceled their subscription before April 1, 1999, and within ninety days of subscribing to the service; (d) identified toll charges as a reason for canceling; and (e) provide proof of the charges. Eligible subscribers may receive reimbursement for toll charges incurred in the first two months of their subscription. Subscribers who cannot provide phone bills as proof of the charges would receive reimbursement up to a maximum dollar amount, which depends on the type of proof submitted.

Part VI of the proposed order requires WNI to notify its advertising agencies, manufacturers, and retailers to discontinue WEBTV NETWORKS, INC. 1117 Analysis to Aid Public Comment making any of the advertising claims prohibited by the order. WNI must also set up, staff, and refer consumers to a toll-free customer service telephone number (or a similar mechanism that is free to consumers) that would handle inquiries regarding telephone toll charges.

Part VII describes a consumer education campaign that WNI must undertake to inform consumers about the limitations of Internet access devices as compared to computers. The campaign will include one-half page advertisements in three national magazines, as well as a brochure that WNI will (a) distribute to retailers selling Webtv set-top boxes for posting in the stores and (b) post on its Web site.

Parts VIII through XI of the proposed order are reporting and compliance provisions. Part XII is a provision Asunsetting@ the order after twenty years, with certain exceptions. The purpose of this analysis is to facilitate public comment on the proposed order. It is not intended to constitute an official interpretation of the agreement and proposed order or to modify in any way their terms.

VOLUME 130 Complaint