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Netflix Brushes Off Legal Threat From Verizon
In Messages to Subscribers, Movie Company Blames Internet Service

By Drew FitzGerald And Shalini Ramachandran
June 5, 2014 5:40 p.m. ET
http://online.wsj.com/articles/netflix-brushes-off-legal-threat-from-verizon-1402004231

Netflix Inc. stood behind its move to name and shame services like Verizon Communications Inc. for allegedly sluggish online videos, even after the broadband provider threatened legal action over the claims.

Verizon General Counsel Randal Milch sent Netflix a cease-and-desist letter Thursday, after the streaming-video company posted blunt messages on subscribers' computer screens blaming Verizon when certain shows stalled out.

"The Verizon network is crowded right now," said one of the messages, which a subscriber reposted on Twitter. Netflix said its system had sent messages to subscribers of other broadband companies as well.

"Netflix's false accusations have the potential to harm the Verizon brand in the marketplace," Verizon's letter said, adding that many factors affect customers' Internet performance, including Netflix's own choices about how to manage its network. The letter demanded evidence of Netflix's claims and warned Verizon could "pursue legal remedies" otherwise.

Netflix stood behind the messages. "We are trying to provide more transparency," spokesman Joris Evers said. "Verizon is trying to shut down that discussion."

The dispute is another sign of the increasingly contentious world of Internet transit amid debates between Web content producers and big broadband companies over who should bear the cost of shuttling massive amounts of digital traffic.

It is especially noteworthy given Netflix struck a deal with Verizon about a month ago to link the companies' networks and ease the flow of Netflix's videos. Netflix will pay for the hookups, an agreement it said it reached reluctantly because Verizon wasn't allowing other low-cost routes into its network to expand.

The connections are just getting set up. Data from network research firm Renesys show the two networks already set up a test connection to carry video in the Dallas area, but major networks typically need links in dozens of cities to deliver traffic effectively.

Verizon said it plans to fulfill the terms of its agreement with Netflix over the next few months.

"We are working on the first 13 cities, and we do plan to have everything done in 2014," said Verizon spokesman Bob Elek. "All of this kerfuffle that is going on isn't affecting that."

Netflix earlier this year also agreed to pay Comcast Corp., the nation's largest broadband provider, for a similar direct connection into its network after months of their shared customers seeing poor streaming quality.

Netflix says it is testing ways to let its subscribers know "how their Netflix experience is being affected by congestion on their broadband provider's network." It says such notices aren't limited to Verizon customers and that it is testing the notifications for "a couple hundred thousand" people across several other U.S. broadband providers as well.

The notices, which Netflix started showing to customers early last month, only appear to customers streaming via computers—not through other devices such as Blu-ray players, gaming consoles or Internet-connected TVs. Netflix says it sends the messages when a customer's streaming runs into high congestion, drops to a low average bitrate and results in a high percentage of video buffering. Netflix says it may modify its methodology as it continues the test.

"There is no basis for Netflix to assert that issues with respect to playback of any particular video session are attributable solely to the Verizon network," Verizon's letter said.

http://online.wsj.com/articles/netflix-brushes-off-legal-threat-from-verizon-1402004231