Another shot has been fired in the ongoing battle between Netflix (NASDAQ:NFLX) and Verizon (NYSE:VZ). After a Netflix image of the company blaming Verizon for poor service quality went viral after being posted on Twitter by Vox Media designer Yuri Victo, the wireless and Internet services firm responded by sending Netflix a notice of the “Cease and Desist” variety. So if Netflix continues those anti-Verizon messages, it may get sued. A Verizon spokesperson also referred to the message as “a PR stunt” in a conversation with CNET. Verizon’s letter details that the user experience is Netflix’s responsibility.
Indeed, in the first instance, responsibility for its customers’ experience falls squarely on Netflix itself. Netflix has the ability to directly connect to every broadband network in America should it chose to do so.
Verizon and Netflix do business together, but the two companies are hardly bosom buddies due to opposing positions on net neutrality — the concept that all Internet content and usage should be treated equally. As a provider of Internet access, Verizon is against the concept. The company would rather charge by usage, similar to how it does with data usage in its wireless business. This system would financially benefit Verizon. Netflix is a provider of streaming video content. Charges for Internet usage by usage would cut into the company’s bottom line. As the two companies are on opposing sides of the issue, the clash is inevitable.
During peak streaming times, Netflix can take up to 30 percent of broadband usage in the U.S. Netflix previously never paid extra for all that Internet usage due to previous net neutrality laws. Since much of the Federal Communications Commissions’ (FCC) Open Internet laws that were struck down by a Washington, D.C. court last January, Netflix’ free ride may be over. The FCC has responded to the court ruling by introducing new rules that do not permit deliberate slowing of Internet services, but permit charging extra for “a fast lane” online. Verizon already offers customers tiered Internet options based on speed.
Netflix has responded by making deals with Internet providers in addition to publically supporting net neutrality. The company has already paid an undisclosed amount to Verizon for faster streaming for its website as part of a “paid peering” deal in April. It has a similar deal with Comcast and is in talks with other companies like AT&T. However, the company is resentful that such deals are necessary.
Netflix CEO Reed Hastings is a big advocate of net neutrality. This past March, he posted on the company’s blog why he and Netflix as a whole are for net neutrality. In that post, Hastings called out Verizon’s CFO over its claim that Netflix is “dumping” material into its network.
Some ISPs say that Netflix is unilaterally “dumping as much volume” (Verizon CFO) as it wants onto their networks. Netflix isn’t “dumping” data; it’s satisfying requests made by ISP customers who pay a lot of money for high speed Internet. Netflix doesn’t send data unless members request a movie or TV show.
The company has continued to publically challenge Verizon in the months since that blog post. Netflix data shows that Verizon continues to be one of the slowest connections for Netflix service, despite the deal. Both sides promise that will improve coming months as each blames the other for the current slow speed.