A frustrated Netflix won't back down from telling customers what it observes

Ever since net neutrality rules were struck down in court early this year, instances of apparent throttling have been on the rise.  Comcast Corp. (CMCSA) -- the nation's largest cable internet provider -- was the first to capitalize on the newly unregulated landscape.  It began throttling Netflix, Inc. (NFLX) subscribers, but agreed to stop after Netflix agreed to pay it a special fee for extra bandwidth.

In the months since, Verizon Communications Inc.'s (VZ) FiOS and AT&T Inc.'s (T) Uverse customers have also seen suspicious slowdowns in Netflix video.  The ISPs claim their networks are just experiencing natural lags and perhaps a bit of congestion at peak hours in urban areas.

Verizon and Netflix reached a "paid peering" deal, similar to the one Netflix made with Comcast, at the end of April.  And yet, despite agreeing to this double dipping, customers and Netflix  are indicating that speeds are still looking suspiciously slow for many users, a possible indictation of throttling.

Having already paid and raised its rates, Netflix was almost out of options, so it turned to a bold approach -- putting warnings for AT&T and Verizon customers, calling out the ISP by name and warning that their network was detected as "congested".

Verizon throttling message

The new approach created quite a stir.  Verizon has now threatened to sue Netflix, sending it a cease and desist letter.  In the letter Verizon calls the claims in Netflix's message "deceptive" and  "false", blaming the slowdown on Netflix.  Verizon writes:

In light of this, Verizon demands that Netflix immediately cease and desist from providing any such further 'notices' to users of the Verizon network... We further demand, that within five days … Netflix provide Verizon with any and all evidence and documentation that it possesses substantiating Netflix's assertion to Mr. Yuri Victor that his experience in viewing a Netflix video was solely attributable to the Verizon network.

Here's a full copy of the letter:

Letter to David Hyman by Brian Fung

Netflix fired back, saying that it was OK with giving Verizon its data showing the slowdown was on the service provider side, but that it won't be stopping the messages.  Netflix spokesperson Joris Evers writes The Washington Post in an email:

This is about consumers not getting what they paid for from their broadband provider.  We are trying to provide more transparency, just like we do with ISP Speed Index, and Verizon is trying to shut down that discussion.

In a statement to Quartz, Netflix elaborates further, writing:

This is about consumers not getting what they paid for from their broadband provider. We are trying to provide more transparency, just like we do with the Netflix ISP Speed Index, and Verizon is trying to shut down that discussion.

We are testing ways to let consumers know how their Netflix experience is being affected by congestion on their broadband provider’s network. At present, we are testing in the U.S. in areas serviced by many broadband providers. This test started in early May and it is ongoing.

Our test continues.

Now that Netflix has called Verizon's bluff, it should be interesting to see if Verizon files a lawsuit over the warnings, or backs down.  Either way, it's going to be increasingly tough for companies like Netflix and Google Inc. (GOOG) (owner of YouTube) to provide free or affordable streaming video services, as internet service providers are look to increaase their profits with offerings of their own.  As America has so few internet service providers and as these providers can throttle at will, warning customers directly is probably the only real recourse a company like Netflix has.

And if the courts silence those warnings, American customers will have to deal with the consequences without even possibly being aware of them.

Sources: Verizon to Netflix via Scribd, The Washington Post, Quartz

"I'm an Internet expert too. It's all right to wire the industrial zone only, but there are many problems if other regions of the North are wired." -- North Korean Supreme Commander Kim Jong-il

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