In the latest episode of the Netflix streaming saga, Verizon is now threatening to take legal action in response to a notice that Netflix has started displaying for subscribers.

A Verizon Communications Inc. (NYSE: VZ) customer noted the new alert earlier this week when his Netflix service slipped into buffering mode. On the buffering screen, Netflix Inc. (Nasdaq: NFLX) included a warning that "The Verizon network is crowded right now," laying blame for the service slowdown directly at the operator's feet. The telecom company is having none of it, however. In a counter move, Verizon has now sent a cease-and-desist letter to Netflix, opening the door to a potential lawsuit.

Netflix recently signed paid interconnection agreements with both Verizon and Comcast Corp. (Nasdaq: CMCSA, CMCSK) in an effort to improve service for customers on those broadband networks. However, despite working out those deals, the online video provider is clearly not content with the content delivery situation. Netflix CEO Reed Hastings has continued to push loudly for strong net neutrality rules, which he says should prevent "ISPs from charging a toll for interconnection to services like Netflix, YouTube Inc. , or Skype Ltd. , or intermediaries such as Cogent Communications Holdings Inc. (Nasdaq: CCOI), Akamai Technologies Inc. (Nasdaq: AKAM), or Level 3 Communications Inc. (NYSE: LVLT), to deliver the services and data requested by ISP residential subscribers." (See Netflix CEO Wants 'Strong' Net Neutrality .)

While Netflix continues to fight its battle in the press, Verizon says it's ready to take the latest dispute to court. In addition to demanding that Netflix take down the new buffering alerts, Verizon wants the company to provide documentation proving that the streaming problems are all Verizon's fault, and a list of customers who received the incriminating message.

In the cease-and-desist letter, which DSLReports has posted online, Verizon specifically stated, "Failure to provide this information may lead us to pursue legal remedies, and Verizon reserves all rights in that regard."

— Mari Silbey, special to Light Reading