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Verizon Threatens to Sue Netflix

Mari Silbey
6/6/2014
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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

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Duh!
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Duh!,
User Rank: Light Sabre
6/10/2014 | 9:33:00 AM
Re: Not ever
Yup. 
brookseven
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brookseven,
User Rank: Light Sabre
6/9/2014 | 7:25:25 PM
Re: Not ever
Duh!, Don't you mean AT&T and Cogent? seven
Duh!
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Duh!,
User Rank: Light Sabre
6/9/2014 | 5:12:04 PM
Re: Not ever
The throughput of any data flow is a fair share of the capacity of the bottleneck link.  Since a fair share the bottleneck link between you and the Speedtest server is >15 Mb/s, and the bottleneck link between you and Amazon Prime is >10 Mb/s, that means that the bottleneck link is not being shared with at least Speedtest and Amazon Prime.  In fact, it is the peeriing link between AT&T and Netflix.  The performance decline is a textbook example of a load-throughput curve:  add more traffic to a link, and it congests.  Amazon, unlike Netflix, has paid peering with AT&T, and orders more peering links whenever they start to congest.

No sympathy for Netflix on this one.
MarkC73
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MarkC73,
User Rank: Light Sabre
6/9/2014 | 2:12:25 PM
Re: Curious...
KBode, I'd like to see if I can confirm with you your understanding of the issue.

Tier 1s don't pay for interconnect, they simply turn up more connections between each other alternating the connection fee at designated interconnect facilities.

Cogent, has gain huge amounts of CDN content, including those that house Netflix, other Tier 1s don't deploy CDN caches like smaller ISPs because CDNs and content providers come to them for direct access.

Cogent decides that since its generating most of the traffic out, it shouldn't have to pay the connection fee anymore and if other carriers want more they can pay for it.  Of course, other Tier 1s refuse.

Thus, congestion starts to build up between the Tier 1s and in particular Netflix suffers.

Comcast and Netflix agree to a fee where Netflix gains direct access to their customers (not sure if by cache clusters or some other direct access).  Cogent is the loser in this arrangement and Netflix may see higher prices in the future.

Everyone expects Netflix and Vz to make a similar agreement.

(Speculating) --> Something goes wrong with the deal, and Netflix is doing Netflix way of doing things.  And Vz is doing Vz ways of doing things.

Close?
mendyk
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mendyk,
User Rank: Light Sabre
6/9/2014 | 2:07:32 PM
Re: Not ever
If you are using Amazon Prime for the same type of content as Netflix, and Amazon Prime download is an order of magnitude higher, the issue could be either (a) Netflix servers and network setup, (b) the ISP capping bandwidth for Netflix, (c) a combination of (a) and (b), or (d) some other reason. And so far, Netflix hasn't posted its "your ISP sucks" message to U-Verse users (at least it hasn't been reported). From your example, I'd say the bigger issue is signing up (and paying for) 25MB service and getting only 15.
desiEngineer
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desiEngineer,
User Rank: Light Beer
6/9/2014 | 1:50:56 PM
Re: Not ever
Not sure how nasty this insinuation is.  I have u-verse (25Mbps, measured at about 15Mbps using Speedtest).  Until about 5 months ago, my Netflix service was pretty good, roughly 3Mbps in peak hours.  Nowadays, I get about 0.7 Mbps on Netflix.  I have not seen anything higher than about 1.1 Mbps in a long time.  On the other hand, Amazon Prime is consistently over 10Mbps.  Tell me ATT isn't messing with my Netflix.  I wouldn't put it past Verizon to be doing the same.

Yeah, it could be the Netflix server farm, but I doubt it.  Not for this long, consistently.

-desi
desiEngineer
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50%
desiEngineer,
User Rank: Light Beer
6/9/2014 | 1:50:54 PM
Re: Not ever
Not sure how nasty this insinuation is.  I have u-verse (25Mbps, measured at about 15Mbps using Speedtest).  Until about 5 months ago, my Netflix service was pretty good, roughly 3Mbps in peak hours.  Nowadays, I get about 0.7 Mbps on Netflix.  I have not seen anything higher than about 1.1 Mbps in a long time.  On the other hand, Amazon Prime is consistently over 10Mbps.  Tell me ATT isn't messing with my Netflix.  I wouldn't put it past Verizon to be doing the same.

Yeah, it could be the Netflix server farm, but I doubt it.  Not for this long, consistently.

-desi
DHagar
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DHagar,
User Rank: Light Sabre
6/9/2014 | 1:31:48 PM
Re: Curious
@Phil_Britt - agreed.  A lot of this appears to be "public" positioning for image, and as a deterrent to further erosion of their interests.

 
DHagar
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DHagar,
User Rank: Light Sabre
6/9/2014 | 1:25:32 PM
Re: Curious
@KBode, I think you have the right focus on transparency.  That should determine the "reality" of whether there truly is a technical limitation affecting the Netflix delivery or not.  Plus, that would go a long way in settling the battle at large - whether it is truly legal or PR.

 
Phil_Britt
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Phil_Britt,
User Rank: Light Sabre
6/9/2014 | 12:40:46 PM
Re: Curious
Though in some legal aspects "corporations are people" (I could go on a rant about that idea, but this isn't the place), I think any attempt by Verizon to sue would stretch this concept a bit far. Also, though I'm no lawyer and the rules may have changed, I believe truth is a defense in this matter.

But it's also important that Verizon defend itself in the court of public opinion, regardless ot the legality (or lack thereof) of the company's response to Netflix.
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