netflix and verizon square off
June 6, 2014

Battle For Bandwidth: Face Off Between Netflix And Verizon Over Content Delivery

Peter Suciu for - Your Universe Online

Telecommunications giant Verizon on Thursday fired back at Netflix, issuing a "cease and desist" letter to the video streaming service after Netflix said it was trying to "provide more transparency" to its customers.

This isn't the first showdown between Netflix and a broadband provider.

In February over-the-top (OTT) streaming video service Netflix completed a content delivery deal with Comcast, which followed allegations that the cable provider and broadband service had slowed down connections. Any Comcast subscribers who streamed the second season of the Netflix original series House of Cards may have noticed that the video quality wasn't quite up to expectations.

That deal was resolved and two companies announced a multi-year agreement that would provide the OTT service with more-direct access to the broadband network.

More recently, Netflix fired a broadside at Internet Service Providers (ISP), including Verizon, for demanding a fee to maintain better video quality. In April Netflix agreed to pay Verizon to establish a direct connection to the Verizon network.

Despite this agreement, the video streaming service posted what have been called "blunt messages" that blamed the carrier when streams stalled out or hung.

"The Verizon network is crowded right now," read one of the messages, which was shared widely on social media.

Verizon fired back, saying, "This could cause a customer to think any attempted viewing of video (could) yield a similarly 'crowded' experience."

"As Netflix knows, there are many different factors that can affect traffic on the internet, including choices by Netflix in how to connect to its customers and deliver content to them, interconnection between multiple networks, and consumer in-home issues such as in-home wiring, Wi-Fi, and device settings and capabilities," wrote Verizon's public policy chief Randal Milch in the letter as reported by VentureBeat.

In the end there may be no winners in such a showdown, said telecommunications industry analyst Jeff Kagan.

"Both Netflix and Verizon are at fault and the customer pays the price," Kagan told redOrbit. "This is not just a Verizon problem. It's a Netflix and Verizon problem. This has to do with the runaway success of Netflix over the Internet and how Verizon is not fast enough to keep up with Netflix demand."

It is also an issue that is largely contained to Netflix because of its success. A study conducted by research firm Sandvine last fall found that Netflix, along with Google owned YouTube, now account for 50 percent of all Internet traffic.

Those Verizon customers that don't use those services will likely not see such "crowds."

"This is not a widespread problem. It's only Netflix that's got this complaint," added Kagan. "And you have to also remember that Netflix accounts for roughly one third of all Internet traffic every evening and weekend. So Netflix is not your average Internet company. It's the giant all of a sudden. And it's getting worse."

Netflix has adapted to change before, and has "pivoted" accordingly as its business model changed.

"Netflix started by mailing DVDs to customers. It's only in the last year or two since they've been using the Internet. Meaning Netflix is using more than their fair share of the Internet," explained Kagan. "A fair solution would be for Netflix to partner with broadband companies and pay for the inordinate amount of data it uses daily basis. Currently Netflix almost gets off 'Scott free' when it comes to paying extra for their incredible demand. Is that fair?"

In some ways, Kagan noted that the messages were meant to pass the buck and the blame.

"Verizon offers high-speed Internet, which is fast enough for most customers," said Kagan. "However customers that are Netflix and Verizon customers feel the pinch. Netflix does not want the customer to think it's a Netflix problem. They want the customer to think it's a Verizon problem. But you have to remember it's a Netflix caused the problem. Netflix maybe delivering a very popular service in the marketplace, but the question is are they paying their fair share for the delivery service?"

On the other hand, Netflix has to deal with many different service providers; with Verizon is just being one of them. Their service can't work without deals from the broadband providers.

To this end Kagan said, "It's time for Netflix to start paying for all the traffic that they're using which is roughly one third of all Internet traffic; more than any other single company. So shame on both Netflix and Verizon for not coming to terms and for resorting to this kind of name-calling; obviously we need a high-speed solution. Not pointing fingers."