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Netflix war of words with Verizon on slow service escalates

Netflix Inc., facing a threat of legal action from Verizon Communications Inc., said it will continue to display on-screen messages that blame broadband providers for slow-loading videos.

“This is about consumers not getting what they paid for from their broadband providers,” Jonathan Friedland, a Netflix spokesman, said by email Thursday.

Verizon (NYSE: VZ) sent a letter Thursday threatening legal action if Netflix (Nasdaq: NFLX) doesn’t stop citing the phone company when films and TV shows load slowly or are interrupted in progress. The online movie and TV company has been in a war of words with some Internet service providers, or ISPs, including Verizon and Comcast Corp. (Nasdaq: CMCSA), about whom to blame when consumers have trouble watching “Orange Is the New Black” and other shows.

Some Netflix subscribers began seeing a message last week when their picture cut out that read, “The Verizon network is crowded right now.”

“We are trying to provide more transparency, just like we do with the ISP Speed Index, and Verizon is trying to shut down that discussion,” Friedland said.

The video-subscription company previously agreed to pay both Comcast and Verizon so viewers can get faster speeds.

In a letter to the general counsel of Netflix, Verizon demanded the company provide “within five days” evidence and documentation that substantiates its claim that the streaming issues called out were “solely attributable to the Verizon network.”

Seeking names

Netflix also should provide a list of all Verizon customers who received similar messages, said Randal Milch, a Verizon executive vice president and general counsel.

“Failure to provide this information may lead us to pursue legal remedies,” Milch wrote in the letter.

Broadband providers and Netflix are arguing over how traffic is routed from the time it leaves Netflix servers to when it reaches viewers’ homes.

The debate takes place as pay-TV and Internet companies that deliver Netflix to their customers consolidate. Comcast, the largest U.S. cable-TV company, is buying No. 2 Time Warner Cable Inc. (NYSE: TWC) in a $45 billion deal. AT&T Inc. (NYSE: T) has agreed to buy DirecTV (Nasdaq: DTV), the largest satellite provider, for $48.5 billion, and wireless companies Sprint Corp. and T Mobile US Inc. (NYSE: TMUS) are in talks.

Milch said Netflix, instead of connecting directly to broadband providers, uses delivery partners that suffer congestion issues unrelated to Verizon.

‘Not facts’

Netflix has said in its monthly ISP Speed Index that broadband providers who adopt its Open Connect direct-delivery service to manage the flow of content consistently offer the best customer experience. Verizon and Comcast are not Open Connect partners, the company has said.

The comment from Netflix that its messages offer consumers transparency “could not be further from the truth,” Alberto Canal, a Verizon spokesman, said Thursday.

“We embrace transparency but the message that appeared on customers’ screens was not based on facts or research, and that’s what we have a fundamental issue with,” Canal said in a telephone interview.

A Verizon executive in a blog posting this week called the notice a stunt and said it is “deliberately misleading” and shifts the blame.

Netflix, based in Los Gatos, rose 0.4 percent to $430 at 9:34 a.m. in New York, and is less than 6 percent below the record $454.98 set March 4. Verizon, based in New York, was little changed at $49.22.

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