Netflix and Verizon Take Their Bandwidth Battle Public

The digital streaming company pointed a finger and the mobile phone and internet service provider responded with a cease and desist letter.

Jun 12, 2014 at 2:04PM

Netflix (NASDAQ:NFLX) has been overtly public in communicating with its customers when it feels user experience is being affected by Internet service providers. So it's not shocking that the company chose to message some of its subscribers letting them know that recent slow speeds and other issues were -- in the opinion of the digital streaming service -- Verizon's (NYSE:VZ) fault.

It's important to note that while it's Netflix pointing a finger at Verizon that has gotten the most media attention, the video service has been delivering similar messages about a number of ISPs. Those companies have either kept quiet or responded directly to their customers or Netflix. Verizon answered publicly, filing a cease and desist order against Netflix.

"I think they [Verizon] made things worse," said host Jason Hellmann on Business Take, the show that gives you the Foolish perspective on the most important business stories of the week.

"It's going to get ugly," panelist Daniel Kline responded.

Netflix has been forced to make deals, including one with Comcast (NASDAQ:CMCSA), to ensure decent user experiences for its customers. The company has been very public that it finds distasteful the idea of paying to not have its data throttled down by ISPs. This happened because of the in-flux state of net neutrality -- the principle that all Internet traffic must be treated equally. Once the law of the land, a lawsuit earlier this year forced the Federal Communications Commission to reconsider net neutrality, and the current policy allows for pay-for-performance deals.

Net neutrality has been an issue the public has not fully understood, which has allowed the ISPs to get away with things like throttling down Netflix users in an attempt to force the content company to make a deal. That strategy might have backfired. It has essentially put a face on why net neutrality benefits people who do not own Internet service providers.

"Imagine what would happen if Netflix just turned off access to Verizon customers?" Hellmann said. "I think a wholesale shutting down or blocking a Netflix or a service just as popular on certain ISPs is really what it takes to get this to the national debate level."

Panelist Jake Mann said that Netflix is clearly courting public opinion and that Verizon is on the losing side of the debate.

"It's pretty easy to see why users are taking the side of Netflix," Mann said. "From a PR standpoint Verizon is already losing."

Do you think Netflix is right to attempt to shame ISPs into following net neutrality principles? Watch the video for the whole story then share your thoughts in the comments section below.

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Daniel Kline has no position in any stocks mentioned. Jake Mann has no position in any stocks mentioned. Jason Hellmann has no position in any stocks mentioned. The Motley Fool recommends Netflix. The Motley Fool owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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