Netflix Inc (NASDAQ:NFLX) is telling customers that Verizon Inc (NYSE:VZ) and other Internet providers are to blame for slow speeds as the video streaming service pushes to avoid paying for faster delivery of its movies and TV shows.
Netflix has been calling on the U.S. Federal Communications Commission to do away with fees content companies pay to Internet service providers for smooth delivery of their services to consumers.
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The FCC is expected to consider that idea as it seeks public comment on recently proposed Internet traffic, or "net neutrality," rules that suggest content companies should be allowed to strike "commercially reasonable" deals with broadband providers to give priority to their traffic.
"The Verizon network is crowded right now," reads a notice Netflix sent to some customers on the screen when a video is buffering.
Netflix is sending similar messages to U.S. customers of other broadband providers when the networks are congested, spokesman Jonathan Friedland said on Wednesday. The test began in mid-May and is reaching a few hundred thousand subscribers.
"We are testing ways to let consumers know how their Netflix experience is being affected by congestion on their broadband provider's network," he said. "At present, we are testing in the U.S. in areas serviced by many broadband providers."
Netflix for months has been telling customers around the world which Internet providers offer the fastest, or slowest, service through a speed index it posts on a company blog. (Speed index: http://ispspeedindex.netflix.com/)
Verizon spokesman Robert Elek called the new alerts a "PR stunt."
"We're investigating this claim, but it seems misleading and could confuse people," Elek said.
In April, Netflix signed a deal to pay Verizon for faster delivery of its TV shows and movies. But the agreement has not taken full effect. Verizon is working to implement the needed architecture and expects improvements throughout 2014, a source with knowledge of the agreement said.
In a blog post on Wednesday, Verizon said Netflix chooses how to route its traffic. If speeds are slow, the company said, "the problem is most likely congestion on the connection that Netflix has chosen to use to reach Verizon's network."
Netflix, which has raised concerns about the FCC's net neutrality proposal, has said it reluctantly agreed to pay Verizon and Comcast Corp for faster connections but believes the Internet companies should provide quicker delivery for free. Netflix Chief Executive Officer Reed Hastings argues free connections are key to ensuring "net neutrality," the equal treatment of data on the Internet.
Netflix may be trying to encourage customer complaints to regulators or broadband providers, BTIG analyst Rich Greenfield said.
"We suspect Netflix hopes (the buffering alerts) will generate enough call volume to ISPs, politicians and the FCC that it forces ISPs to rethink their paid interconnection policies," Greenfield said in a blog post.
(Reporting by Marina Lopes and Lisa Richwine. Additional reporting by Alina Selyukh; Edited by Ronald Grover and Lisa Shumaker)