\j I - Public Policy '2 General Counsel Verizon Communications Inc. 140 West Street. 29"? Floor New York, New York 10007 Phone 212-395-2384 Fax 908-766-3834 SENT VIA EMAIL AND FEDERAL EXPRESS June 5, 2014 David Hyman, Esq. General Counsel Net?ix 100 Winchester Circle Los Gatos, California 95032 RE: Demand to Cease and Desist False Claims and Unfair Business Practices Dear David, An article posted yesterday on Quartz (qz.com) reveals that Net?ix is displaying ?error messages" to customers that blame the customer?s Internet service provider (ISP) for purported connectivity issues. The article contains an image allegedly captured by a Net?ix customer while watching a Net?ix video on his computer using his Verizon Internet access service. The image states that ?(t)he Verizon network is crowded right now. Adjusting video for smoother playback. . There is no basis for Net?ix to assert that issues with respect to playback of any particular video session are attributable solely to the Verizon network. As Net?ix knows, there are many different factors that can affect traf?c on the Internet, including choices by Net?ix 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, WiFi, and device settings and capabilities. Indeed, in the ?rst instance, responsibility for its customers? experience falls squarely on Net?ix itself. Net?ix has the ability to directly connect to every broadband network in America should it choose to do so. Instead, as described in a recent entry on the Internet Phenomena Blog, Net?ix relies on a panoply of content-distribution and other middle-man networks to reach its customers, trying to lower its costs as much as possible? The cost/quality trade-off is one Net?ix has chosen. Net?ix has been aware for some time that a few Internet middlemen have congestion issues with some IP networks and nonetheless, Net?ix has chosen to continue sending its traf?c over those congested routes. To now accuse last-mile ISPs of being solely responsible for service issues that may relate to congestion on peering circuits stemming from network arbitrage by upstream providers is self-serving, deceptive, inaccurate and an unfair business practice. Net?ix is making sure customers know whom to blame for slow, grainy video, Zachary M. Seward, Quartz, June 4, 2014, 2 Choices: Video Providers, CDNs, Peers, ISPs. . .and You, Don Bowman on sandvine, May 6, 2014, Net?ix?s false accusations have the potential to harm the Verizon brand in the marketplace. This potential harm is broader than only the experience of a customer viewing Netllix content. The impression that Netflix is falsely giving our customers is that the Verizon network is generally ?crowded? and troublesome. This could cause a customer to think that any attempted viewing of video, whether it be Hulu, YouTube or other sites, would yield a similarly ?crowded? experience, and he or she may then choose to alter or cease their use of the Verizon network. This potential damage to Verizon, because of Net?ix delivery decisions must be factored in to Netflix?s deceptive behavior. The fact is that Netflix?s characterizations run directly counter to other, publically-available information that highlights the reliability and consistency of Verizon?s broadband services. For example, in testing performed by the Federal Communications Commission as part of its Measuring Broadband America program, Verizon?s service consistently delivers speeds well in excess of advertised speeds, even during peak busy hour.3 In light of this, Verizon demands that Netflix immediately cease and desist from providing any such further ?notices? to users of the Verizon network. We further demand that within ?ve days from the date of this letter that Net?ix provide Verizon with any and all evidence and documentation that it possesses substantiating Netflix?s assertion to Mr. Yuri Victor that his experience in viewing a Netflix video was solely attributable to the Verizon network, and that Netflix also provide a list of all Net?ix customers on the Verizon network to whom Net?ix has delivered such messages with the date and time that each such message was displayed for each user and the purported substantiation for it. Failure to provide this information may lead us to pursue legal remedies, and Verizon reserves all rights in that regard. Finally, as you know, our two companies recently completed a long-term, strategic agreement to bring Net?ix content directly onto the Verizon network for the mutual bene?t of both our customers. I sincerely hope this is not a harbinger of things to come in terms of how Netflix treats its network partners and our mutual customers. Sincerely, Randal S. Milch Executive Vice President Public Policy General Counsel Verizon Communications Inc. 3