Kudos to Netflix, this is great strategy. But I wish the letter were a touch better written. They might attach a written-for-laymen description of the interconnection problem (so they can keep the response itself punchy).
As I understand the problem, the congestion builds at the interconnection because Verizon's routers at that point at working at capacity. Verizon could solve the problem by adding routers at that point. I honestly don't understand what Verizon wants Netflix to do, unless it is to extend the Netflix data provision deeper into the Verizon network -- essentially adding routers at the point where Verizon is supposed to be maintaining routers. (I wonder if that is what this Open Connect program is about?)
If that's right, I wish Netflix would provide some further detail explaining the problem. Otherwise they risk having readers -- and politicians -- go into glazed eyes and presume that this is just some inscrutable battle among corporate giants.
"I honestly don't understand what Verizon wants Netflix to do...."
Die in a ditch.
Seriously. Per the last big discussion on this, from https://news.ycombinator.com/item?id=7858919 from a Verizon press release, "Verizon had a total of 5.8 million FiOS Internet and 5.0 million FiOS Video connections at the end of the [2nd] quarter [of 2013]". I would infer from that press release that they have 3.1 million plain DSL customers.
Netflix et. al. are an existential threat to their FiOS Video business, especially since to my knowledge Verizon is the only holdout in putting caps on landline Internet connections (e.g. AT&T is in much less danger with 150-250 GiB/month, $10/for each additional 50 GiB).
So I'm assuming there's nothing Netflix can do to satisfy Verizon besides giving up, going out of business, etc. Which, with cap and congestion ISP policies, is not beyond the realm of possibility; since the DVD renting business went sour, I've long thought for this reason Netflix was a high risk venture.
For your second paragraph, that is what Open Connect is about -- put netflix hardware inside the ISP's own network to reduce congestion at interconnects.
That said, it's also an inscrutable battle among corporate giants, but one that people care about because in general, most people hate their ISP but like internet companies like Netflix and so put up with things.
For up-to-date analysis on Internet issues, read up on dslreports.com as each stunt happens. It's not enough to hit mainstream news often, but if you follow it online you'll pick up on patterns. Here they cover this PDF (the last paragraph links to backstory): http://www.dslreports.com/shownews/Netflix-Wont-Back-Down-on...
Netflix paid Verizon to upgrade their network, but Verizon hasn't finished the upgrades because it takes them months to order and install routers. Netflix knows that these upgrades are coming but is still publicly shaming Verizon, perhaps trying to encourage them to work faster. Presumably Verizon would prefer Netflix to be patient.
As I understand the problem, the congestion builds at the interconnection because Verizon's routers at that point at working at capacity. Verizon could solve the problem by adding routers at that point. I honestly don't understand what Verizon wants Netflix to do, unless it is to extend the Netflix data provision deeper into the Verizon network -- essentially adding routers at the point where Verizon is supposed to be maintaining routers. (I wonder if that is what this Open Connect program is about?)
If that's right, I wish Netflix would provide some further detail explaining the problem. Otherwise they risk having readers -- and politicians -- go into glazed eyes and presume that this is just some inscrutable battle among corporate giants.