This has been going on for the past month or so and is still NOT FIXED!
It's nice that others are posting solutions that worked for them, but these can only be temporary. We turn our tv off every day, so restarting ATV is not a fix.
Trust me, I have tried everything that I can think of... restarting, reseting to factory defaults, loggin out and logging in, restarting the router and ATV, turning everything off then on, disconnecting cables and reconneting, etc... I have a new APE, so it's not a signal issue either. ATV connection is usually good or excellent and we have no other connectivity issues with any other device on our network.
This is a serious Netflix issue and It's gotten worse since the latest ATV update. Right now, Netfilx is unwatchable. Any show or movie, as soon as it starts will be in 1080p for a short period (a few seconds to maybe a few minutes at most), then drop down to low quality definition. I've checked the bitrate by viewing the Netflix "Example Short 23.976" and it will start out with a bitrate of 1050 kbps (at most), then drop down to 235kbps! Just terrible.
Everything else plays at 1080p high def just fine. Airplay, Movies from the Apple store and Hulu all work great, Netflix is the only service having this issue.
Also, I've got 50-70Mbps down and 10Mbps up, so it's not my ISP.
Going to call Netflix tomorrow to see what is going on. Definitely going to have them refund the past month or two for this BS.