SK going after Netflix for network fees

By Jun Ji-hye

SK Broadband has failed to settle a conflict with Netflix through bilateral negotiations over how to share data traffic costs, asking the Korea Communications Commission (KCC) to arbitrate in the disputes, company and KCC officials said Tuesday.

SK Broadband CEO Park Jung-ho

SK Broadband, an affiliate of the nation's top mobile carrier SK Telecom, submitted an application for the communication regulator's arbitration, Nov. 12, claiming that the U.S. streaming giant has refused to pay for using its internet networks to offer data traffic-heavy services to users in Korea.

Under the Telecommunications Business Act, the KCC is required to make a decision within 90 days, though another 90 days can be given if necessary. A party that wants to protest against the KCC's decision can file a lawsuit with a court.

“The two companies have failed to find a point of agreement, thus we requested the KCC's mediation as continued conflict could cause inconvenience to users,” a SK Broadband official said.

It marked the first case for a Korean internet service provider to have called for the communication regulator's arbitration in disputes with a global content provider at a time that the sharing of data traffic costs has become a hot issue amid the rapid growth of content businesses such as YouTube and Netflix.

Domestic content providers ― Naver and Kakao ― are known to pay tens of billions of won to telecom companies annually for using their networks, but there have not been particular guidelines for foreign companies.

SK Broadband claimed it has faced aggravating financial burdens due to Netflix' data traffic-heavy video streaming services, calling on the KCC to make a “rational decision.”

Netflix CEO Reed Hastings

Regarding the issue, a Netflix official said the U.S. company has made heavy investments into network infrastructure worldwide, cooperating with more than 1,000 internet service providers around the world, including those in Korea.

“We are offering our open connect service, such as cache servers, for free as the service helps reduce traffic while improving user experience,” the official said. “In negotiations with SK Broadband, we have also proposed the free offer of the open connect service multiple times.”

But the SK Broadband official said the service that Netflix offers is not an effective method for cost-sharing, citing that it signed a contract with Facebook in January this year to share data traffic costs.

Meanwhile, a KCC official said, “We will listen to various opinions from SK Broadband and Netflix as well as from experts during our review period to make a fair and objective decision.”