Ahead of 5G boom, controversy reignited over network usage fees
By Baek Byung-yeul
Logos for Netflix and SK Broadband / Korea Times file
As the amount of data usage is expected to proliferate with more people using much-faster fifth-generation (5G) networks, the controversy over network usage fees between content providers and internet service providers (ISPs) is emerging again.
The latest tussle between them comes as streaming giant Netflix reportedly filed a civil lawsuit on Monday with the Seoul Central District Court against SK Broadband, an ISP and an affiliate of the country's top mobile carrier SK Telecom, over the use of the latter's network.
According to industry insiders, the U.S. streaming service provider filed the suit, requesting the Seoul court to confirm that it has no obligation to pay network fees. The lawsuit came after the two sides failed to narrow the gap in opinion through the Korea Communications Commission's (KCC) arbitration last November.
Since last year, SK Broadband and Netflix have clashed over the network fee issue as the former wants the latter to pay for using its internet networks to offer data traffic-heavy services to users. The company, which has increased its network capacity to weather the soaring traffic, has claimed it has faced an aggravating financial burden due to Netflix's data-heavy video streaming services.
Netflix has said it has no intention to pay and instead proposed SK Broadband install a cache server, a dedicated network server that saves webpages and content in temporary storage to reduce load on internet traffic. But SK Broadband claimed a cache server isn't a solution to reduce the heavy traffic caused by the content provider, even though some other local ISPs including LG Uplus and D'Live have accepted Netflix's offer.
The network fee issue has been a long-standing problem between local ISPs and overseas content providers. Google, Netflix and others have been criticized for not paying their fees while domestic content providers such as Naver and Kakao have been paying their annual usage fees of around 70 billion won and 30 billion won, respectively, to local ISPs. The KCC has released a guideline on network fee contracts in January, but there are no specific guidelines for global content providers.
An industry official said Netflix “has been ambivalent about the network usage fee issue depending on countries as the streaming platform has paid the usage fee to ISPs in other countries such as the United States and France.”
Netflix's stance on the network fee issue has been different depending on the country and region. The streaming giant has paid network usage fees to U.S.-based ISPs like Comcast and Verizon since 2014 and Orange of France.
Its stand is the opposite of Facebook's, which pays network usage fees to local ISPs and sets up a cache server. In 2019, Facebook dealt with a lawsuit regarding data traffic, but a local court ruled in favor of the social media platform, saying ISPs are responsible for such matters.
Given the country's three largest mobile carriers ― SK Telecom, KT and LG Uplus ― are desperately searching for more enjoyable content to attract more subscribers to their internet services, industry analysts said Netflix, arguably the most popular and largest streaming service platform, has the advantage over local ISPs in the network fee tussle.
“In the network fee conflict, Netflix has cleverly positioned itself to have the upper hand against local ISPs. While mobile carriers here are looking to improve the number of 5G network subscribers, Netflix understands that those companies are struggling to produce or import more content,” the official said.