Kim Hyun-bin began his journalism career at Arirang TV from 2012 to 2017, specializing in defense, foreign affairs and the economy. In 2018, he joined The Korea Times, covering society and business, and is currently responsible for embassy affairs.
Reporter's Notebook KT gives Netflix pass to freeload off network
KT models show a Netflix video on a smartphone after the two firms inked a partnership deal. / Courtesy of KT
By Kim Hyun-bin
By Kim Hyun-bin
KT's partnership with Netflix is expected to create good profits for the telecom company, but is it the right move for the industry?
This is a question that needs to be asked as the partnership cannot be seen as a step forward for the future of the local internet protocol TV (IPTV) and over-the-top sector (OTT).
Of course, it is an intriguing deal for KT, able to utilize Netflix's endless content, which has become a key selling point when attracting new subscribers to its platform. Even before the deal, KT had a strong foothold in the IPTV and OTT market as No.1 in the field with 250 real-time channels and over 210,000 videos on demand.
There are no legal issues surrounding the partnership, but there is slight controversy because the deal was sealed as SK Broadband and Netflix are in a legal battle over the U.S. content giant's free use of local telecom companies' networks.
But KT's partnership essentially gives Netflix a free pass to continue this without paying a dime toward the streaming of its heavy-traffic content. KT has the largest fixed-line connectivity in the country where others such as SK Telecom and LG Uplus cannot compete.
Some say KT and Netflix agreed on the possibility that the telecom company could charge network-use fees in the future, but under the current revision of the Telecommunications Business Act enforcement ordinance, there are no clauses that make the fees mandatory. So unless it is set in stone within the contract, Netflix will not be obliged to pay.
If there are no government regulations preventing Netflix from freeloading, it will just be a matter of time before global powerhouses such as Google and Facebook take the same path. At present, they are among the foreign content providers that do pay a fee.
This raises the question of whether KT thoroughly contemplated the consequences of the Netflix partnership or just followed the cash trail.
It is given that the partnership will lead to better earnings and profitability and elevate the company's stocks, but the deal comes as SK is in a legal battle fighting for what is right for the industry's future.
Making money is a top priority for any business, but is it worth more than trading-in the company's conscience to make a quick buck? The decision could well come back to haunt them not that far down the line, with other content providers also freeloading off the telecom companies' networks, drastically increasing traffic that could result in slower services for paying customers.