ED Ruling against Netflix

Video streaming giant should not pass costs on to consumers

A local court ruled against global video streaming giant Netflix in its network usage fee dispute with Korean internet access provider SK Broadband (SKB), Friday. The Seoul Central District Court rejected Netflix's request for confirmation that it has no obligation to negotiate with SKB. The court also dismissed a request from the U.S.-based video-streaming service provider for it not to be liable to pay network usage fees to the internet service provider. “Concluding contracts and paying prices are matters to be decided through the negotiation of the concerned parties,” the court said. “It is not a matter for the court to get involved in.”

At the heart of the matter was the judgment on who should pay the expenses incurred by global providers' expansion of services. SKB has accused Netflix of free riding on its network, despite the massive traffic caused by its streaming service. Netflix's stance raised controversy that local platform service providers that pay such fees, such as Naver and Kakao, are being discriminated against. Netflix pays network use fees to telecom companies in the U.S. and France, but not in Korea.

The court's refusal to accept Netflix's arguments was meaningful in that it has laid the basis to rectify the “reverse discrimination” problem. However, it is regrettable that the court stopped short of making a judgment on the network use fee itself. Nevertheless, its ruling against Netflix amounts to a de facto recognition of the principle that the beneficiary should shoulder the cost. The ruling has also provided a guideline for network usage fees when other foreign over-the-top (OTT) service providers, including Disney+ and Amazon Prime, advance here.

If Netflix pays network usage fees to SKB through their negotiations, it would be least desirable for the U.S. company to pass the costs on to local consumers by increasing subscription fees. Likewise, SKB should use the fees it receives from Netflix to upgrade service quality and enhance consumer satisfaction. We hope the ruling will serve as an occasion to create an internet ecosystem that makes winners of all the parties concerned ― content providers, internet service providers and consumers.