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In Net Neutrality setback, South Korea lays service quality at content providers’ feet

We missed it earlier: South Korea on May 7 amended its Telecommunications Business Act that would essentially hold content providers like messaging apps and streaming services liable for network issues. This is a significant Net Neutrality issue, since this makes Quality of Service for individual services the content providers’ problem, as opposed to ISPs. While the amendment doesn’t specify what exactly content providers can do to avoid liability, lawyers Kim Jong-hyun and Lee Yunjoh indicated that this might legitimise ISPs’ practice of forcing content providers to cough up fees as a kind of internet traffic tax.

This is hardly a new phenomenon, even in Korea. Companies that run KakaoTalk and Line, popular chat apps in the country, pay tens of millions of dollars every year to Korean internet providers. Netflix refused to pay this fee, and sued the carrier SK Telecom for asking for it, arguing that its subscribers were already paying telecom operators for access to the internet. Facebook has criticised South Korea’s network sharing rules; after traffic congestion in 2017, the company chose to redirect users to Hong Kong servers rather than pay up the fees ISPs demanded.

In a statement, Netflix told MediaNama, “We’ve been working with telecommunications networks all around the world for years. Our pioneering Open Connect servers — which we provide free of charge — ensure that the Netflix catalog is stored as close as possible to people’s homes. This is a win-win for both sides, helping ISPs to cut costs while ensuring a fast, high-quality service for our members. We’ve offered to work with SK Broadband as we do with LG U+ and D’Live in Korea, and will continue to do so while also making a case in court.”

Why a network fee model is harmful

This network fee model can hurt consumers and may lead to deteriorated services for content providers who don’t pay up. But Korea’s amendment goes one step further, placing legal liability on content providers if their services aren’t working well. This gives ISPs a significant bargaining advantage in demands for network fees. In addition, privately negotiated network fees could lead prices for consumers to increase more than they would in a truly free market where telcos would have to compete with each other to reconcile network costs and competitive tariffs.

OpenNet, a Korean nonprofit, said that the amendment could also restrict freedom of speech due to how obscurely content providers are defined — this could become a freedom of expression issue too, they said.

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South Korea has among the fastest broadband speeds in the world, but even though it is a highly developed country, internet tariffs are relatively cheap. SK Telecom’s EBITDA, a profitability indicator, has been modest since the late 2000s, with revenue also declining in recent years.

In 2013, then-Airtel CEO Sunil Mittal indicated that he thought a fee like this was necessary, raising Net Neutrality red flags. Since then, the situation has changed enormously, and Net Neutrality regulations in India prevent telcos from arm-twisting content providers like this.

Written By

I cover the digital content ecosystem and telecom for MediaNama.

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.



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