KCC Considers 'Video Conference' with US Netflix Headquarters

CP vs ISP Positions Clash as 'Network Fee' Settlement Nears
Broadcasting Commission: "Considering Video Conference with Headquarters if Needed"
Meetings with SKB, Netflix Representatives Scheduled by Mid-Month
Draft Settlement Expected as Early as May

[Asia Economy Reporter Koo Chae-eun] The Korea Communications Commission (KCC) is considering holding a video conference with the headquarters of Netflix, the world's largest online streaming company based in the United States. This is because it is necessary to confirm the headquarters' clear position regarding the draft 'network usage fee' currently being negotiated with SK Broadband.

As Netflix traffic has surged due to the spread of the novel coronavirus disease (COVID-19), the draft agreement between SK Broadband and Netflix, prepared under the mediation of the Korean government, is expected to become a global reference. Attention is focused on how Netflix headquarters will respond to the Korean government's request.

KCC Considers Video Conference with Netflix Headquarters

According to industry sources on the 4th, the KCC plans to hold a video conference with Netflix headquarters as early as this month, or by May at the latest. This is part of the ongoing effort since November last year to finalize the 'network usage fee draft' with SK Broadband. A KCC official said, "The written response from Netflix may be insufficient in some aspects, so we are keeping the possibility of a meeting with the headquarters open," adding, "We will proceed if necessary to prepare a neutral and reasonable draft."

Earlier, at the end of last month, the KCC received final 'rebuttal materials' from SK Broadband and Netflix's legal representatives, respectively, and began preparing the draft. Meetings with both SK Broadband and Netflix representatives are ongoing until the 10th of this month. A KCC official stated, "The current network quality degradation issues fundamentally stem from conflicts over network usage fees between CPs and ISPs," and added, "Since there are contentious points in various issues, we are meeting face-to-face with both parties to discuss the key points."

Summarizing industry opinions, Netflix maintains that based on the basic position of its U.S. headquarters, it is using the network legitimately and is not refusing negotiations. On the other hand, SK Broadband claims that Netflix's domestic traffic has rapidly increased to an unmanageable level, causing transmission costs to soar, yet Netflix is not responding to negotiations on network usage fees.

Conflict Intensifies Due to COVID-19 Traffic Surge... Focus on 'Draft Agreement'

The problem is that as network traffic has increased recently due to COVID-19, users are experiencing discomfort with Netflix's video quality. Telecom companies continue to criticize content providers like Netflix for 'free network usage,' while Netflix argues that other methods, such as installing cache servers, can offset network fee payments. This conflict between the two camps is causing inconvenience to users. Recently, Netflix took the 'extraordinary measure' of lowering video quality in Europe to reduce network congestion.

The 'draft agreement' between SK Broadband and Netflix is expected to be finalized as early as May. The mediation proposal is likely to include specific standards based on concrete dispute cases for establishing principles, methods, and procedures for negotiating network usage fees. Netflix's domestic paid subscribers were only 400,000 in 2018 but have now surpassed 2 million, a fivefold increase in two years.

Meanwhile, domestic content providers such as Naver currently pay about 70 billion KRW (as of 2016) in network usage fees to telecom companies. YouTube and Netflix do not pay network usage fees.