US State Department Asks "Is the Netflix Law Targeting American Companies?" Pressures Korea

Obligatory Network Quality for Internet Providers
U.S. State Department Protests Over Enforcement Decree of Telecommunications Business Act
Embassy, US Industry Associations, and State Department Apply Pressure Through Multiple Channels
Netflix, YouTube, Facebook Subject to Enforcement

[Asia Economy Reporter Koo Chae-eun] The U.S. Department of State has reportedly expressed strong regret to the South Korean government regarding the amendment to the Telecommunications Business Act (commonly known as the Netflix Act), sparking controversy. The amendment, which assigns responsibility for network quality to internet service providers, was questioned as targeting Netflix, but critics argue that this diplomatic faux pas arose from a misunderstanding of the law's intent.

According to industry sources on the 16th, the U.S. Department of State expressed strong regret to the South Korean government about the "Enforcement Decree of the Telecommunications Business Act Amendment" during the "Korea-U.S. Information and Communication Technology (ICT) Policy Forum" held via video conference on the 10th. Steve Anderson, Acting Deputy Assistant Secretary of State, attended on the U.S. side, while relevant directors and managers from the Ministry of Science and ICT participated on the Korean side.

U.S. Asks, "Is the Netflix Act Targeting Specific OTTs?"

At the meeting, the U.S. Department of State conveyed concerns that the Enforcement Decree of the Telecommunications Business Act Amendment, known as the Netflix Act, is perceived as targeting a specific U.S. OTT (Netflix). They noted that American companies have criticized the currently discussed enforcement decree and stated plans to continue gathering opinions from U.S. ICT companies in the future.

The core of the Telecommunications Business Act amendment mentioned by the U.S. Department of State is to impose "network quality management obligations" on providers that generate large amounts of traffic, often called "data hippos." This includes Naver and Kakao, as well as Netflix and YouTube. Particularly for foreign providers, the amendment mandates the designation of a domestic agent to comply with government orders for data submission. Contrary to the U.S. Department of State's claim that it targets Netflix, the amendment includes all providers deemed responsible for network quality, such as Naver and Kakao.

Regarding the U.S. expression of regret, the Ministry of Science and ICT stated, "This law is not aimed at any specific provider. We have conducted sufficient consultations with the concerned provider (Netflix)." The Korean side clearly communicated that the amendment applies to domestic and foreign providers above a certain scale and explained the legislative intent at length. Despite this, as the U.S. side continued to raise objections, it is reported that a summary of the enforcement decree in English was even provided.

U.S. Pressure Continues... Importance of Korean Government's Enforcement Capability Grows

This is not the first time the U.S. government has expressed concerns about the Telecommunications Business Act amendment. Earlier, right after the amendment passed the 20th National Assembly in May, the U.S. side raised concerns about potential trade friction with the Korean government, and the Internet Association of America delivered a protest statement to the Korean government. A senior government official explained, "Concerns have been conveyed through various channels including the U.S. Embassy in Korea, the Department of State, and the Internet Association of America regarding the Telecommunications Business Act amendment," adding, "It seems they are only listening to U.S. ICT companies and protesting to us."

As criticisms arise that the U.S. Department of State's expression of regret constitutes a diplomatic faux pas, experts are closely watching the Korean government's response. Professor Kim Hyun-kyung of the Graduate School of IT Policy at Seoul National University of Science and Technology said, "The key to the Enforcement Decree of the Telecommunications Business Act amendment is to enable enforcement against foreign companies," adding, "A sophisticated approach from our government side will be necessary."