[2020 National Audit] "Lee Hae-jin, Come Out" Heated Debate in Science and ICT Committee... Google App Toll and 5G Also Under Fire (Comprehensive Report 2)

At the National Assembly's Science, Technology, Information and Broadcasting Communications Committee's audit, Choi Ki-young, Minister of Science and ICT (left), and officials are taking an oath.
[Image source=Yonhap News]

[Asia Economy reporters Seulgina Jo, Jinkyu Lee, Jinju Han] At the first Science, Technology, Information and Broadcasting and Communications Committee (STIBC) audit of the 21st National Assembly held on the 7th, major issues highlighted included the controversy over Naver's algorithm manipulation, Google's app commission policy, and 5G mobile communications.

In particular, during the process of demanding the summons of Lee Hae-jin, Naver's Global Investment Officer (GIO), a heated debate between ruling and opposition lawmakers expanded over a research forum centered on lawmakers related to Naver, causing a temporary disruption. The STIBC audit that day proceeded without general witnesses as Nancy Mable Walker, Google Korea's representative residing in the U.S., was absent citing COVID-19.

◆ "Lee Hae-jin, come to the audit" Ruling and opposition clash over Naver

Opposition lawmakers launched a full-scale offensive on portals from the start of the audit, demanding the attendance of GIO Lee Hae-jin. Park Sung-joong, a People Power Party lawmaker, said, "Since Naver Shopping was fined by the Fair Trade Commission due to algorithm restructuring, the suspicions raised by the opposition and media have been proven true," demanding Lee Hae-jin's summons as a witness.

Kim Young-sik, also from the People Power Party, said, "Issues with Naver's portal algorithm are emerging," and raised his voice, "Since the problem has surfaced, it is necessary to establish guidelines this time." Huh Eun-ah, from the same party, criticized, "Is Naver more powerful than the ruling party with 180 seats?" and called the denial of search algorithm manipulation a blatant lie. As the procedural remarks were overwhelmed by the offensive against Naver, Lee Won-wook, chair of the STIBC, hinted at related discussions by saying, "It can be resolved by the 15th, before the comprehensive audit on the 22nd."

The fairness of artificial intelligence (AI) algorithms was also raised. Jeong Hee-yong, a People Power Party lawmaker, argued, "Algorithms are never neutral," and insisted, "The Ministry of Science and ICT should oversee to ensure portals operate algorithms fairly."

Conflicts also followed over remarks about the research forum of lawmakers related to Naver. Park Dae-chul, a People Power Party lawmaker, revealed the Korean Internet Corporations Association's (KICA) draft plan for the 'Digital Economy Research Forum (tentative name),' claiming that Naver, the chairman company of KICA, tried to influence the National Assembly through the forum.

Park said, "The chairman of KICA is Han Seong-sook, CEO of Naver, who actually controls it. KICA had already set the representative appointment and operation plans before launching the forum," presenting documents prepared by the association as evidence. He explained that KICA's promotion of a lawmaker research group itself could be seen as an intention for commissioned legislation.

Especially when Park called it "Naver's alleged parliamentary manipulation," Yoon Young-chan, a Democratic Party lawmaker and former Naver vice president who co-chairs the forum, immediately reacted, saying, "You insulted fellow lawmakers," escalating the clash. As the ruling and opposition lawmakers' quarrel continued, Lee Won-wook eventually declared a suspension of the audit and proceeded to verify the remarks. Even afterward, loud exchanges over whether Park would officially apologize led to repeated recesses during the STIBC audit.

◆ Continued condemnation of Google’s 'commission bullying'... STIBC pushes integrated adjustment bill

There was also ongoing condemnation over the commission bullying controversy of Google, the 'app market giant' with a 70% domestic market share. Although the Google Korea representative, originally summoned as a witness that day, was absent and no explanation from the company was heard, voices emphasized the importance of responses at the National Assembly and government levels.

Hong Jeong-min, a Democratic Party lawmaker, said, "Google's imposition of a 30% commission on in-app purchases is an abuse of its dominant market position," pointing out, "It is an excessive level that startups cannot bear, causing consumer harm and destroying the app ecosystem." He added, "Internet content industry players, including startups, fear revealing their identities due to Google's dominant market position. They fear disadvantages," and urged, "The government should step in to regulate by applying the Fair Trade Act and the Telecommunications Business Act."

Choi Ki-young, Minister of Science and ICT, responded to calls for the National Assembly and government to adopt a resolution opposing Google's actions and take active measures, saying, "It's not about a specific company; if there is unfairness, it should be improved, and innocent victims should not arise." Regarding the ongoing investigation by the Ministry of Science and ICT, he said, "It has progressed considerably and is expected to conclude by the end of this month."

Minister Choi answered Hong's question about whether Google's recently announced program worth 100 billion won to support Korea's digital content ecosystem is sufficient, saying, "No, I think not in the long term." He agreed with Hong's criticism that Google's support is merely for show.

Earlier, Google announced that starting next year, app developers on Google Play will be forced to use Google's payment method (in-app payment) when selling content and items, taking a 30% commission in the process. Unlike Apple App Store, which applied the commission policy only to games, Google expanded it to all content and apps. Consequently, the burden on app developers will increase, and consumers are expected to face direct price hikes on content.

As criticism of Google's commission policy continued, Jo Seung-rae, the ruling party's STIBC secretary, revealed that an immediate response plan was agreed upon through bipartisan secretary consultations that afternoon.

Jo explained, "Regarding the forced in-app payment by global operators like Google, it was agreed to take firm measures even during the audit," and added, "During the audit period, a practical task force will be formed and operated to create a committee alternative that integrates and adjusts bills currently proposed by five lawmakers including myself, Park Sung-joong, Han Jun-ho, Hong Jeong-min, and Yang Jeong-sook."

Along with this, Jo referred to the U.S. House Judiciary Committee's antitrust subcommittee report, saying, "There may be various trade and other issues in regulating global operators, but since the analysis is like this even in the U.S., there is no need to be intimidated. I ask the Ministry of Science and ICT to be proactive and progressive." The report, released on the 6th (local time) after a 16-month investigation, included content stating that Google and Facebook hold monopolistic power and require regulation and dismantling.

Park Sung-joong criticized the government for pouring hundreds of billions of won of taxpayers' money annually into Google YouTube, which allegedly evades taxes by exploiting loopholes in the existing tax system. According to Park, the government's YouTube advertising budget was 1.3 billion won in 2016 during the Park Geun-hye administration but doubled to 2.6 billion won after the Moon Jae-in administration began in 2017. It surged to 6.2 billion won in 2018 and 18.6 billion won in 2019.

Park said, "If the government, local governments, ministries, and affiliated organizations all bring money without hesitation because they don't pay taxes, how ridiculous must South Korea look?" He added, "Some citizens comment, 'Do you have no shame at all?' At this rate, can we collect corporate tax and network usage fees from global content providers like Google?"

◆ "Expensive and unreliable" 5G also criticized

Centered on the ruling party, which campaigned on 'reducing household communication costs,' there was a flood of criticism that 5G plans costing up to 130,000 won per month are excessive. Despite one and a half years since commercialization, coverage is still poor, critics said.

Woo Sang-ho, a Democratic Party lawmaker, said at the audit, "Charging up to 130,000 won when 5G service is not properly provided is excessive profiteering," and pointed out, "The communication plan categories should be simplified and reorganized around unlimited data plans."

He claimed, "The recent cost of LTE and 5G plans is in the mid-30,000 won range, and the average revenue per user (ARPU) is in the 50,000 won range," calling it "excessive profiteering." Regarding the telecom companies' rebuttal that the cited figures are incorrect, he dismissed it as "nonsense." Currently, telecom companies argue that the cost used as the basis for Woo's claim is underestimated and that discounts such as selective contract discounts, official subsidies, and family bundling discounts are not reflected, causing significant errors.

Jeon Hye-sook, from the same party, criticized, "In the U.S., telecom operators base on LTE and charge extra if users want 5G," pointing out that consumer burdens are increasing due to the release of 5G-only smartphones. Hong Jeong-min, a Democratic Party lawmaker, revealed that from the first half of last year when 5G was commercialized until now, 562,656 subscribers switched from 5G back to LTE. This accounts for 6.1% of the 8.658 million 5G subscribers of the three major telecom companies as of the end of August. The expensive plans and poor coverage were cited as reasons.

Minister Choi Ki-young responded, "If telecom operators submit a plan to reorganize rates, it will be approved if deemed appropriate," giving a general answer. Regarding the criticism that 5G-only smartphones are being released domestically, he said, "We have improved so that LTE subscription is possible even with 5G phones."

However, criticism also arose that the National Assembly is recklessly shifting the burden of 'rate reduction' and 'investment expansion' onto companies without considering the huge investment costs at this early stage of network construction. Instead of creating a virtuous cycle of 'early infrastructure construction - 5G activation - rate reduction - investment expansion' through incentives to attract private investment, the National Assembly has focused on an offensive of 'just hit first.' The industry refutes some presented data as erroneous and not reflecting reality.

Additionally, Minister Choi addressed concerns about a difference of several trillion won arising from differing price calculation methods between the government and operators ahead of the frequency reassignment auction scheduled for next year, saying, "(It is) difficult to fix the allocation fee calculation criteria in law. We will flexibly include both aspects in the law and find a predictable method."

That day, lawmaker Kim Young-sik said, "The Ministry of Science and ICT has disagreements with telecom companies, and there is no clear standard on how to reflect the government's calculation criteria when allocating frequencies, so the allocation fee deviation could be up to several trillion won," expressing concern. Democratic Party lawmaker Byun Jae-il also pointed out, "The predictability for companies is low," and urged that the reassignment criteria be specified in enforcement ordinances.