[2020 National Audit] Top 3 Telecoms Demand Network Usage Fees from Overseas CPs like Netflix

Differences in Positions on OTT Partnerships

Yu Young-sang, Head of SK Telecom MNO Business (from left), Kang Guk-hyun, Head of KT Customer Division, and Hwang Hyun-sik, President of LG Uplus, are responding to questions during the National Assembly's Science, Technology, Information and Broadcasting and Communications Committee's audit of the Korea Communications Commission held on the afternoon of the 8th in Yeouido, Seoul.
[Photo by Yonhap News]

[Asia Economy Reporter Kim Heung-soon] The three major mobile carriers have expressed a common opinion that they should receive network usage fees in relation to the controversy over the internet network "free-riding" by global content providers (CPs) such as Netflix.

On the 8th, Yoo Sang-young, SK Telecom MNO Business Representative, Kang Guk-hyun, KT Customer Division Head, and Hwang Hyun-sik, LG Uplus President, appeared as witnesses at the National Assembly Science, Technology, Information and Broadcasting and Communications Committee’s audit and stated this position in response to a question from independent lawmaker Yang Jeong-sook, who asked, "Isn't the cost burden being passed on to consumers because network usage fees are not being charged?"

According to the amendment to the Enforcement Decree of the Telecommunications Business Act, which the Ministry of Science and ICT announced for legislative notice on the 8th of last month, CPs must cooperate with Internet Service Providers (ISPs) to secure network service stability measures.

Representative Yoo emphasized, "According to the amendment to the Enforcement Decree of the Telecommunications Business Act, it is important for telecom companies and CPs to share joint responsibility for network service stabilization," adding, "Only then can we provide stable services and reasonable prices to consumers." Previously, KT mentioned that it agreed to receive network usage fees in its contract with Netflix but did not disclose specific details about the basis for this.

Division Head Kang also said, "KT is negotiating network usage fees with Netflix," and added, "Once the enforcement decree is finalized, it will be much more helpful in receiving network usage fees." President Hwang added, "Overall, I think it is right for telecom companies to increase their bargaining power and strive to receive network usage fees."

However, since KT and LG Uplus have partnerships with Netflix, the three companies showed differences in their stance on cooperation with global OTTs. In response to a question from Democratic Party lawmaker Han Jun-ho asking whether partnering with foreign OTTs like Netflix threatens the domestic content ecosystem, Division Head Kang said, "YouTube and Netflix account for more than 70% of South Korea’s video traffic," and added, "KT will expand its own OTT, Season, while also broadening the options for viewing foreign OTTs."

President Hwang also said, "LG Uplus has fewer subscribers, so it is realistically difficult to grow its OTT by investing in its own content," adding, "We have no choice but to create competitiveness through partnership relationships."

On the other hand, Representative Yoo said, "With the responsibility of being the number one operator, rather than easily partnering with foreign companies, we will do our best to grow the domestic OTT industry."

Lee Tae-hyun, CEO of Wavve, the OTT platform jointly operated by SK Telecom and the three terrestrial broadcasters, said, "From the telecom companies’ perspective, I understand the situation of partnering with Netflix to expand subscribers," but added, "Some telecom companies’ partnerships with Netflix are unfair." He explained, "Other OTTs like Wavve or Watcha require installing an app, but partnering with Netflix on IPTV causes discrimination in accessibility."