"One Month Before Implementation of the 'Netflix Free Riding Law' Excluding This and That: Growing Pains"

[Asia Economy Reporter Seulgina Jo] The so-called 'Netflix Free-Riding Prevention Act (Amendment to the Telecommunications Business Act)' is facing controversy over being a patchwork law just one month before its enforcement. Since the detailed enforcement decree aimed at regulating global content providers (CPs) such as Netflix and YouTube (Google), which generated massive traffic but did not properly pay network usage fees domestically, was disclosed, key provisions have been gradually deleted or relaxed amid growing pains.

According to the Ministry of Science and ICT and the industry on the 12th, there are concerns that the enforcement decree for the amendment to the Telecommunications Business Act, which was announced for legislative notice last September, has significantly retreated ahead of the Regulatory Reform Committee review scheduled for the 13th. The previously disclosed draft enforcement decree included a provision (Article 4 of the enforcement decree) requiring value-added telecommunications service providers, who are subject to the law, to submit annual reports on the implementation status of service stability measures to the government. However, the recent revised version ahead of the Regulatory Reform Committee review confirmed that this regular data submission obligation has been deleted. Pressure to revise is also intensifying on other key measures, such as the criteria for selecting subjects of the law and the requirement for global CPs to notify in advance when changing traffic routes in consultation with telecommunications carriers.

The problem is that these provisions are evaluated as essential measures to check the implementation status of network stability obligations. In a situation where the penalty of a 20 million KRW fine for violations is already criticized as a slap on the wrist, if such key measures are deleted, it will inevitably become more difficult to secure the effectiveness of the legal system.

Currently, instead of the regular data submission obligation in Article 4 of the enforcement decree being deleted, it is likely that the Ministry of Science and ICT will be able to request data submission from the relevant operators only after service failures or interruptions occur. However, in this case, even if the Ministry requests data, operators can refuse to submit it, and the Ministry will have no way to grasp the situation until user damage such as failures actually occurs. An official said, "It has not been finalized yet," but confirmed that discussions are proceeding in this direction.

Inside and outside the industry, there are also views that the enforcement decree, which initially aimed to "stop Netflix's free-riding," is retreating and will ultimately benefit only global CPs. Netflix previously paid network usage fees after disputes with overseas internet service providers (ISPs) such as Comcast and Verizon in the U.S. and Orange in France, but domestically, it has refused to pay until the end, ignoring the mediation of the Korea Communications Commission and proceeding to litigation.

Recently, the U.S. Washington Federal Court of Appeals ruled that CPs must properly pay network usage fees to ISPs, but domestically, even the bill imposing obligations for network stability is facing a situation where its effectiveness is being undermined. Currently, overseas content providers (CPs) such as Netflix and YouTube account for more than 70% of domestic traffic.

However, some argue that the regulations prepared to control global CPs like Netflix may only hinder domestic operators such as Naver and Kakao. Regarding this, the Ministry of Science and ICT drew a line, stating that related measures will be specified focusing on service stability measures already applied by domestic CPs to prevent reverse discrimination. It explained that most domestic operators currently have network interconnection agreements and are performing service implementation measures.

Minister Choi Ki-young of the Ministry of Science and ICT also responded to related concerns at the National Assembly audit, saying, "The reason the enforcement decree was issued is because of Netflix and Facebook," and added, "We operated an expert research group and sufficiently collected industry opinions."