[Reverse Discrimination Caused by Regulation] Implementation of Netflix Free-Riding Law... Doubts About Compliance

"Concerns That It Will Only Hold Back Domestic Companies"
Criticism of Lenient Punishments

[Asia Economy Reporter Minyoung Cha] As controversies over the “free riding” on networks by global companies such as Google YouTube and Netflix intensified, the government last year prepared and began implementing the so-called “Netflix Free Riding Prevention Act (Amendment to the Telecommunications Business Act).” With the legal clarification of the obligation to maintain network quality, it is evaluated that a path has opened to demand fair compensation from global content providers (CPs) that consume large-scale traffic.

However, this has also sparked controversy over reverse discrimination against domestic companies such as Naver and Kakao. For example, it is uncertain whether overseas IT companies headquartered in the US or other countries will fully comply with administrative agency directives such as submitting related data. There are concerns that this will only hinder domestic companies.

Attorney Koo Tae-eon of Law Firm Lin pointed out, “Domestic CPs bear a heavy burden of network usage fees, and additional burdens have been imposed,” adding, “It is practically impossible to conduct operations such as inspecting servers of overseas headquarters in case of non-compliance with orders.” There is also criticism that the imposition of fines up to 20 million KRW on violating businesses is merely a slap on the wrist.

Google, which caused a blackout incident immediately after the law’s enforcement in December last year, became the first subject to which the law was applied. However, since the enforcement decree stipulates that only outages lasting more than four hours are subject to regulation, direct consumer compensation is difficult. Unlike domestic companies, YouTube and Netflix have been criticized for not issuing apology notices or compensation plans for users despite frequent blackouts and access failures.

Professor Minsoo Shin of Hanyang University’s Business Administration Department argued, “Like Apple’s decision to establish a 100 billion KRW mutual growth fund, voluntary improvement plans should be encouraged.” A representative from the Ministry of Science and ICT, the competent authority, explained, “For overseas companies, we plan to prepare supplementary measures such as appointing agents to reduce controversies over reverse discrimination between domestic and foreign companies.”