'Free Riding Controversy on Network' Netflix and SKB First Trial Verdict to Be Released Today

Judgment Scheduled for Announcement on the Afternoon of the 25th

[Asia Economy Reporter Cha Min-young] The dispute over network usage fees between Netflix, the world's number one online video service (OTT) since 2015, and SK Broadband, a domestic telecommunications service provider, will be decided today. There are concerns that if Netflix wins, it could provide foreign companies with a justification for 'free-riding' on networks.

The Seoul Central District Court is scheduled to deliver the first-instance verdict around 1:50 PM on the 25th regarding Netflix's lawsuit against SK Broadband for a 'confirmation of non-existence of debt.' The debt in question refers to the network usage fees demanded by SK Broadband, and Netflix is asking the court to confirm that there is no reason for them to pay these fees.

Since Netflix filed the lawsuit in April last year, both parties have conducted three rounds of hearings and technical presentations (PT) from October to April this year. The case involved complex technical concepts including net neutrality, basic internet principles, and network usage fees, so the court's understanding was expected to have a decisive impact on the ruling. Netflix's legal representative, the law firm Kim & Chang, presented arguments, while SK Broadband's law firm Sejong countered them in a back-and-forth exchange.

In the hearings, Netflix consistently argued that 'connection and transmission are different,' maintaining that transmission fees, which correspond to network usage fees, should be free. They claimed that since maintaining quality is the responsibility of the telecom company, SK Broadband should also bear the maintenance costs arising from increased traffic usage. Netflix also argued that their responsibility ended after expanding cache servers in Japan and Hong Kong.

SK Broadband rebutted that the distinction between connection and transmission is an arbitrary claim by Netflix, asserting that internet network usage is fundamentally chargeable. They also pointed out that Netflix actively manages content transmission and reception using SK Broadband's network. Although SK Broadband cited cases where Netflix paid network usage fees to overseas telecom companies such as France's Orange, Netflix responded that those were 'private agreements.' Regarding the interpretation of net neutrality principles, Netflix claimed 'network usage fees are free,' while SK Broadband countered that 'only discrimination is prohibited, not that it is free.'

This lawsuit has attracted attention as a case involving network usage fees between a major domestic ISP (Internet Service Provider) and a global CP (Content Provider). The industry anticipates it will set an important precedent for future contracts between Korean ISPs and global OTTs such as Disney Plus, Apple Plus, and other big tech companies.

There have also been ongoing criticisms of domestic reverse discrimination. In Korea, CPs including Naver all pay network usage fees to domestic ISPs. In the case of EBS, additional line capacity was urgently expanded in preparation for increased traffic due to the start of online classes earlier this year.

Earlier, SK Broadband filed a motion for resumption of hearings for additional arguments on the 4th, but the court did not accept it, so it appears that the hearings will not be resumed. An industry insider said, "Both law firms are predicting a win for their side, but no one knows how the actual verdict will come out," adding, "Regardless of who loses, it is expected to proceed to the appeals court."