[2021 National Audit] Today’s Science and ICT Committee... Again on the Agenda: '5G 28GHz' Deployment and Netflix Network Free Riding

[Image source=Yonhap News]

[Asia Economy Reporter Seulgina Jo] On the 20th, during the National Assembly's Science, Technology, Information and Communications Committee (STICC) audit of the Ministry of Science and ICT, alongside the perennial issue of 5G communication quality, key IT and telecommunications topics are expected to include the status of 5G 28GHz base station deployment and the free-riding of overseas content providers (CPs) such as Netflix on network usage.

In particular, as network executives from the three major mobile carriers will appear as witnesses, questions from ruling and opposition party lawmakers are expected to focus on the inadequate implementation of the 5G 28GHz base station deployment plan. With the mandatory deployment rate achievement standing at a mere 0.3%, voices attributing this to a policy failure are growing louder, and within the National Assembly, there are calls that "the government must decisively revise its policy."

◆What about 5G ‘28GHz’ deployment… Ministry of Science and ICT remains 'unyielding' despite policy failure criticism

According to the National Assembly and industry sources, the three telecom companies?SK Telecom, KT, and LG Uplus?are required to deploy a total of 45,125 28GHz 5G base stations by the end of the year, but as of the end of August, only 161 have been installed. This falls far short of the number promised to the government at the time of frequency allocation. The mandatory deployment fulfillment rate is only 0.3%. It has become virtually impossible for the three carriers to meet the 28GHz 5G mandatory deployment rate within this year.

The sluggish progress in deploying 5G 28GHz base stations is not only due to the impact of COVID-19 and the passive stance of the three carriers. Criticism has been raised that the Ministry of Science and ICT, the responsible ministry, set an unrealistic plan without properly reviewing the frequency characteristics and the overall ecosystem factors from the start.

The 28GHz band has a short radio wave reach, requiring many base stations to be installed. Its low concrete penetration rate reduces usability in urban areas. This is why the nationwide deployment of 28GHz, which the government previously promoted as "20 times faster than LTE," is realistically considered difficult. Telecom companies argue for B2B uses such as smart factories and smart farms within industrial complexes instead of nationwide deployment, but the B2B business model is still understood to be in an immature stage.

During the audit of the Ministry of Science and ICT on the 1st, lawmakers also criticized the 5G 28GHz base station deployment. Democratic Party lawmaker Byun Jae-il questioned, "Isn't 28GHz unusable for B2C? Are there any devices that can use it?" and criticized, "Why are telecom companies being forced to build 28GHz? They shouldn't."

Democratic Party lawmaker Yoon Young-chan pointed out, "The telecom companies' low investment is not unrelated to the Ministry of Science and ICT's 28GHz frequency supply policy," adding, "When the Ministry allocated the frequency in May 2018, it did not sufficiently consider the 28GHz 5G technology review and related service demand, resulting in operators having limited investment capacity upon initial market entry."

There is a growing call for creating an ecosystem centered on specialized networks with voluntary participation rather than imposing obligations on telecom operators and burdening them.

At this audit, network executives from the three carriers are expected to appear as witnesses and face detailed questioning regarding the status of 5G 28GHz base station deployment and related policies. Additionally, demands for policy revisions from the Ministry of Science and ICT are expected from both ruling and opposition parties.

However, Minister Lim Hye-sook showed a passive stance toward policy change during the audit on the 1st, stating, "We will continue to encourage telecom companies to install all promised wireless stations." Deputy Minister Cho Kyung-sik also responded, "We need to monitor the network deployment status," and "There are no plans for revision so far."

If the carriers fail to fulfill their network deployment obligations by the end of this year, frequency allocation can be canceled under the Radio Waves Act. The frequency allocation fee of 622.3 billion KRW will not be refunded. Currently, the telecom industry is reportedly proposing to expand investment in the 3.5GHz nationwide network instead of 28GHz base stations. A National Assembly STICC official said, "Given the strong criticism of policy failure, it will not be easy for the Ministry of Science and ICT to immediately take measures such as canceling or reclaiming frequency allocations," but added, "A policy shift that fits the reality is necessary."

◆Netflix ‘free-riding’ on networks mentioned by the President... Legislative action gaining momentum

The audit is also expected to address the controversy over Netflix's free-riding on network usage. Recently, President Moon Jae-in urged, "Please look into the issue of reasonable network usage fees," which has drawn attention to the possibility of accelerating legislative discussions.

During a weekly meeting with Prime Minister Kim Boo-kyum on the 18th, President Moon said, "Global platforms need to fulfill responsibilities commensurate with their scale," and "Please also look into the issue of reasonable network usage fees and fair contracts (such as standard contracts) between platforms and content producers." This pointedly criticized global platform companies that generate enormous profits worldwide using K-content like 'Squid Game' but do not fulfill their network usage fee payment obligations in Korea.

The controversy over overseas CPs' free-riding on networks is not new. Although they earn huge revenues based on domestic infrastructure, they do not pay network usage fees, an issue repeatedly criticized in the National Assembly. This contrasts sharply with domestic CPs like Naver and Kakao, which pay hundreds of billions of KRW annually in network usage fees to Internet Service Providers (ISPs), cooperating in stable network management and expansion. However, Netflix, currently refusing to pay network usage fees in Korea and involved in legal disputes, is confirmed to pay network usage fees to overseas ISPs such as Comcast, Verizon, and AT&T.

Notably, after losing a lawsuit against SK Broadband seeking a declaration of non-existence of debt, Netflix appealed the decision. In response to Netflix's refusal to accept even the first-instance court ruling, SK Broadband filed a counterclaim on the 30th of last month under the Civil Act's unjust enrichment return principle, seeking actual network usage fees for the past three years.

The Ministry of Science and ICT has also indicated the need for government-level guideline legislation, and detailed questions and answers on this topic are expected during the audit. Minister Lim also mentioned during the audit on the 1st, "There is no countermeasure for the massive traffic from overseas CPs," and "Network usage fees are subject to voluntary negotiation between operators, but overall guideline legislation is necessary."

Looking at Netflix's recent actions, despite the passage last year of the so-called 'Netflix Free-Riding Prevention Act,' an amendment to the Telecommunications Business Act that introduced provisions to secure service stability for value-added telecom operators, it has proven insufficient to prevent overseas CPs' free-riding on networks.

National Assembly Deputy Speaker Kim Sang-hee pointed out, "Some operators are causing a surge in network traffic, and among the top 10 operators, six are overseas companies," adding, "They account for more than 80% of the actual share." She urged, "There is a need to improve the system to prevent free-riding," and "We are preparing related legislation and ask the government to actively participate."

Other major issues expected to be addressed during the audit include 5G plans that continue to face quality and high-price controversies even in their third year of commercialization, measures to protect internet platform users, the market situation of MVNOs where subsidiaries of the three major carriers dominate, and follow-up measures on the 10-gigabit internet speed degradation controversy.