[Opinion] The World Watches the Conflict Over Network Usage Fees

In March, the second trial began in the lawsuit addressing the dispute over network usage fees between SK Broadband, a Korean Internet Service Provider (ISP), and Netflix, a global Content Provider (CP).

The first-instance court ruled in favor of SK Broadband, determining that SK Broadband provided the service of connection and that Netflix has an obligation to pay for it. In the second trial, Netflix argues that network usage fees have been settled through the Open Connect Alliance (OCA), a temporary storage device, and that the Bill and Keep method, which connects services without mutual settlements, should be applied.

In response, SK Broadband maintains that even if OCA is installed, issues regarding domestic network usage fees and space and electricity costs after OCA remain, and that Bill and Keep, which applies when traffic between ISPs is similar and no separate fees are charged, does not apply to this case. With both sides holding firm positions, the court’s judgment is highly anticipated.

Separately from the lawsuit, bills mandating CPs that generate massive traffic to pay network usage fees are being discussed. Among them, the bill proposed by Assemblyman Kim Young-sik defines as prohibited acts the failure of value-added communication service providers to pay fair usage fees, considering the network configuration and traffic volume necessary for providing services, despite receiving internet connection services using the network of a telecommunications service provider.

The issue of network usage fees in Korea is now becoming an international issue. In mid-February, representatives of European Union (EU) telecom companies such as Germany’s Deutsche Telekom, France’s Orange, and the UK’s Vodafone sent a letter to the EU Parliament requesting legislation that would require Big Tech companies to share network expansion costs. The United States, on the other hand, takes a stance of protecting its global CPs.

The U.S. Trade Representative’s (USTR) country-specific trade barriers report released in March includes concerns that if network usage fee bills targeting CPs like Netflix and Google pass, it could raise issues regarding Korea’s international trade obligations. This reflects the perception of network usage fee legislation as a barrier to digital trade.

Now, the network usage fee issue in Korea is expanding into a major confrontation between global telecom companies and Big Tech, evolving into a zero-sum game among internet ecosystem participants beyond national boundaries. While the EU has implemented the General Data Protection Regulation (GDPR) to restrict data transfers abroad in a desperate effort to curb the market dominance of U.S. Big Tech, the Organisation for Economic Co-operation and Development (OECD) plans to check major U.S. Big Tech companies starting next year through a ‘digital tax’ that imposes taxes where revenue is generated even without a physical presence. Network usage fee regulation has thus become the third round in efforts to restrain U.S. Big Tech.

Implementing network usage fee regulation through legislation, despite the rationale of protecting domestic companies, raises questions about its theoretical validity and practical enforceability, given that price regulation is imposed by countries adopting market economies. The in-app payment forced prevention law, intended as price regulation, is also facing difficulties in achieving its original goals despite enthusiastic legislation.

Therefore, while observing court rulings on specific cases, it is necessary to build consensus on the principle that ISPs and CPs should share roles mutually to achieve the common goal of expanding network investment in response to surging traffic, for the sustainable development of the internet ecosystem.

Seong-Yeop Lee, Professor at Korea University Graduate School of Technology Management / Director of the Technology Law Policy Center