[Illegal Free Riding Prevention Act] Netple and SKB 2nd Trial as Basis for National Assembly Amendment Decision

Next Month 12th, 6th Hearing Date
Legal Dispute Focused on 'Sanghomujeongsan'
Issue of Implicit Agreement on Subsequent Payment of Network Usage Fees

[Asia Economy Reporter Cha Min-young] Google (YouTube) has directly joined the ‘Network Free-Riding Prevention Act’ legislation in the National Assembly by signing in opposition, drawing attention to the legal judgment basis contained in the second trial court’s ruling on Netflix-SK Broadband.

According to industry sources on the 23rd, the Seoul High Court Civil Division 19-1 will hold the 6th hearing for the appeal and counterclaim trial between Netflix and SK Broadband on the 12th of next month. In the first trial, Netflix filed a declaratory judgment lawsuit against SK Broadband claiming "unable to pay," but the court ruled against the plaintiff in June last year. The court stated, "The part confirming the non-existence of the duty to negotiate is dismissed, and the plaintiff’s remaining claims are rejected." However, the court left open the issue of whether to conclude a contract and what compensation to pay regarding network usage fees, stating that it should be determined through negotiation between the parties based on the principle of freedom of contract.

Since then, during five hearings this year, both sides have continued legal disputes focusing on the issue of ‘mutual settlement exemption (bill and keep).’ The trial issues have also changed. In the first trial, where the question was whether the network is chargeable, SK Broadband won, and the legal judgment that there is an obligation to pay costs if excessive traffic is generated has already been made.

The issue in the second trial is whether there was an ‘implicit agreement.’ After Netflix connected to SK Broadband through ‘public peering’ in 2016, the traffic volume increased exponentially, leading both companies to agree in 2018 to connect through ‘private peering’ (direct connection with a private server). Regarding whether the network usage fee was to be paid later in this process, SK Broadband’s position is that "no agreement was reached and it was left as a matter for future negotiation," whereas Netflix insists that "a no-settlement agreement was made." SK Broadband has continuously demanded payment since then, but Netflix maintains that it never made such a request.

The trial is currently at an impasse. Both sides are repeating oral arguments without concrete evidence, resulting in ongoing disputes. No evidence supporting either side’s position has emerged from documents or emails containing contract terms. Although the court has instructed both parties to present evidence, both sides continue to repeat their previous positions based on circumstantial evidence, deepening the court’s dilemma.

Legal circles believe that even if Netflix wins in the second trial, it will only be recognized that appropriate compensation was provided to the telecommunications operator, and the obligation to pay network usage fees for large-volume traffic has already been legally established through the first trial.

Based on this, the National Assembly is preparing an amendment to the Telecommunications Business Act that mandates payment of network usage fees by operators generating large-scale traffic. If SK Broadband wins again in the second trial, the legal basis for mandating additional costs due to large-volume traffic will be further strengthened. This is because there will be grounds to directly receive usage fees beyond mutual agreements.

Currently, a total of seven bills have been proposed in the National Assembly. The most recent is the ‘Netflix Free-Riding Prevention Act,’ led by Democratic Party lawmaker Yoon Young-chan. The amendment guarantees autonomous contracts between operators but prohibits acts such as imposing unreasonable or discriminatory conditions, unjustly refusing contract conclusion, and refusing to pay fair compensation.