[Illegal Free Riding Prevention Act] "Domestic CPs Also Burdened... Concerns Over K-Content Contraction"

[Asia Economy Reporter Yuri Choi] The content industry is concerned that although Google's claims are somewhat exaggerated, they will impact creators and ultimately increase the burden of network usage fees on small and medium-sized CPs. The logic is that if those who generate more traffic have to pay higher network usage fees, it will translate into a burden for creators uploading popular content and the users viewing it.

The currently discussed Network Usage Fee Act (Amendment to the Telecommunications Business Act) mandates CPs that generate large-scale traffic to pay network usage fees. Creators or users are not subject to this burden, nor does it apply to all CP companies. While there is no direct damage to the industry, global CPs are likely to reduce support for domestic creators or investment in content. Since new cost burdens arise, they inevitably have to cut back on investments.

Last year, Naver, which accounted for 2% of domestic internet traffic, paid about 70 billion KRW annually in network usage fees. Simply calculating based on traffic share, Google (27%) and Netflix (7%) would have to pay approximately 900 billion KRW and 200 billion KRW respectively. This is why YouTube argues that changes in business operations following the law amendment could disadvantage creators (some of the network usage fees burden falling on them).

A domestic CP official said, "From a company's perspective, when costs increase, reducing investment is the natural step," adding, "Given the winner-takes-all nature of platforms, if large CPs cut back on investment, creators will be hit."

There is also controversy over whether the burden on domestic CPs already paying network usage fees will increase and by how much. As content consumption rapidly shifts from text to photos and videos, traffic volume is exploding. Therefore, if network usage fees are imposed based on traffic, the burden on small and medium-sized CPs could naturally increase. Even if not applied immediately, there are concerns that CPs will eventually have to pay due to weakened negotiating power against telecom companies with legal grounds.

A CP official said, "Currently, network usage fees are left to individual negotiations between operators under various conditions, but if this is legislated and standards are established, CPs' negotiating power could weaken," predicting, "Small and medium-sized CPs are in an even weaker position, so they will ultimately bear the burden as well."

On the other hand, regarding Google's claim that domestic CPs will have to pay network usage fees when providing services overseas, the response was that "the possibility is low." Although moves to legislate network usage fees are emerging beyond Korea in some European countries, it is considered difficult to introduce such measures in the United States, where mega CPs are concentrated.

A portal industry official said, "In the U.S., where big platforms like Google, Netflix, Facebook, and Amazon exist, they will not institutionalize network usage fees that increase their burden," adding, "Due to trade friction issues, legislation should be approached cautiously."