Free Ride: Google Uses Communication Network without Paying Any Fees | BusinessKorea

Monday, November 20, 2017

SEOUL,KOREA
23 October 2017 - 1:00pm
Michael Herh

Google is chalking up sales of several trillions of Korean won each year in Korea but is using most of its revenue-generating Internet services free of charge.

According to the Internet industry, sales of Google Korea are estimated at 3 trillion won. 'Korea Wireless Internet Industry Status of 2016' published by the Korea Mobile Internet Business Association (MOIBA) in the first half of the year says that Google Play, the application market of Google, posted 4,465.6 billion won in sales in 2015.

Profits from Google's app sales are shared by developers and Google 70-30 so 30% of the sales are more than 1.48 trillion won which went to Google. YouTube and search advertisement fees have increased rapidly over the past several years. These advertisement fees are estimated to exceed 1.48 trillion won. Although Google does not disclose its revenue and profits in principle, it is said that its revenue is close to three trillion won.

On the other hand, to maintain the quality of the wired and wireless internet which are the service paths of Google, capital expenditures (CAPEX) invested by Korean network operators (three major telecommunication carriers) are set at 5.85 trillion won for this year alone. At present, more than 50% was executed. According to NH Investment & Securities, since 2011 4G LTE started to be built, the three telecom service operators have invested 6.82 trillion won in internet service facilities a year on average. The “piece de resistance” problem is that Google has been using such high-quality Internet networks that consume six trillion won each year as a free loader.

In fact, Google's share is overwhelmingly high in video streaming which accounts for the largest portion of actual Internet traffic. According to Wiseapp’s research, Google’s YouTube accounted for 73% of the total mobile video market in Korea while recording a total of 20.2 billion minutes as of May.

Afreeca TV accounted for 5.3% (1.9 billion minutes), followed by Naver TV for 2.7% (800 million minutes) and other video platforms accounted for 5%. At present, there is no statistics about objective domestic traffic shares of foreign content providers (CP). Based on "use time shares" measured by Wiseapp, it is estimated that YouTube generates 13.7 times more traffic than Afreeca TV and 27 times more traffic than Naver TV. Both Afreeca TV and Naver TV are Korean companies.

In this situation, however, there is no current network use fee paid to the three Korean telecommunication service carriers by Google Korea. Korean CPs are paying billions of Korean won per year for the use of the network to provide a stable high-definition (720p) video quality service.

In case of Naver, the largest Internet portal in Korea, it costs Naver an estimated 20 billion won to use the network. It is estimated that Google YouTube will have to about 200 billion won per year if it pays fees for the internet network based on the same standard. But Google Korea is not paying them at all. The three Korean telecommunication service carriers are transmitting Google’s contents through cache servers, but Google even do not pay for using the cache servers.

 

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