Amid Ignoring Domestic Cost: Google Proposes Sharing Cost for Int’l Networks | BusinessKorea

Monday, November 20, 2017

Google recently demanded Korean telecommunications carriers' sharing of cost for international circuits.
Google recently demanded Korean telecommunications carriers' sharing of cost for international circuits.
SEOUL,KOREA
25 October 2017 - 12:00pm
Michael Herh

It has been found that Google which is causing a controversy about “reverse discrimination” because the company causes considerable burden on Korean communication networks but does not pay any fees for network use, recently demanded Korean telecommunications carriers' sharing of cost for international circuits. As Google’s YouTube makes tremendous traffic, three major internet service providers (ISPs) that invest thousands of won in internet networks each year say that Google’s demand is absurd and defies common sense.

According to the industry on October 24, Google said to some ISPs, "We have built an international circuit but the expansion of the capacity is inevitable because of an explosive increase in traffic volume due to Korea’s high usage. Korean ISPs share a burden for the expansion of international circuits."

Currently, Google handles a lot of high-volume traffic such as videos by way of cash servers installed at the three Korean ISPs. Accordingly, Google and the three ISPs neither give nor receive money between them.   

Google is categorized into an “Internet portal” service company that provides search and content services in Korea but in the US, Google has the status of an ISP that builds a “communication network” like a telecommunication carrier. The global search giant also builds international lines.

Meanwhile, Google asked Korean telecommunications carriers to share costs for line expansion citing increased traffic. To do so, Google needs to "cross-check" for traffic growth in Korea. This is because the networks of both parties are in an interconnected state.

There was a similar precedent in France where a similar case became a legal dispute. Google entered into an Internet network interconnection agreement with French telecom operator France Telecom (subsidiary: Open Transit) in 2005 through its affiliate Cogent, and agreed not to charge each other within the range of a 1 to 2.5 traffic exchange ratio.

Since then, as the traffic of Google ballooned, France Telecom demanded the payment of “extra network fees” according to the interconnection agreement for traffic outside the scope of the agreement. Google countered this, and in May 2011 France Telecom filed a complaint with the French Fair Trade Commission (FTC) that Google was abusing its dominance over the network. The French FTC disagreed with Google in consultation with the communications regulator ARCEP. Google filed a series of appeals to the French High Court and Supreme Court, but all of the higher courts dismissed Google’s complaint and ruled in favor of France Telecom. Since January 2013, Google has been paying money corresponding to excess traffic to France Telecom.

Currently, in Korea, Google is using domestic cache servers free of charge. There has been no payment by Google for explosive traffic volume. Google surpassed the traffic ratio of 1 to 2.5 considered a practice in France and the global internet market a long time ago but payment for extra cost has never been made.

"In fact, the matter got off on the wrong foot,” said an executive of a Korean telecommunication carrier. “When Google’s traffic grew explosively in 2011, the three major Korean telecommunications companies were more than ten trillion won, respectively, in building nationwide LTE networks. As they were investing tens of thousands of Korean won in order to make their services faster than those of their competitors at that time, they had no choice but to install cache servers as extreme measures. Not to mention sharing the cost with Google, the three competed for handling traffic sparked off by Google.”      

A bigger problem is that the current situation kindled by Google is just a beginning. This is because the burden on the network is growing rapidly as foreign online TV service providers such as Netflix and Watcha, as well as other overseas contents providers (CPs) such as Facebook are rapidly invading the Korean market. Worldwide Internet traffic, which hit 55 exabytes in 2016 (1 exabyte = 1 billion gigabytes), is expected to rocket 247% to 191 exabytes in 2021 according to a Cisco report. The vast majority of increasing traffic is occupied by videos. The Cisco report predicts that video-related traffic will grow 30% a year, to reach 154.71 exabytes, or 81% of 191 exabytes in 2021.

Such circumstances are fueling demand for regulators to act as judges for fair competition in the Internet industry and about the payment of reasonable traffic usage fees. "Some are promoting use fee payment as a net neutrality issue. But net neutrality is a major principle that prohibits ISPs from discriminating against users and CPs for its own profit and do not ban them from charging," said a communication policy specialist. "The worst situation has already occurred as the government has done nothing, saying, ‘That is an issue among operators.’ Korean authorities should establish the proper rules of the market. Even now it is not too late."

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