Network Usage Fee Conflicts Persist
SK broadband and Netflix, the world’s leading online video streaming service (OTT), have settled their network usage fee litigation and agreed to a service partnership. Consequently, customers can now access Netflix content on SK telecom’s mobile and Internet Protocol TV (IPTV) platforms.
While the litigation between the two companies has been concluded, the ongoing network usage fee disputes between Google’s YouTube and domestic telecoms companies remain unresolved.
On Sept. 18, SK broadband and Netflix revealed that they have mutually withdrawn lawsuits concerning unjust enrichment and debt non-existence confirmation. In turn, they have decided to forge a strategic partnership. Notably, unlike KT and LG Uplus, SK broadband, which faced challenges in acquiring subscribers without offering Netflix content, and Netflix, wary of a precedent that could impact them internationally, have reached this surprise agreement.
The specifics of the agreement remain undisclosed. However, one of the contentious issues during the lawsuit, the Open Connect Appliance (OCA) that is Netflix’s proprietary network, was discussed. To provide a stable customer experience, SK telecom, SK broadband, and Netflix have agreed to deploy OCA. Installing OCA can reduce network usage, a method that Netflix has adopted by forming partnerships with telecoms companies that voiced concerns about network usage burdens.
Netflix stated, “We plan to offer the OCA free of charge,” and “Details will be finalized through operational discussions.” LG Uplus currently provides Netflix service through a domestic OCA installation, and KT is connected to Japan’s OCA.
There is also speculation within the telecoms industry that, in return for dropping the lawsuit, Netflix will compensate SK broadband with fees corresponding to network usage.
In addition, SK telecom, SK broadband, and Netflix announced a partnership on the same day to offer customers a seamless Netflix experience on platforms such as smartphones and IPTV (B tv). This will include launching Netflix-bundled products in combination with SK telecom’s tariff plans and SK broadband’s IPTV products. Furthermore, a Netflix bundled product will be introduced with SK telecom’s “T Universe” subscription product.
Historically, SK broadband argued that due to the surge in traffic demand, global content providers (CP), including Netflix, should pay network usage fees. In contrast, Netflix claimed that attempting to charge both end-users and CPs constituted “double billing” and filed a lawsuit to confirm the non-existence of this debt. The court of first instance ruled in favor of SK broadband, but Netflix appealed. SK broadband also retaliated by filing a lawsuit in the Seoul High Court, demanding the return of unjust profits.
Currently, there are eight proposed amendments to the Telecommunications Business Act in the National Assembly aiming to clarify network usage fees. Some fear that with the withdrawal of this lawsuit, momentum for these legislative changes might decrease. Nonetheless, the telecom industry and experts are urging the establishment of at least minimal legal standards. The YouTube network usage fee issue remains, and preventative measures are necessary to avoid similar disputes in the future.
Professor Shin Min-soo from Hanyang University’s Business Department commented, “The network usage fee issue with Google’s YouTube, which lacks alternatives and competitors, remains unresolved. Additionally, we cannot rule out potential problems arising from future negotiations between Netflix and telecoms companies.” Professor Shin added, “To prevent unnecessary conflicts, we must enact legislation that establishes at least basic guidelines for network usage.”