A lawsuit in South Korea ended in a loss for Netflix and a victory for the country’s ISPs, who may now be empowered to charge bandwidth usage fees on streaming platforms that devour traffic. The decision is likely to be challenged as it essentially applies the new wave of streaming services with ISP-negotiated rents as the market explodes.
As reported by the Korean Economic Daily, the court’s decision is less prescriptive than an official finding out for himself. But it doesn’t protect streamers from a class of bandwidth fees that they have been battling against for years.
Netflix filed a lawsuit in 2020, alleging that ISP SK Broadband had no right to demand payment for the bandwidth used by the platform, much like a lawsuit that flared up around 2014.
Back then, ISPs complained that streaming services were consuming excessive bandwidth and companies should pay to offset the cost of providing them. Streaming sites countered that they were simply fulfilling requests from users who had already paid for the bandwidth in question, and that ISPs were trying to “double-dip” and charge the same bits twice.
The technical reality is a little more complicated, however, and Netflix ended up paying so-called interconnect fees in order to enable the infrastructure required to provide huge amounts of data quickly and consistently. Netflix has said this is basically a “fast lane” tax, but due to the lack of chatter since the matter was settled, they appear to have counted it as a cost of doing business.
In a statement by its Korean subsidiary (reported in the same story in the Korean Economic Daily), Netflix said it “has not paid any network usage charges or anything equivalent to the charges required by SK Broadband to any of the ISPs (internet service providers) in the world . ”It is not clear whether interconnect and caching are classified as“ equivalent ”or whether these arrangements have changed; I have asked for clarification from the company and will add it to the story if they respond.
In Korea, however, the issue is not so regulated, and with the tremendous growth there, streaming sites would probably rather not have to pay fees commensurate with their success – hence the lawsuit. But the court’s recent ruling put the ball back on its field, saying that “whether or not some fees will be paid must be determined through negotiation between the parties involved.”
For the broadband providers, this is welcome news as the fee they are negotiating will be higher than zero, which is what they have been working with before. What kind of money they could possibly ask is a complete mystery given the space changes so quickly. And the lawsuit will almost certainly resume since it is so inconvenient for some of the largest corporations in the world (which could make a splash in the voracious South Korean market). In the meantime, consumers in the country can well see streaming prices rising – a proven way to stir up a lot of consumer outrage.
The issue is far from settled in the USA and elsewhere, as a new FCC led by the Democrats could also put new pressure on strict net neutrality rules. Netflix had urged outlawing this type of fee during the original net neutral push, but ultimately the idea was abandoned (and later discussed anyway when the rules were repealed). The dispute over what ISPs can and cannot charge and who should pay is an ongoing and global dispute.