The Paradox of Ultra-High Speed... Repeated 'Gongginali Free Network Tantrums'

Thanks to Korea's Fast Network Quality for YouTube, Netflix, etc.
Securing Many Paid Subscribers
Traffic Explosively Increasing
Urgent Need to Establish System and Structure for CPs to Share Management Responsibility

[Asia Economy Reporter Koo Chae-eun] Netflix, the "traffic hippo" with 180 million paid subscribers worldwide, is deepening conflicts by claiming it will not pay network usage fees to domestic telecom companies. Considering previous disputes over network usage fees with Google and YouTube, some interpret this controversy as the "paradox of high-speed internet." South Korea, as a telecommunications powerhouse, has developed infrastructure to the extent of being the first in the world to commercialize 5G, but institutional mechanisms to recover network investment costs from content providers are insufficient. Ultimately, it is diagnosed that the problem of free-riding on networks by giant content giants, abusing their bargaining power and making unreasonable demands, is recurring.

◆ LTE speeds carrying Netflix are unrivaled = According to the Korea Telecommunications Operators Association (KTOA) on the 4th, LTE speeds in South Korea are outstanding. The average LTE download speed in Korea is 150.68 Mbps, about three times faster than the North American average of 52.23 Mbps, and overwhelmingly faster than Japan (46.55 Mbps), Hong Kong (43.18 Mbps), the UK (56.07 Mbps), and France (67.34 Mbps). Additionally, South Korea’s smartphone ownership rate is 95%, significantly higher than that of developed countries.

Experts evaluate that South Korea’s dense population distribution and high rate of apartment living have contributed to building ultra-high-speed communication networks that are efficient over short distances. If the killer content of 1G was voice calls, 2G was text messaging, and 3G was mobile messengers, the hit product of 4G was video content like YouTube and Netflix, which led to explosive traffic growth. The combination of "the world’s fastest and most stable communication network" and "affordable content consumption formed through IPTV bundle discounts" has rapidly increased the Netflix user base. A telecommunications industry official said, "South Korea’s network quality is excellent, providing an optimal foundation for companies like Netflix to secure many paid subscribers," adding, "Traffic is also exploding, but content providers do not want to bear the costs, which causes disputes."

◆ Continued 'free-riding' on networks = The problem is that content providers do not participate in negotiations over network usage fees by leveraging their "power advantage." Content providers (CPs) like Netflix maintain the position that telecom traffic should be the responsibility of internet service providers (ISPs) such as telecom companies. However, major countries worldwide are increasingly recognizing CPs as having "joint management responsibility" for the traffic they generate.

The U.S. Federal Communications Commission (FCC) abolished net neutrality principles in 2018 and expressed the principle that telecom companies should secure proper investment funds from CPs through legitimate network usage contracts. Netflix also signed a network usage contract with Comcast in 2014 and began paying network usage fees. Countries like Japan and France intervene at the government level in unfair transactions between CPs and ISPs through network usage fee surveys and mandatory transaction conditions. However, in South Korea, the issue of network usage fees between CPs and ISPs remains opaque due to the "principle of private autonomy" and "confidentiality agreements," and the government is not actively involved, fearing trade friction with the U.S.

◆ Need for shared responsibility in network usage fees = Experts argue that the Netflix case should be a turning point to end the free network problem. Since Facebook pays network usage fees after several rounds of negotiations, Netflix and YouTube should not stubbornly resist. Lee Jong-kwan, a senior advisor at the law firm Sejong, said, "In the platform economy, issues inevitably arise about where to place responsibility for user protection due to the interconnection and linkage structure among market participants," adding, "There needs to be revenue sharing based on value creation contributions and shared responsibility for aspects that undermine value." Professor Shin Min-soo of Hanyang University’s Business Administration Department diagnosed, "Since the telecommunications market has characteristics of a two-sided market, a structure should be created where CPs also bear indirect responsibility."

This content was produced with the assistance of AI translation services.