'Netflix Act' Targets 'Users Over 1 Million + Top 1% Traffic'... 5 Companies Including Naver and Kakao

Notice of Legislative Proposal for Amendment to the Enforcement Decree of the Telecommunications Business Act

[Asia Economy Reporter Joesulgina] Going forward, content providers (CPs) with over 1 million domestic users and data traffic exceeding 1% must secure essential server capacity and access routes to ensure service stability. If access routes are changed abruptly, a legal obligation to consult with telecommunications companies in advance has also been imposed.

The Ministry of Science and ICT announced on the 8th that it will publicly notify the draft amendment to the Enforcement Decree, which contains detailed provisions necessary for the enforcement of the amended Telecommunications Business Act, starting from the 9th.

This amendment mainly includes measures to ensure the service stability of value-added telecommunications service providers, detailed criteria for rejection under the deferred notification system (allowing rejection of terms and conditions notification within 15 days), and easing entry barriers for IoT service resale businesses. The Ministry plans to collect stakeholders' opinions by October 19th ahead of the December enforcement.

◆ Service Stability Obligations for Global CPs like Netflix... Including Naver and Kakao

First, pursuant to the newly established Article 22-7 of the Telecommunications Business Act, which requires value-added telecommunications service providers to take necessary measures to provide stable services, the application criteria and required measures have been stipulated. This is a measure to impose obligations on global CPs such as Netflix and YouTube (Google), which generate massive traffic but do not properly pay network usage fees domestically, to maintain the quality of domestic telecommunications networks. This is why the law passed in the 20th National Assembly was called the so-called 'Netflix Free Riding Prevention Act.'

Specifically, the law applies to value-added telecommunications service providers whose average daily users exceed 1 million and whose domestic total traffic exceeds 1% based on a three-month period at the end of the previous year. Currently, five companies?Google, Netflix, Facebook, Kakao, and Naver?fall under this scope. Both user count and traffic volume criteria must be met (and condition) for the obligation to ensure service stability, thus excluding small startups that were initially a concern.

A Ministry of Science and ICT official explained, "There are about 50 companies with over 1 million average daily users and 8 companies exceeding 1% of domestic traffic. To limit the obligation to those who genuinely need to ensure service stability, applying an and condition rather than or results in a total of 5 companies meeting both criteria."

However, since traffic from September to November will be applied at the time of enforcement, the number of companies subject to the law may increase beyond five. The list of target companies will be announced annually.

The Enforcement Decree includes provisions requiring providers to ensure stable service regardless of user environment by ▲multiplying servers, ▲securing essential server capacity, and ▲optimizing content transmission volume.

It also stipulates that target CPs must consult with related businesses, including telecommunications carriers, if necessary. For example, in cases like the traffic route change dispute between Facebook and the Korea Communications Commission, if there is a reason that significantly affects service stability, prior notification to the contracted telecommunications company is mandatory. This is interpreted as a measure to prevent traffic concentration on some CPs from overloading the entire telecommunications network.

Additionally, the Enforcement Decree mandates the establishment of internal guidelines to maintain service stability and requires submission of related implementation status data by the end of January each year. The five applicable companies must also secure online and ARS channels to handle user requests. It includes provisions to notify contact information for service stability consultations such as in case of failures. Violators will be subject to corrective actions under the law, including fines of 20 million KRW.

◆ Detailed Criteria Established for Deferred Notification System... Easing Entry Barriers for Small-scale IoT Businesses

The Enforcement Decree also reflects detailed criteria for rejection under the newly introduced deferred notification system. The amended Article 28 of the Telecommunications Business Act applies a notification system to all business operators' terms and conditions to promote autonomous competition in fees and services in a diversified and complex telecommunications environment, but allows rejection within 15 days after notification for some operators to prevent side effects.

The draft amendment specifies rejection criteria and detailed procedures. From a user protection perspective, it reviews whether the cost burden is unreasonably increased compared to existing similar fee plans, whether unfair benefits are concentrated on long-term or high-volume users, and whether unreasonable usage conditions are imposed. From a fair competition perspective, it examines concerns such as excluding competitors through fees lower than wholesale prices or refusing or unfairly discriminating against essential elements for other operators' bundled sales.

Entry regulations for IoT service resale have also been eased. This is a follow-up measure to the regulatory sandbox temporary approval. The main point is to relax registration requirements for telecommunications business operators so that IoT services can be provided more easily by reselling the mobile networks of wholesale providers.

Previously, stricter registration requirements were applied when providing IoT services using the mobile networks of wholesale providers to protect users compared to using other operators' networks. However, considering that IoT services are often conducted on a small regional basis and that user protection concerns can be addressed through registration conditions, the requirements have been eased.

Going forward, the Ministry of Science and ICT plans to apply the same registration requirements to IoT companies using wholesale providers' mobile networks as those using other operators' networks. By significantly lowering entry barriers for IoT businesses, it is expected to create a foundation for small and venture companies to commercialize creative ideas.

In addition, the amendment clarifies the scope of public interest review regulations and includes changes such as modifying identity verification methods following the amendment of the Electronic Signature Act.

It clarifies that when a corporation as a telecommunications business operator enters into a merger agreement with a foreigner, it is subject to public interest review. Also, following the abolition of the certified certificate system by the amendment of the Electronic Signature Act in June, identity verification can be done through electronic signatures (which can verify the signer's real name) as defined in Article 2, Clause 2 of the amended Electronic Signature Act.

Furthermore, with the abolition of the mobile internet service (Wibro), it deleted mobile internet service from the list of services eligible for fee reductions for disabled and low-income groups, and reflected legal terminology adjustments under the Telecommunications Business Act. The Ministry of Science and ICT will collect opinions submitted during the public notice period and proceed with reviews by the Ministry of Government Legislation in the future.

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