[2020 National Audit] "Korean OTT is Dying" Heated Debate Over Netflix Partnership (Summary)

Temperature Gap in Foreign OTT Partnerships
SKT vs KT, LGU+
Launch of Online Plans...Consensus
Different Dreams on Revision of Mobile Subsidy Law

[Asia Economy Reporter Koo Chae-eun] At the National Assembly Science, Technology, Broadcasting and Communications Committee’s audit held on the 8th, key issues such as lowering communication fees, amendments to the Device Distribution Act, 5G connectivity problems, Google in-app payments, and Netflix partnerships were discussed.

In particular, KT and LG Uplus, which partnered with the foreign OTT Netflix, faced criticism from committee members who said it could undermine the competitiveness of native OTTs. There were concerns that if platform operators, who should be nurturing K-OTT as an industry, join hands with foreign OTTs, the media’s self-sustainability could be lost.

Foreign OTT Partnerships: KT-LGU+ vs SKT

The three major telecom companies showed contrasting positions on foreign OTT partnerships. KT and LG Uplus, which have partnered with Netflix, expressed a pragmatic stance, while SK Telecom stated that native OTTs should be fostered first before partnering with foreign OTTs.

Kang Guk-hyun, Head of KT’s Customer Division, said that many users subscribe to multiple OTTs, explaining, "Season is a mobile OTT, so we are expanding it mainly among KT mobile customers, while Netflix is primarily offered through IPTV. We will broaden customer choice by using foreign OTTs as well, but also expand our own OTT." Kang added, "As the number of subscribers grows, there will be more capacity to invest in content and grow the OTT." He specifically mentioned, "This reflects the fact that YouTube and Netflix account for more than 70% of video traffic." Hwang Hyun-sik, President of LG Uplus, also said, "Because the subscriber base is small, it is difficult to grow and invest in our own content. Realistically, we have no choice but to build competitiveness through partnership relationships."

However, SK Telecom took a different stance. Yoo Sang-young, Head of SK Telecom’s MNO Business, responded to a question about plans to partner with Disney Plus by saying, "We will do so when we have sufficiently equal power to partner." Yoo said, "We will prioritize investing in Wavve and strive to grow K-OTT," adding, "I believe it is desirable to partner with foreign OTTs once K-OTT has grown."

Three Telecom Companies to Launch 'Affordable Online Plans'

The three telecom companies agreed on launching cost-effective mid-range online plans. Byun Jae-il, a member of the Democratic Party of Korea, said, "There are many public complaints that communication fees are expensive. If activation is done online, communication fees can be lowered," and asked, "Isn’t it possible to reduce fees by up to 20-30% compared to now?"

Yoo Sang-young, Head of SK Telecom’s MNO Business, replied, "I strongly agree. SK Telecom will also work on revising plans to increase customer-friendly benefits." Yoo added, "We will launch online plans by the end of this year or early next year at the latest." Kang Guk-hyun, Head of KT’s Customer Division, said, "KT is increasing the online proportion and will work to increase it further," adding, "It takes time for general distribution to adapt to online. We will steadily improve our structure." Hwang Hyun-sik, President of LG Uplus, also said, "I agree. We are preparing diligently to launch online plans."

Differences in Views on Amendment to Device Distribution Act

There were differing views on the amendment to the Device Distribution Act, which is being promoted under the leadership of the Korea Communications Commission.

Yoo Sang-young, Head of SK Telecom’s MNO Business, expressed support when asked about regulations on incentives. However, regarding the separate disclosure system, he said, "Every system has pros and cons. While separate disclosure makes official subsidies transparent, there is a concern that incentives could flow and create discriminatory incentives that disrupt the market. We need to consider both advantages and disadvantages."

Kang Guk-hyun, Head of KT’s Customer Division, said, "I need to see the specific details to answer, but for now, I support it," regarding incentive regulation. He added, "The Device Distribution Act has its merits. It has resolved some past issues. I view positively the government’s effort to introduce a 25% discount on fees." On the separate disclosure system, he said, "It could be advantageous to foreign manufacturers, so that aspect should also be considered."

Hwang Hyun-sik, President of LG Uplus, said, "If incentive regulations are to be made, they should be designed according to characteristics, distribution channels, and timing," adding, "The Device Distribution Act has had both pros and cons. I hope changes will preserve the merits." Regarding the separate disclosure system, he showed a reserved stance, saying, "The purpose is likely to reduce the burden of device prices, but specific accompanying matters need to be decided."

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