[Reverse Discrimination Caused by Regulation] Made Money but Can't Pay Network Fees or Taxes... The Paradox of IT Giants

Refusing to Even Sit at the Negotiation Table Using Market-Dominant Power as Leverage
Even Bypassing Mediation Agencies

[Asia Economy Reporter Minyoung Cha] Global IT giants such as Google YouTube and Netflix are making huge profits based on domestic internet infrastructure, but they are not properly paying network usage fees. This contrasts with domestic companies like Naver and Kakao, which pay hundreds of millions of won annually as usage fees as content providers (CPs). The network usage fee issue is not simply a matter of contracts between domestic internet service providers (ISPs) and CPs. The ongoing issue of reverse discrimination affects not only user fee burdens but also the overall domestic internet network ecosystem.

"Refusing to Pay Network Usage Fees" Global IT Giants in Legal Battles

According to industry sources on the 8th, global companies such as Netflix and Facebook are continuing legal disputes over network usage fees in Korea. For example, SK Broadband is preparing for the third hearing in late April regarding its dispute with Netflix over network usage fees. The dispute began when Netflix filed a lawsuit against SK Broadband claiming non-existence of debt, refusing to pay the network usage fees. In this process, Netflix bypassed SK Broadband’s nine negotiation proposals as well as the mediation process by the Korea Communications Commission (KCC) and went straight to court.

Facebook is also in conflict with the KCC over network usage fees. The KCC judged that Facebook deliberately slowed down speeds during negotiations with domestic telecom companies to gain an advantageous position and imposed a fine in early 2018. However, Facebook appealed and won in both the first and second trials. A KCC official, who announced plans to appeal, pointed out that "this is due to regulatory loopholes" and added, "while responding to this, securing enforcement power against global companies is a challenge."

Paying Network Usage Fees Overseas

Such conflicts are likely to continue for the time being. The global giants at the center of the controversy basically have no intention of paying network usage fees in Korea. Professor Seonghwan Kim of the Department of Economics at Ajou University said that global CPs are avoiding network usage fee burdens by citing net neutrality (the principle that ISPs should treat all content equally) but "net neutrality was originally a protective regulation for small and medium CPs, and does not apply to Google or Netflix." They are also criticized for tax avoidance tactics that reduce corporate tax by paying royalties to their headquarters abroad.

It has also been confirmed that global CPs pay network usage fees in other countries overseas. Netflix signed contracts to pay network usage fees with major US ISPs such as Comcast, Verizon, and AT&T around 2014 when traffic congestion became severe. Google also signed a related contract with French telecom operator Orange in 2013, as revealed by Orange’s management.

According to the Ministry of Science and ICT, as of the fourth quarter of last year, Google’s daily traffic volume accounted for 25.9% of the total, 18.5 times that of Kakao (1.8%) and 14.4 times that of Naver (1.8%). Unlike overseas companies that do not pay network usage fees, domestic companies are known to have paid about 110 billion won in 2017 alone. A Ministry of Science and ICT official said, "We are aware of the reverse discrimination controversy" and added, "We are working to level the playing field."

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