Netflix Appeals, SKB Also Announces Counterclaim... Will the Network Usage Fee Legal Dispute Prolong?

[Asia Economy Reporter Seol Gina Jo] Netflix, the global 'online video service (OTT) giant,' which lost the first trial in the lawsuit over network usage fees with SK Broadband, has finally filed an appeal. In response, SK Broadband also mentioned the possibility of a counterclaim if Netflix fails to fulfill its obligation to pay network usage fees despite the first trial ruling, indicating that the legal dispute over network usage fees is likely to be prolonged.

On the 15th, Netflix announced that it would file an appeal regarding the Seoul Central District Court's ruling on the confirmation of non-existence of debt lawsuit. Netflix stated, "We hope that the factual and legal errors in the first trial ruling will be corrected, and we filed an appeal with the court on July 15," and argued, "The Seoul Central District Court's ruling denies the role-sharing premise essential for cooperation between content providers (CP) and internet service providers (ISP), and contains content that could threaten the internet ecosystem and overall network neutrality."

On June 25, the 20th Civil Division of the Seoul Central District Court ruled against the plaintiff in the first trial of the confirmation of non-existence of debt lawsuit filed by Netflix's Korean subsidiary, Netflix Services Korea, against SK Broadband. The court dismissed Netflix's claim that it had no obligation to provide network usage fees. The claim requesting confirmation that there is no negotiation obligation was dismissed.

In response, Netflix argued that there has never been a case worldwide where courts or governments forced CPs to pay network usage fees, and protested that "there are factual and legal errors that must be corrected in the appeal trial."

Netflix countered, "The first trial ruling shifted the responsibility of ISPs onto CPs, who are already fully responsible for content production," and "Although it recognized the obligation to pay fees, it did not specify any legal basis for it." Netflix's position is that obligations such as payment duties can only arise if there is a legal basis such as laws or contracts.

Additionally, Netflix stated, "The first trial ruling prioritized the interests of domestic ISP companies over Korean CPs and users," and "It could threaten the foundation of the internet ecosystem." According to the first trial ruling, if a U.S. user chooses and enjoys a Korean service, Korean companies might have to pay network usage fees to U.S. ISPs. Netflix also reiterated that this situation directly opposes the principle of network neutrality, which the Biden administration in the U.S. has recently emphasized again to maintain the order of the internet ecosystem.

On the other hand, SK Broadband rebutted, "The paid nature of internet services and Netflix's obligation to pay network usage fees were clearly recognized in the first trial ruling." If Netflix continues to fail to fulfill its obligation to pay network usage fees despite the first trial ruling, we plan to file a counterclaim specifically demanding network usage fees at an appropriate time.

Following Netflix's appeal, the lawsuit over network usage fees is expected to be prolonged and intensified. Since the court did not accept the argument that separates the concepts of access and transmission based on network neutrality, a legal battle reinforcing the legal principles of the Telecommunications Business Act, Commercial Act, and others is inevitable. SK Broadband stated, "Netflix uses our network, and based on the first trial ruling, we will respond thoroughly to the point that Netflix must pay network usage fees."

The legal dispute between the two companies escalated when SK Broadband applied to the Korea Communications Commission for mediation over the network usage fee conflict with Netflix in November 2019, but Netflix filed a lawsuit before the mediation results were announced. This caused controversy as a telecommunications operator with domestic sales in the hundreds of billions of won bypassed the regulatory authority, the KCC.

Previously, Netflix argued that the obligation to transmit video content data lies with the ISP, i.e., SK Broadband, based on the concept of the 'internet fundamental principle,' while SK Broadband claimed that Netflix's use of the platform operator's network to gain economic benefits without paying fees was 'free riding.'

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