"Pay 3 Years of Network Usage Fees" SK Broadband Files Counterclaim Against Netflix

[Asia Economy Reporter Seulgina Cho] SK Broadband announced on the 30th that it has filed a counterclaim against Netflix to claim network usage fees based on the legal principle of unjust enrichment under civil law.

This is a follow-up measure after the Seoul Central District Court ruled against the plaintiff Netflix Services Korea in June in a lawsuit filed by Netflix against SK Broadband seeking a declaration of non-existence of debt (no debt).

SK Broadband stated, "Internet networks require significant investment for initial construction and annual maintenance, and are naturally provided for a fee, yet Netflix is using the company's network without paying any compensation," adding, "despite the first-instance ruling, Netflix has not responded to negotiations at all and has failed to pay network usage fees, so we are claiming the actual network usage fees for the past three years based on the principle of unjust enrichment."

In particular, SK Broadband emphasized that although Netflix benefits from transmitting data to users using the domestic and international data transmission networks that SK Broadband has built and leased, it has suffered losses corresponding to the network usage fees because Netflix has paid nothing.

The traffic generated by Netflix on SK Broadband's network, which dominates the domestic OTT market, has been increasing exponentially every year. From about 50Gbps in May 2018, it surged approximately 24 times to around 1200Gbps as of September this year. As traffic has surged, SK Broadband's losses in managing and maintaining the network have inevitably increased.

SK Broadband added, "There is a direct causal relationship between the benefits Netflix gains from using the network and the losses SK Broadband has incurred from the network usage fees that should have been paid, and Netflix has no basis to use the network without compensation."

The judgment of the domestic judiciary also supports SK Broadband's claims. In the first trial, the court ruled, "Netflix should be regarded as receiving a paid service of internet network connection through SK Broadband," and "it is reasonable and equitable for Netflix to bear the obligation to pay for this."

However, Netflix has filed an appeal, rejecting the domestic judiciary's ruling that it must pay network usage fees.

SK Broadband stated, "Denying the paid nature of network usage recognized in the first-instance ruling by Netflix is to deny the basic business model of telecommunications operators," and pointed out, "It is natural that Netflix should pay network usage fees just like domestic and foreign CPs (Content Providers) who all pay properly." The amount claimed for unjust enrichment will be determined through an appraisal procedure supervised by the court, as in ordinary litigation procedures.

The controversy over free-riding on networks by global content providers (CPs), including Netflix, is not new. Among the top 10 operators by average daily traffic in the second quarter, overseas CPs accounted for as much as 78.5%. National Assembly Vice Speaker Sanghee Kim pointed out, "Domestic CPs such as Naver and Kakao pay hundreds of millions of won annually in network usage fees to Internet Service Providers (ISPs), cooperating in stable network management and expansion," adding, "However, Google YouTube, Netflix, and others, which account for the majority of the rapidly increasing traffic, are ignoring network usage fees."

On the other hand, it has been confirmed that Netflix pays network usage fees to overseas ISPs such as Comcast, Verizon, and AT&T.

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