[The Editors' Verdict] Net Neutrality and Network Usage Fees

“Squid Game” has become a huge hit, ranking number one worldwide in Netflix household viewership. Netflix invested 25 billion won and earned 1 trillion won, achieving a 40-fold profit. The entire country was excited as Squid Game was known as K-content produced by a domestic company. However, the domestic production company's revenue was only 25 billion won, and all the profits were taken by Netflix.

Around the release date of Squid Game on September 17, traffic between KT and Netflix increased by about 39% over a week, and traffic between SK Broadband and Netflix also surged. Numerous users watching Squid Game generated excessive traffic, overloading the communication network, while only Netflix earned enormous profits. However, Netflix pays network usage fees in the U.S., Europe, and Japan, and Naver and Kakao are known to pay network usage fees of about 70 to 100 billion won annually. Yet, Netflix does not pay a single won in network usage fees in South Korea. Although the court ruled against Netflix in June this year, rejecting its claim that paying network usage fees was unfair, Netflix is appealing and resisting. Netflix refuses to pay network usage fees citing net neutrality.

Net neutrality means that all network operators must treat all data and content on the internet equally without any discrimination. This concept was established in the U.S., where the internet was first developed. While it sounds very healthy and plausible, it cannot be denied that it also created a rationale allowing internet mega-corporations like Google and Facebook to use global communication networks almost for free. The original purpose of preventing discrimination was to enable various forms of internet content and portal services, but the reality is the opposite. Until the early 2000s, many internet companies existed not only in the U.S. but also domestically, but now a few mega-corporations dominate, and net neutrality has laid the foundation for these mega-corporations to generate enormous profits.

Currently distributed content is mainly videos like Google’s YouTube or Netflix. Videos are also increasing on Facebook. Video content generates massive traffic. There are predictions that the share of video content will expand to 75%. Internet platform mega-corporations do not have servers domestically but place servers in their home countries, so they only pay network usage fees to their domestic telecom companies. To provide smooth service, they install cache servers domestically, and the installation costs of cache servers are sometimes demanded from domestic telecom companies, holding users hostage.

Logistics distribution networks are originally supposed to be built and borne by logistics suppliers. When traffic increases significantly, investments to expand the network must also increase substantially, but the investment is the telecom companies’ responsibility, while the profits through the network are taken by internet mega-corporations. Numerous users accessing platforms like Google or Facebook not only bear network access fees but are also mobilized to generate advertising revenue for mega-corporations.

Net neutrality played a significant role in the spread of internet services, but it cannot be denied that it currently works too favorably for internet mega-corporations. Internet mega-corporations that generate massive traffic should shift policies toward sharing costs commensurate with their usage instead of free-riding.

Im Juhwan, Honorary President of the Korean Institute of Communications and Information Sciences

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