[2022 National Audit] Bowed Heads of Kim Beom-su, Lee Hae-jin, and Choi Tae-won "Sorry for the Inconvenience... Efforts to Compensate for Damages" (Comprehensive)

Chairman Chey Tae-won Attends National Audit After Forum in Japan
Kim Beom-su: "No Management Return, Compensation Over Legal Age"
Kakao VS SK C&C, Responsibility Dispute Continues

Kim Beom-su, head of Kakao Future Initiative Center, appeared at the comprehensive audit of the Ministry of Science and ICT and related audit target organizations held at the National Assembly on the 24th, and apologized for the Kakao outage. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporters Nahum Kang, Yuri Choi, Seungjin Lee] The heads of three companies?Naver, Kakao, and SK?bowed their heads in apology at the National Assembly’s audit following the platform service outage caused by the SK㈜C&C data center fire. Amid continued criticism from ruling and opposition lawmakers regarding the cause of the accident, the response process, and future measures, these leaders promised ongoing infrastructure investment, active compensation for damages, and prevention of recurrence.

Heads of Kakao, Naver, and SK㈜C&C Bow Their Heads

The afternoon questioning session on the 24th at the National Assembly’s Science, Technology, Information and Broadcasting Committee’s audit of the Ministry of Science and ICT began with apologies from the heads of these companies.

Kim Beom-su, Founder of Kakao and Head of the Future Initiative Center, said, "Since Kakao started generating profits, we have recognized the importance of data centers and decided to invest in them. However, it took 4 to 5 years, and the preparation was insufficient, for which I apologize unconditionally."

Lee Hae-jin, Founder of Naver and Global Investment Officer (GIO), also apologized, saying, "We deeply regret the service outage caused by the recent IDC incident. We followed the manual and restored services quickly, but we understand there were various inconveniences during that time. We will conduct further inspections and do our best to minimize inconvenience going forward."

SK Chairman Chey Tae-won, who arrived late at the audit venue at 8:30 p.m., said, "I feel a great responsibility for this incident," adding, "The entire group is making every effort to manage the situation well." He also explained, "I submitted a letter of absence because postponing the scheduled forum in Japan could cause other issues, but I was able to finish the forum quickly and attend. I apologize for causing concern."

[Image source=Yonhap News]

"We Will Provide Compensation Beyond Terms... Preparing Compensation for Free Users"

During the audit, lawmakers focused their questions and criticism on Kakao and SK C&C regarding responsibility for the KakaoTalk outage. In particular, there were repeated calls to expand compensation to free users, as Kakao’s growth was largely due to its free service.

In this regard, Kim said, "For paid services, compensation beyond the terms has been paid or is being prepared according to the terms. Each affiliate is creating standards that go beyond the terms."

He added, "Since there is no precedent worldwide, as we receive and organize damage cases, we will form a consultative body including affected users and user representative groups to devise measures that can help even a little."

Kim also expressed willingness to consider blanket compensation. In response to Rep. Heo Eun-ah of the People Power Party’s question about whether they would consider blanket support payments to small business owners who had difficulty proving damages, as was done in the 2018 KT Ahyeon telecom office fire, he replied, "We will also consider blanket support payments."

According to Kim, the number of damage cases from the ‘KakaoTalk outage’ currently reaches 45,000. Kakao plans to accept claims until early to mid-November and then announce specific compensation measures.

SK C&C also promised swift compensation at the group level. Park Seong-ha, CEO of SK C&C, said, "Not only SK C&C but also SK Group will discuss compensation. Compensation will be made even before the cause of the accident is identified."

Kim Beom-su, Head of Kakao Future Initiative Center, attended the comprehensive audit of the Ministry of Science and ICT and related audit target organizations held at the National Assembly on the 24th, and appeared to be thirsty during the audit and drank water. Photo by Yoon Dong-joo doso7@

Kim Beom-su Denies Management Return Rumors

Kim recently dismissed rumors about his return to management. When asked by Rep. Heo whether he planned to return to management, he replied, "I have no such intention."

He said, "Professional managers will demonstrate much greater capabilities than I would in specialized areas. Kakao has effectively operated without me for quite some time."

He added, "As the founder, I am taking this incident very seriously and will do everything I can personally."

Regarding whether he has urged management to improve performance or raise stock prices, Kim said, "Since stepping down as chairman of the board, I have not attended executive meetings. That role is handled by CEO Hong Eun-taek."

Kakao’s Insufficient Infrastructure Investment and Server Redundancy Under Fire

Kakao’s inadequate infrastructure investment and server redundancy work also came under criticism. Rep. Park Chan-dae of the Democratic Party pointed out, "Kakao claimed to have completed full network redundancy of all servers to prepare for single server failures, but the delay in service recovery this time was due to the lack of redundancy work."

Previously, Kakao stated that while network redundancy was completed for customer data, preventing data loss, the tools used by developers were not redundant, which prolonged the service outage.

In response, Kim said, "There were shortcomings. We prepared for single server failures and traffic overloads, but not for a situation like this." He added, "We are building our own data center at a ‘Hot Site’ level."

In response to Rep. Heo’s criticism that "Kakao’s facility investment is only 3% of total sales, and the cost related to the Pangyo data center is about 20 billion KRW," Kim explained, "The cost for data centers alone is 20 billion KRW, and we have data centers not only in Pangyo but in four locations," promising, "We will prioritize infrastructure investment."

Kim Beom-su, head of Kakao Future Initiative Center, attended the comprehensive audit of the Ministry of Science and ICT and related audited organizations held at the National Assembly on the 24th. Before the audit began, he received materials from Hong Eun-taek, CEO of Kakao. Photo by Yoon Dong-ju doso7@

Responsibility for Outage Sparks Tensions Between Data Center Operator and Tenants

Tensions arose between the data center operator and tenant companies over the initial response to the outage, especially regarding the timing of power shutdowns, with conflicting statements from the three companies.

When Rep. Park Wan-joo of the Democratic Party asked Park whether Naver was notified about the power supply shutdown after the fire, he said, "I understand it was notified by phone."

However, Naver CEO Choi Soo-yeon, who appeared as a witness that day, said, "I was informed that there was no prior notice regarding the power shutdown."

Kakao CEO Hong Eun-taek said, "Since about 16,000 servers went down immediately after the fire, I believe whether or not we were notified about the power shutdown timing is not the essential issue."

There was also subtle tension over the cause of the outage. Park said, "Since the fire started in the battery room, we consider it a battery issue," adding, "The investigation authorities took all battery-related equipment, so we are not fully aware of the exact details."

Regarding criticism that the risk was increased due to insufficient UPS (Uninterruptible Power Supply) redundancy, Park said, "We were not previously aware of this issue. However, we did implement redundant power wiring. I understand that multiple UPS units are used."

In this regard, Hong said, "When we first moved in, we saw that the main and backup power units were redundant. During the process of expanding facilities, the UPS and batteries ended up in the same space," emphasizing SK C&C’s responsibility for the accident.

Lee Hae-jin, Naver's Chief Global Investment Officer, is attending the comprehensive audit of the Ministry of Science and ICT and related audited organizations held at the National Assembly on the 24th. Photo by Yoon Dong-joo doso7@

Platform Management Legislation: "Cooperation Possible If Information Protection and Reverse Discrimination Are Addressed"

The three companies showed a somewhat progressive attitude toward the government and National Assembly’s legislative push to include digital services in the government’s disaster response system for management purposes.

When Rep. Jo Seung-rae of the Democratic Party asked, "Do Kakao and Naver still oppose the 2020 amendment to the Framework Act on Broadcasting and Communications Development as they did before the data center fire incident?" Lee GIO replied, "I am cautious about answering as I have not studied the specific bill or have information, but cooperation is possible if user information protection and elimination of discrimination against overseas companies are prioritized."

The main content of the amendment was to require the Ministry of Science and ICT to include data center operators and value-added communication service providers’ broadcasting and communication services in the basic disaster management plan for broadcasting and communications. Although it passed the full committee of the Science and ICT Committee in 2020, it was blocked due to strong opposition from related industries and lawmakers citing double regulation of value-added communication service providers.

Kim also said, "The Kakao outage incident has been a painful reminder of how much it affects many aspects of daily life and many people. I hope this incident will serve as a turning point for the evolution of the overall direction of the Korean internet, not just Kakao."

Park Seong-ha, CEO of SK C&C, briefly responded, "We will fulfill our responsibilities as a data business operator."

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