When Carriers Bring Up 'Fairness'... Netflix Says "Carriers Should Also Pay Content Production Costs"

MWC2023 Network Usage Fee Debate
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[Barcelona=Asia Economy Reporter Oh Su-yeon] At Mobile World Congress (MWC) 2023, a heated debate continued between telecom companies and big tech over network usage fees. While telecom companies raised the "fairness" card to demand a share of network investment costs, Greg Peters, co-CEO of Netflix, countered by saying, "Netflix could rather demand that telecom companies share the costs of content production."

On the 28th (local time), Peters delivered a keynote speech titled "The Future of Entertainment" at MWC 2023 held in Barcelona, Spain, revealing this stance.

Greg Peters, CEO of Netflix, is delivering a keynote speech on "The Future of Entertainment" at MWC 2023 held in Barcelona, Spain, on the 28th (local time).
[Photo by Netflix]

Speaking publicly for the first time since his appointment, Peters directly refuted the telecom companies' "fairness" issue, stating that content providers (CPs) have expanded investments to meet growing demand, but telecom companies have not. He pointed out, "Netflix has invested more than $60 billion (about 79 trillion KRW), equivalent to half of its revenue, in content over the past five years," adding, "As content popularity increased, traffic grew by about 30% annually. However, Internet Service Providers (ISPs) have efficiently managed the increasing consumer usage without changes in cost expenditure."

Regarding the claim that content providers should form a fund to partially share telecom network infrastructure investment costs, he said, "This is not a matter of choosing between large telecom companies and entertainment companies." He also stated, "Taxes would produce the opposite effect," adding, "Content investment would decrease, harming the creative community and diminishing the appeal of expensive telecom service plans. Ultimately, consumers would suffer." If CPs were made to bear network investment costs, it would result in double charging consumers and make it difficult for CPs to produce hit works like 'Squid Game.'

He asked, "Considering the old pay-TV model, isn't it possible that Netflix could demand network operators share the costs of content production?" He also emphasized, "Netflix's role is to continuously invest in the quality and diversity of content," urging each party to fulfill their respective roles.

Dean Garfield, Vice President of Policy at Netflix, participated in the ministerial program "Network Investment: Delivering the Digital Revolution" held the same day at MWC. In the panel discussion, he said, "It is important to start by confirming the premise that entertainment companies like Netflix and telecom companies empathize with each other," adding, "ISPs and CPs have a symbiotic relationship, and by continuing partnerships and clearly examining the issues to be jointly resolved, I believe successful outcomes will follow."

At the opening keynote the previous day, the European Union (EU) and European telecom companies raised the issue of "fairness," calling for big tech to share network investment costs. Thierry Breton, European Commissioner for Internal Market, said, "We need to reconsider the business model," and added, "Europe intends to consider a fairly distributed funding model for large-scale investments in negotiations to ensure fair contributions from big tech to telecom networks."

Christel Heydemann, CEO of French telecom company Orange, urged institutionalization so that big tech, which profits from internet usage, can cover necessary infrastructure investments. She stated, "The current situation is unsustainable for telecom companies, and they cannot bear the excessive costs required to meet current traffic demands alone."

Yoo Young-sang, CEO of SKT and SKB, said at a recent briefing, "If we approach how to share roles between content providers (CPs) and telecom companies (ISPs) not by power but by fairness logic, we can find an answer."

At MWC, the Korea Telecommunications Operators Association (KTOA) and the European Telecommunications Network Operators' Association (ETNO) signed a memorandum of understanding to establish a joint front on fair and reasonable network usage cost sharing.

Korea is the first country to start related discussions due to the network usage fee lawsuit between SKB and Netflix. Currently, seven related bills are pending in the National Assembly. However, a quick conclusion seems difficult. The National Assembly's Science, Technology, Information and Broadcasting Committee visited the MWC site that day. Assemblyman Jo Seung-rae of the Democratic Party said, "I met with the EU Commission's telecommunications officer. They are fundamentally considering what kind of structure to create because network investment must be sustainable," adding, "Regulators and CPs also need to consider network promotion aspects. There will be various forms of contribution." However, he clarified, "They did not come to conclude on network usage fees."

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