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Netflix issues tepid response to Korean network usage payment demands

US video streaming giant Netflix has published a blog in response to SK Broadband suing it for the costs of increased network traffic resulting from Squid Game.

For those with better things to do, Korean TV show Squid Game has taken Netflix by storm and has been its most popular item in many countries for some weeks. Due to the nature of streaming video, that means Squid Game alone is the cause of significant strain on the communications networks in many countries including, of course, South Korea.

Earlier this year a Koran court ruled Netflix should pay network usage fees to operators and it seems the spike associated with Squid Game has given one of them – SK Broadband – the pretext it needs to test this ruling out. At the start of this month SK Broadband sued Netflix, seeking some sort of extra compensation for carrying its content to subscribers.

Netflix went quiet for a while but finally bloke its silence yesterday with a blog written by its VP of Global Public Policy Dean Garfield. He started strongly, stressing “The next ‘Squid Game’ depends on a free and open internet… But, unfortunately we have come to a crossroads — Red Light, Green Light — where Internet gatekeepers could get to decide if the next great Korean story can be watched, and loved, by the world. Why would anyone want that?”

The rest of it is pretty limp, however, consisting mainly of a wishy-washy effort to PR Korea as a country by going on about how much great content it produces. He goes on to infer that much of this has been made possible by partnering with Netflix and insinuating that may all go out of the window if Netflix is forced to pay for network usage.

“Unfortunately, while more than a thousand ISPs around the world recognize these benefits, one of the largest internet companies in Korea is turning a blind eye,” writes Garfield. “Why? Because by making both consumers, and content providers pay, they can get paid twice.”

That final point is a valid one and points to the underlying issue. Until now the communications paradigm involved subscribers paying CSPs to access voice and data. There was no mention of the source of that data and, if a CSP offered uncapped packages the assumption was that it priced them such that it could still make a profit. Many of them even have ‘fair use’ policies to ensure that.

SK Broadband seems to be indicating that model is now broken and that it’s no longer turning a profit thanks to the extra cost of carrying super-popular content. That poses many questions, the most important of which concerns where it can turn to get extra revenue. Rather than charge its customers more it’s trying to extract the money from the sources of the content they consumer, an endeavour Korean courts seem sympathetic to. How this plays out could well have global implications for both the telecoms and content industries.

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2 comments

  1. Avatar Andre 27/10/2021 @ 3:06 pm

    The demand from SK Broadband is ridiculous. This would be like a power company demanding payment from Tesla because their cars use so much power to recharge their batteries. At the end of the day a utility has to sell their product at a price where they can cover costs and make some profit. If their business model is flawed they cannot blame content providers.

  2. Avatar Mike 27/10/2021 @ 7:28 pm

    You got through that whole article without mentioning net neutrality once. Interesting that the Reuters article says SKB claims Netflix and Google are the only content providers not already paying network usage fees. Perhaps there’s a missing angle here. I’m not in necessarily in favour of content providers having to pay network usage fees, but if they exist then surely they should be applied fairly for all content. Ultimately it is end consumers who should pay for delivery of their content, either through network service plans or content subscriptions. SKB seems to be implying neither is happening, but presumably it already knew Netflix wasn’t paying when it put together its service plans, so that claim looks hollow.

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