Netflix ordered to pay for network usage in Korea

A South Korean court has ruled against Netflix in a case over its payment – or lack thereof – of network usage fees.

The decision essentially means that the video streaming specialist will now have to pay the network operators to carry its traffic, pending the result of what is being seen as an inevitable appeal.

The story comes from the Korea Herald, which explains that late last week a court in Seoul ruled that Netflix should pay for traffic over SK Broadband’s network.

That’s the short version. The full story dates back to 2019 when SK Broadband – a broadband and TV provider, and a unit of incumbent telco SKT – filed a complaint against Netflix with regulator the Korea Communications Commission, the paper said. Shortly afterwards, Netflix launched a legal challenge, asking the courts to determine whether or not it is obliged to pay for traffic on SK Broadband’s network.

It appears that Netflix was leaning heavily on the principle of net neutrality – in which all network traffic is treated equally and not separated out and charged for… just in case anyone has forgotten, given that we don’t discuss it as much as we once did – and objected to the idea of SK Broadband presenting it with a bill. It’s not wholly clear whether that bill for network usage came out of nowhere, or whether there was an established relationship between the parties that changed over time, possibly as a result of Netflix’s growing popularity. The paper claimed that Netflix accounted for 4.8% of all network traffic in South Korea in the fourth quarter of last year.

The court came down on the side of the free market, essentially ruling that it is up to the companies in question to agree any commercial agreements between them. “According to the principle of freedom of contract, whether to conclude a contract and what price to pay is a matter to be decided through the negotiations of the concerned parties,” the paper quoted it as saying.

That’s a pretty clear stance against net neutrality.

The court also acknowledged that Netflix is receiving network services at a cost to SK Broadband and declared it “reasonable” that it should have to pay for those services.

The paper quoted  SKT chief executive Park Jung-ho as saying that “the time has come to meet Netflix.” He added: “I think the ruling can make our meeting much better. Cooperation in Asia will be important for Netflix.”

‘Cooperation’ may or may not involve money changing hands. The paper notes that Netflix has agreed marketing deals with the country’s other two major mobile operators, KT and LGU+, which could be beneficial for it when it comes to negotiating traffic fees.

But this ruling has broader implications. Facebook and Google account for huge amounts of traffic in South Korea, while the likes of Disney and Amazon are looking to establish themselves in the market. Many companies’ strategies will be impacted by the outcome of the appeal that everyone expects Netflix to lodge.