By Kim Bo-eun
Netflix Services Korea raked in 414.45 billion won in sales in 2020, up 123.54 percent from the previous year backed by a surge in subscribers. Netflix Korea's subscribers exceeded 3 million as of the end of last year, up from 2 million in October 2019.
Netflix and YouTube operator Google collectively account for more than 70 percent of online traffic generated here.
But these foreign players do not pay the telecommunications firms for using their networks. Local content providers Naver and Kakao, on the other hand, are paying tens of billions of won each year in return for servicing their content using the companies' telecom infrastructure. This has long been a point of dispute here, as local firms are required by law to pay for network usage while global entities are not.
Netflix is currently engaged in a suit with SK Broadband on the matter, with the Seoul Central District Court to deliver a ruling next month. KT and LG Uplus have partnered with Netflix to offer its content via their internet-based TV services, forgoing their call for Netflix to pay up for using their networks. Given Netflix's dominance in the market for over-the-top media services, local telecom firms have little bargaining power.
Netflix's rationale is that its role is to provide quality content as a content provider and that internet service providers are responsible for their networks.
Netflix is contending that SK Broadband should seek to solve the traffic issue through an open connect appliance (OCA). These appliances store encoded video files and serve these files to client devices such as set top boxes, mobile devices and smart TVs.
Netflix has its own OCA system and the nearest server accessible to Korean internet service providers is based in Japan.
SK Broadband in the meantime says the spike in Netflix subscribers is making it difficult for existing networks to offer consistent quality.
The internet service provider has had to upgrade and expand its network for Netflix users, and claims content giant should share the costs that were incurred and investments that were made for this purpose.
SK Broadband also claims the Japan-based OCA server won't help data transfers within Korea, and refers to Netflix having paid telecommunications firms in the U.S. Netflix has paid Comcast, AT&T and Verizon to ensure high-quality streaming of its content, after the internet service providers rejected Netflix's Open Connect proposal and demanded payment.
Network operators need to ensure that small content providers are not excluded from accessing their networks and content providers need to pay for using the infrastructure so that operators are able to maintain and upgrade their networks.
The logic is simple. If an entity reaps substantial profits off of using another entity's infrastructure, the former needs to admit to this and pay up. Especially if the infrastructure provider has spent additional costs to accommodate the former's services.