Network operators, including telecommunications companies, provide benefits worth an estimated 506 billion won annually to Netflix users in South Korea. (Image courtesy of Kobiz Media)
SEOUL, Apr. 22 (Korea Bizwire) – A new study suggests that network operators, including telecommunications companies, provide benefits worth an estimated 506 billion won annually to Netflix users in South Korea.
The research paper titled “An Empirical Study on the Benefits Provided by Internet Service Providers (ISPs) to Over-the-Top (OTT) Service Users,” authored by Professor Byun Sang-Kyu of Hoseo University and published in the journal “Industrial Economics Research” on April 20, proposed a model for calculating the value exchanged between network operators that provide high-speed internet services and content providers (CPs).
The model was designed based on user benefits, considering the availability of analytical data.
Byun presented a hypothetical scenario where all network operators charge Netflix for data transmission, resulting in additional costs for users. Through an online survey, respondents were asked about their willingness to pay, ranging from 2,000 to 8,000 won per month, with valid responses received from 350 individuals.
The survey results indicated that the average willingness to pay was 3,667 won per person.
Citing a market research firm’s estimate that Netflix had 11.5 million monthly active users in South Korea as of April 2022, Byun multiplied this figure by the average willingness to pay of 3,667 won and extrapolated it to an annual figure, arriving at the 506 billion won figure.
“This suggests that domestic network operators provide this amount of benefits to Netflix subscribers annually by transmitting content to them,” Byun explained.
While multiple CPs pay network usage fees to network operators, sharing the costs, the amount has been determined through negotiations between the parties, lacking objective criteria for determining a fair price.
There have been concerns about discrimination against domestic CPs, as global players often pay lower network usage fees or none at all, despite generating significant traffic.
This issue has led to disputes between companies, with the lawsuit between SK Broadband and Netflix being a notable example. The two parties were unable to reach a resolution for over three years before finally establishing a strategic partnership to end the dispute.
Byun stated, “There are doubts about whether network usage fees are being fairly determined in a market with power imbalances, and there have already been concerns raised about equity between domestic and global CPs. This prompted me to propose this model.”
He added, “This model can provide foundational data necessary for rational negotiations, overcoming differences in bargaining power, and it can be applied to other CPs beyond Netflix.”
Kevin Lee (kevinlee@koreabizwire.com)
