Twitch, the internet broadcasting platform owned by U.S. e-commerce giant Amazon.com, has announced its withdrawal from the South Korean market. (Image courtesy of Yonhap)
SEOUL, Dec. 19 (Korea Bizwire) – In a landmark decision that has reignited a long-standing controversy, Twitch, the internet broadcasting platform owned by U.S. e-commerce giant Amazon.com, has announced its withdrawal from the South Korean market. This move has brought the debate over network usage fees back into the spotlight, highlighting a growing international dispute over internet traffic costs and their allocation.
Network usage fees are at the heart of this controversy. These fees are paid by content providers such as Naver, Google, Netflix, and Twitch to Internet Service Providers (ISPs) like SK Telecom, KT, and LG Uplus in compensation for the traffic incurred while delivering content to end-users. In South Korea, Twitch cited the fees as being ten times higher than in most other countries, leading to its decision to cease operations by February 27 of next year.
This issue has been simmering since 2020, when the COVID-19 pandemic led to an unprecedented surge in online content consumption. According to the South Korean Ministry of Science and ICT, the country’s wireless traffic in September doubled from the same month in 2019, reaching over 1 million terabytes. With video content alone accounting for 54.7 percent of this traffic, the strain on network infrastructure has been immense.
The debate over network usage fees is complex, involving international tech giants, local ISPs, regulatory bodies, and consumers. Companies like Google and Netflix, which contribute significantly to the internet traffic in South Korea, have been accused of avoiding fair payment of these fees. This accusation stems from the disparity between their traffic contributions and the fees paid, especially when compared to domestic companies like Naver and Kakao, which occupy a smaller share of the traffic but consistently pay the fees.
Google and Netflix’s stance on this matter is underpinned by the principle of ‘net neutrality,’ arguing that network usage fees go against the ethos of an open and equal internet. They prefer the term ‘interconnection fees’ and claim that their investments in infrastructure, such as cache servers, indirectly compensate for these costs. However, their arguments are met with skepticism from ISPs and some market analysts who view such claims as attempts to circumvent fair payment for the substantial network load they generate.
The conflict reached a turning point when Netflix settled a long-standing fee dispute with SK Broadband in September last year, ending years of legal wrangling. Despite this resolution, Google and other major content providers continue to resist the payment of direct network usage fees, deepening the divide between global content providers and local ISPs.
The broader implications of this dispute are significant. As the world increasingly relies on digital services, the question of who should bear the cost of the required infrastructure becomes more pressing. This issue is not unique to South Korea; it reflects a global challenge as countries worldwide grapple with the demands of rising internet traffic.
Choi Kyoungjin, President of the Korean AI Law Society, emphasizes the need for a societal discussion on the equitable distribution of these costs. He points out that, ultimately, these expenses could fall on consumers or the state, raising concerns about fair access to digital services.
Consumer impact is already evident. Netflix, following its settlement, introduced additional charges for account sharing, and YouTube hiked its premium service fees in Korea by over 40 percent. These cost increases suggest that the financial burden of network usage fees might eventually be passed on to end-users.
Transparency remains another critical issue. The criteria and pricing for network usage fees are often shrouded in secrecy, governed by non-disclosure agreements between parties. This lack of transparency hinders public understanding and informed debate on the issue.
As of now, the South Korean legislature has several bills related to network usage fees pending. However, progress has been slow, reflecting the complexity and sensitivity of the issue. Industry experts caution that without proactive legislative action, the controversy will likely persist, potentially prompting more companies to follow Twitch’s lead and exit the market.
Kevin Lee (kevinlee@koreabizwire.com)
