Korean court sides against Netflix, opening door for streaming bandwidth fees from ISPs

A court case in South Korea has ended in a loss for Netflix and a victory for ISPs in the country, which may now be empowered to levy bandwidth usage fees on traffic-gobbling streaming platforms. The decision is likely to be challenged, as it essentially saddles the new wave of streaming services with ISP-negotiated rents just as the market is exploding.

As reported by the Korean Economic Daily, the court’s decision is less prescriptive than an official “figure it out amongst yourselves.” But it fails to protect streamers from a class of bandwidth fees they have fought for years.

Netflix filed suit in 2020 alleging that the ISP SK Broadband had no right to demand payment for the bandwidth the platform uses, similar to a legal conflict that flared up around 2014.

Back then, ISPs complained that streaming services consumed an inordinate amount of bandwidth and the companies should pay something to offset the cost of providing it. Streaming sites countered that they were simply fulfilling the requests of users who had already paid for the bandwidth in question, and that ISPs were trying to “double dip” and charge for the same bits twice.

The technical reality is a bit more complicated than that, though, and Netflix ended up paying what are called interconnect fees to facilitate the infrastructure necessary for the quick, consistent delivery of huge amounts of data. Netflix has said that this is basically a “fast lane” tax, but from the lack of chatter since the matter was settled back then, they seem to have chalked it up as the cost of doing business.

In a statement offered by its Korean subsidiary (reported in the same Korean Economic Daily story), Netflix said it “has not been paying network usage fees, or something equivalent to the fees claimed by SK Broadband, to any one of the ISPs in the world.” It’s not clear whether it classifies interconnect and caching as “equivalent” or whether these arrangements have changed; I’ve asked the company for clarification and will add it to the story if they respond.

In Korea, however, the issue is not so settled, and with huge growth there, the streaming sites would probably prefer not to have to pay fees proportionate to their success — hence the lawsuit. But the court’s recent decision put the ball back in their court, saying that “it needs to be determined by negotiations between the parties involved whether or not some fees will be paid.”

It’s welcome news for the broadband providers, since any fee they negotiate will be higher than zero, which is what they were working with before. What sort of money they can possibly demand is a complete mystery, since the space is changing so quickly. And the court case, since it’s so unfavorable to some of the biggest companies in the world (which stand to make a mint in the voracious South Korean market), will almost certainly be taken up again. In the meantime consumers in the country may well see streaming prices go up — a tried and true method of whipping up a froth of consumer outrage.

The issue is far from settled in the U.S. and elsewhere, as with a new Democrat-led FCC there may also be a new push for strong net neutrality rules. Netflix had pushed for this sort of fee to be outlawed during the original net neutrality push, but ultimately the idea was abandoned (and would later be mooted anyway when the rules were rescinded). The argument over what ISPs can and can’t charge for, and who should pay, is an ongoing and global one.