South Korea National Assembly member and Chair of the Committee for Science, Technology, Broadcasting and Communication, Young-Chan Yoon of the Democratic Party of South Korea and more than a dozen lawmakers from leading parties proposed an amendment to the telecom framework on September 8. A series of hearings have bill held around the bill which mandates no fees but requires negotiation for network use and transparency of information. The lawmakers seek fair, reasonable, transparent, and predictable conditions for network traffic exchange.
Specifically the bill attempts to resolve concerns that foreign content providers are favored and that they would delay and refuse to deliver content. It seeks to establish a reliable source of information for use of South Korea networks so that there can be transparency for contracts. The bill would apply to all South Korea broadband providers and only large content/application providers (1 million users and/or generating 1 percent of total network traffic). It would prohibit both broadband and content providers from engaging in unfair, discriminatory conditions or restrictions in these contracts; the unfair delay or refusal to conclude contracts; the refusal to pay for fair use of the network; and the failure to explain or the false explanation of service charges, terms, conditions in contract negotiation. Violators would be subject to penalty and corrective action, and broadband providers would be penalized the equivalent $10k for failing to submit requested materials to authorities, or the submission of false materials.
Even as the traffic of global content providers rapidly increases, only a very few content providers with strong market dominance are free-riding on the network, observed Ahn Jung-sang, senior advisor of the Democratic Party. “We are trying to clarify the legal basis for creating a win-win environment between telecommunications companies and content providers where content providers share the appropriate costs” he said.
Back and forth with Google
Google Korea reported its 2021 sales grew almost a third over the prior year to292.3 billion won with 88 percent operating profit. The single largest source of traffic in South Korea, Google opposes the bill. It launched a series of Google ads against it and enjoined South Korean YouTubers to join. Asia-Pacific Vice President for YouTube Gautam Anand warned that the bill would “penalize the companies that provide the content, and the creators who share a living with them.” Some 265,000 YouTubers signed the petition.
Google’s lobbying practices came under question in one hearing which revealed that South Korea’s leading internet advocacy non-profit OpenNet, which was founded with Google as the sole sponsor, received some $10 million to espouse favorable policy. Lawmakers questioned the relationship for what appeared to be lobbying efforts outside the organization’s remit and an official financial disclosure from the organization that noted a far lower figure than the actual gift from Google.
Netflix in the mix
Concerns about content hold up and abuse may have been triggered by reports of Netflix secretly degrading its content and the ongoing Netflix-initiated litigation in which it declared that it has no obligation to negotiate or pay for the use of another’s network when it sends data. The court rejected this argument, and Netflix appealed. This follows a failed attempt at regulatory mediation between Netflix and the local broadband provider which sought compensation after experiencing a near overnight 26-fold increase in traffic from Netflix, necessitating a $40 million investment in equipment to manage the traffic.
Indeed certain applications like streaming video entertainment can create unique challenges to the network. These applications take disproportionate share of network bandwidth. For example Netflix is calibrated to demand high-definition resolution. Its adaptive bitrate streaming generally adjusts up the video quality to improve resolution. This means that a user’s Netflix stream can expand to fill available bandwidth, and there is little to nothing the end user or broadband provider can do to limit this. While the technology improves the viewing experience for the Netflix user, it can reduce the network capacity for others who need the network for work, school, or health and safety.
Separately leading South Korea internet policy analyst and lawyer Dr. Dae Keun Cho published the book “Nothing Is Free: An In-depth report to understand network usage disputes with Google and Netflix.”
Creating transparency with traffic reports
As part of the Network Stabilization Act of 2020, the Ministry of Science and Technology (MIST) must issue an annual report about the largest platforms and their relative percentages of traffic. The most recent report was issued in February 2021 which notes the following:
The legislation observes that the quality of content delivery is a shared responsibility between content and broadband providers. This obliges the largest parties to ensure the stability of their services, notably through the adequate provision of servers and other network equipment.
Some observers say the Korean system has led to less efficient traffic flows, higher prices, and lower quality, though there appears to be no empirical or systematic evidence to support this. South Korea still enjoys the highest rate of next generation deployment and adoption of any country for fiber to the home (FTTH) and 5G, according to the OECD and the International Telecommunications Union. Korean content companies have paid usage fees for some years, and this has not slowed the growth of Korean content, now considered a global force.
The MIST report does not provide the total traffic level in terabytes (TB) but a separate data set of South Korean mobile broadband networks suggests that traffic has increased since the 2020 law was passed. December 2021 mobile broadband traffic was 842,722TB over the prior year’s 711,937 TB, an 18 percent increase. The monthly mobile network traffic of August 2022 was 976,414 TB, a 24 percent increase over December 2020. Notably the types of applications may differ on network and platform, however given South Korea’s near ubiquity of FTTH and 5G, users likely consume all services on both.
Twitch: Where there is a bill, there’s a way
Amidst the hearing, video game streaming app Twitch announced technical partnerships and adjustments to reduce its South Korean data usage and maintain image quality with the shift from the default of 1080p to 720p on channels where transcoding is provided. While some decried this development, it can also be recognized as a prudent, community-aware, and climate-enhancing innovation. Twitch engineers proved so creative and resourceful that they could configure their high-resolution service to work with fewer pixels and less data.
Indeed policymakers are increasingly concerned about broadband network energy requirements and welcome proactive efforts to cut energy consumption. In any event, Twitch was acting like a responsible Korean community member whereas in other countries, the de facto response is to demand greater network capacity, a charge that gets passed to all end users, whether they want to Twitch or not.
South Korea lawmakers observe that as broadband is essential for society, so is broadband cost recovery. To their credit, they seek market solutions in which the relevant parties determine the terms of exchange, not mandated price control which favor one party over another. Fortunately there are incentives for the parties to cooperate, and both sides want consumers to benefit. Market forces, if allowed, ensure multiple fair and efficient prices for exchange. South Korea is on the right track to ensure that all parties can negotiate in good faith and that the country maintains its global leadership in broadband.