Dispute between telcos and US tech giants escalating worldwide
The trial for Netflix’s lawsuit with South Korean broadband service provider SK Broadband over fees for using the latter’s network has started in the appeals court.
SK Broadband is demanding that the US streaming service pay fees for using its network while Netflix is refusing to do so.
The pair’s legal dispute in South Korea when SK Broadband had asked South Korea’s media regulation agency, the Korea Communications Commission, to look into the matter in November 2019. Netflix countered by filing a lawsuit against SK Broadband to prove that it has no debt against the company to the Seoul Central District Court in April of the following year.
The district court ruled in favor of SK Broadband and said Netflix must make a restitution payment, but the US company appealed.
The pair’s trial at the Seoul High Court, the appeals court, started in March last year and held eight hearings up to last month.
The battle between telcos and over-the-top (OTT) service providers such as Netflix is a worldwide phenomenon. The district court decision was the first ruling over such disputes.
Telcos not just in South Korea but worldwide had been “brewing” over this issue for over ten years, people working in the telco industry in South Korea tell TheElec.
The issue started when smartphones become mainstream in the 2010s, which caused data usage to explode, they argue, especially for wireless services.
During that decade, telecommunication has evolved from 3G, 4G to now 5G, which also increased the need for spectrum for telcos. This has caused the spending of telcos to increase concomitantly. Spending not only on wireless services increased but also on fixed-line services to handle the massive amount of data.
But this didn’t help telco’s revenue as it is a heavily regulated sector, telcos argue. This is because spectrum is allocated by the government as a backbone infrastructure. Meanwhile, price plans remained fixed.
SK Telecom, South Korea’s largest mobile operator, as of 2022, had an average revenue per user of 30,495 won, a drop of 5,709 won from 2010. At the same time, data traffic has increased 32.7 times from 2012 to 2022; from 29,748TB to 973,515TB. SK Telecom’s CAPEX in 2010 was 1.845 trillion won; this increased to 3.35 trillion won in 2022.
Over the same time period, various OTT companies have risen to become “tech giants”, such as Google, Meta, Amazon and Netflix.
These companies have consistently argued for “net neutrality”, the principle that internet service providers should enable access to all content and applications regardless of the source, and without favoring or blocking particular products or websites, according to the Oxford Languages Dictionary.
Network is a prerequisite for these OTT companies. Contents shifted from texts to multimedia, and in multimedia, the resolution increased from SD, HD to 4K.
OTT companies are not investing in autonomous driving, the so-called Metaverse and cloud. The amount of data is about to explode, even more so than before.
Telcos argue that now is the time to find a balance between data increase and the fees they are allegedly owned for usage.
Governments, which seemed to have favored net neutrality for the past decade, are shifting gears.
The US Federal Communications Commission, for instance, announced an open Internet policy in 2010. At the same time, US OTT companies expanded worldwide. But in 2017, the FCC reversed course and abandoned its net neutrality policy and defined network as a product, not as a public service. Around the same time period, US telcos began investing aggressively in their 5G networks.
A similar sentiment was shared during Mobile World Congress 2023, hosted by GSMA, the worldwide alliance of telcos.
“Without the telcos, without the network, there is no Netflix, there is no Google,” Michael Trabbia, chief technology and innovation officer for France’s Orange, told CNBC. “So we are absolutely vital, we are the entry point to the digital world.”
But US tech giants oppose this plan. Netflix co-CEO said its ISP partners had suggested taxing entertainment companies to “subsidize their network infrastructure” in response to concerns about rising traffic costs. Peters said proposing an entertainment tax “would have an adverse effect, reducing investment in content, hurting the creative community, hurting the attractiveness of higher-priced broadband packages, and ultimately hurting consumers.”
