On September 8, Korean National Assembly member Rep. Young-chan inserted an amendment to the Korean Telecommunications Companies Law, called the “Netflix Free Rides Prevention Law”. East invoice, a consolidation of six similar bills introduced over the past year, suffers from the same flaws as its predecessors and does nothing to address the international concerns that have been raised about those bills. If passed, this legislation would (1) directly undermine well-established global norms that allow the exchange of Internet traffic, and (2) would likely violate Korea’s trade obligations by targeting US content providers and requiring contracts and mandatory fees for any company that meets arbitrary data transfer thresholds. This unreasonable extraction of fees and explicit discrimination against a subset of suppliers is inconsistent with a number of trade obligations that Korea has assumed, in particular under the Free Trade Agreement. between Korea and the United States (KORUS).
A more detailed analysis of the business and political implications of these bills (including this latest version) is available. here.
The legislation seeks to solve an alleged problem unique to the Korean market. Korea’s three dominant Internet Service Providers (ISPs), which together control access to more than 90% of Korean internet subscribers, have long complained about a problem they call “reverse discrimination” – their alleged inability to impose the same excessive fees that they have managed to impose on similar Korean online service providers (e.g. search, video, games and communications) to foreign companies that offer content and applications to Korean consumers. Since foreign companies have the option to exchange traffic outside Korea and offer popular video, gaming and other applications demanded by Korean consumers, foreign companies have so far been able to fend off unreasonable demands from ISPs.
Here is a more affirmative approach that the Korean government should support and that would not hurt foreign providers: Korea could prohibit ISPs from charging such fees to any content and application provider, domestic or foreign. This would help domestic content providers and would have the additional benefit of preventing ISPs from undermining domestic and foreign competitors against ISPs’ own video and gaming offerings.
However, with their market power and the help of lawmakers, the ISPs are seeking the opposite: a regulatory mandate to impose unreasonable fees on all major companies that rely on Korea’s telecom networks to reach Internet users. This not only disrupts longstanding global rules governing Internet traffic exchange, a process that operates in all parts of the world on the basis of voluntary agreements that generally do not involve direct payments between content providers and ISPs, but it also involves the range of detailed business obligations. more on this analysis.
These obligations include KORUS Article 14.2 (Access and Use)which requires Korea to ensure that all US service providers are offered access to and use of any public telecommunications network or service on reasonable and non-discriminatory terms and conditions.
In addition, the legislation could conflict with KORUS Article 14.5 (Competitive Safeguards)a provision requiring Korea to “adopt or maintain appropriate measures for the purpose of preventing suppliers from engaging in or continuing anti-competitive practices”.
Finally, the legislation breaks sharply with the open Internet principles articulated in CHOIR Article 15.7 and the recent Declaration for the Future of the Internet, through which Korea has pledged to uphold a free and open Internet.
Moving forward with this legislation will undermine Korea’s position as a leader in digital policy and negatively impact its participation in bilateral and plurilateral initiatives that promote the benefits of digital trade.