South Korean Internet Service Provider Sues Netflix

SK Broadband, a major South Korean telecommunications company, is suing Netflix over high broadband network usage costs incurred from a surge in popularity in South Korean original shows such as “Squid Game” (Wikimedia Commons).

SK Broadband, one of South Korea’s largest telecommunications companies, sued Netflix on September 30 over an increase in network traffic and service maintenance costs brought on by an unprecedented rise in viewers of the streaming company’s content. South Korean-produced drama series including “Squid Game” and “DP” are primarily responsible for the recent surge in viewership and network usage in the country. SK Broadband claims that since May 2018, the amount of Netflix’s data traffic it handles has soared from 50 gigabits per second to 1,200 gigabits per second, a 24-fold increase. 

Netflix claimed in a statement on September 29 during an online “Netflix Partner Day” conference that its investments in South Korea over the past five years, totaling 770 billion won ($650 million) have resulted in an economic effect of more than 5.6 trillion won ($4.7 billion). Kang Dong-han, Netflix’s vice president for content in South Korea, further explains that “the investment has generated 5.6 trillion won in cumulative economic effect and created 16,000 jobs in various industries related to entertainment and content creation... other industries like fashion and food have received a ripple effect worth an additional 2.7 trillion won.”

Despite this, Netflix is one of two streaming services, alongside its competitor YouTube, to not pay any network usage fees in South Korea, unlike other companies that provide streaming services, such as Amazon, Apple, or Facebook. This concern was initially raised by SK Broadband in November 2019 by way of complaint, against which Netflix filed a lawsuit in early 2020 in the Seoul Central District Court claiming that the company’s duties end with “creating content and leaving it accessible” and the expenses that SK Broadband was incurring were part of its contractual obligations to Internet users to deliver broadband services free of charge.

However, the court ruled against Netflix, on June 18, asserting that “according to the principle of freedom of contract, whether to conclude a contract and what price to pay is a matter to be decided through the negotiations of the concerned parties.” More directly, the court ruled, “It is also reasonable to say that Netflix has the obligation of paying the price for the services to SK Broadband,” helping pave the way for the lawsuit filed by SK Broadband on September 30. The court already estimates that Netflix owes 27.2 billion won ($22.9 million) in 2020 network usage fees alone.

Although Netflix is already planning to appeal the ruling, with proceedings set for December 2021, industry watchers interpret it as a significant threat to South Korea’s adherence to net neutrality, the principle that service providers should not have the ability to discriminate against different types of data. In the United States, Netflix has been paying a fee to broadband provider Comcast Corp for over seven years for faster streaming speeds.