SK Broadband insists Netflix pay up like others

Netflix is a “free rider,” according to SK Broadband as it fires its latest salvo in the ongoing feud between the companies.

It says that the Scotts Valley, California-based streaming service is acting in Korea in a way it has not acted in other countries. The provider has signed contracts for the use of bandwidth with Comcast, AT&T and Verizon in the United States and with Orange in France.

Netflix claims that it has never paid a “network usage fee” in any other country.

The service has been growing rapidly in Korea, with subscription fees more than doubling in a year and user numbers up tenfold in two years.

Netflix filed a case with the Seoul Central Court on April 13, asking it to confirm that it does not have the obligation to compensate SK Broadband for the cost of upgrading and expanding the local company’s network for Netflix users.

SK Broadband argues that Netflix should be willing to share the costs and investments associated with the traffic it has generated.

Netflix claims that the additional fees would amount to a “double charge,” as subscribers using SK Broadband’s internet already pay for the bandwidth, therefore it should be SK Broadband’s responsibility to maintain a good quality connection.

“That argument completely ignores the fact that this is a two-sided market,” SK Broadband said in a statement last week. “Content providers can only reach users and generate profit via the internet network. It’s absurd that it claims to be free of obligation in regard to network usage.”

Netflix has suggested local internet service providers share technology to help reduce overloading. Its Open Connect initiative offers internet service providers free access to the nearest cache server ? which for Korea is located in Japan.

SK Broadband is rejecting this offer, saying it only helps in transfers from Japan but not within Korea. It adds that Netflix has had previous conflicts with other internet service providers and agreed to pay up.

In 2014, Netflix paid Comcast, AT&T, Verizon and Time Warner Cable undisclosed sums to ensure the high-quality streaming of its content to subscribers. The U.S. telecommunications companies had previously refused Netflix’s Open Connect offer and insisted Netflix pay for the costs for delivery to end users.

Netflix Korea has not disclosed details of contracts on grounds of confidentiality but said it has never paid network usage fees proportional to the volume of traffic.

The global company claimed that the internet service provider is creating an inconvenience for its users by refusing its Open Connect offer, which will ensure a more stable streaming environment.

In Korea, LG U+ has taken the deal, with the two now also working together on marketing and sharing content.

SK Broadband has attacked this move as well, saying Netflix in the past has employed the same strategy of partnering with weaker players in order to prevent providers from uniting forces.

The legal battle has broad implications. Disputes on network traffic for global services have been a longtime issue in Korea, as local companies are paying, as required by law, while international companies are not.

“The reverse discrimination on local internet companies is an issue that should be resolved. We need multiple government offices working together on the matter,” Science and ICT Minister Choi Ki-young told local reporters last week when asked about the SK Broadband-Netflix dispute.

BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]