Netflix, SK Broadband end three-year legal skirmish over network costs

Industry

Published: 18 Sep. 2023, 16:43 Updated: 23 Sep. 2023, 03:07

Netflix, SK Broadband end three-year legal skirmish over network costs

The Netflix logo is seen on top of its office building in Hollywood, California. [AFP/YONHAP]

Netflix and SK Broadband have dropped the charges against each other, ending a high-profile three-year legal battle over who should pay for the ever-increasing cost of network maintenance.

The firms said they have dropped the suits filed against each other on Monday morning, concluding a battle which has been ongoing since April 2020.

SK Broadband, the broadband subsidiary of network provider SK Telecom, demanded that Netflix take responsibility for the surging internet traffic caused by its video content and pay up. However, Netflix has been arguing that maintenance is the duty of the internet service provider (ISP), not the content provider (CP), such as Netflix, YouTube or other streaming services.

The two parties' settlement came in the form of a partnership that they both emphasized was "for the good of the customers."

From as early as 2024, SK Telecom and SK Broadband will roll out a variety of subscription models which include Netflix membership, and telecom users will also be able to watch Netflix via IPTV. New subscription packages akin to Netflix's ad-supported membership will also be launched.

The three companies will also work together to develop AI technologies to offer tailored content based on data from SK Telecom and SK Broadband. In the future, telecom users may receive recommendations or customized Netflix content through a chatbot.

SK Telecom's Choi Hwan-seok, vice president and head of the corporate strategy office, said the partnership "comes as part of our efforts to provide customers with an enhanced media service environment.”

A Netflix spokesperson elaborated that the partnership is a win-win deal for both sides, as the deal also encloses that Netflix will freely provide its in-house developed technology to SK Telecom and SK Broadband to lessen the network traffic burden.

The technology is dubbed “Open Connect Appliances” (OCA), a type of content storage space set up within an ISP’s network so that Netflix content can be delivered faster to local users. Once OCA is deployed, more than 95 percent of the traffic will be reduced, according to a Netflix spokesperson.

"The partnership with SK Telecom, a leader in Korea's telecommunication and innovative technology industries, holds special significance as it enables Netflix to enhance entertainment experiences for a broader Korean audience," Tony Zameczkowski, Netflix's vice president of Asia-Pacific partnerships, said in a statement.

"Netflix is committed to creating and delivering the best stories to members in Korea and audiences worldwide, and we have high expectations for the journey ahead as partners serving our customers with SK Telecom and SK Broadband."

The lawsuit between the two parties sparked global interest over the tricky question of which side is responsible for the network maintenance. Globally, the European Union has also been debating whether to charge CPs for network fees but Korea marks the first case to go the court as well as propose bills regarding the matter.

Eight related bills were proposed at the National Assembly over the years to give ISPs the right to restrict streaming services if they refuse to pay network usage fees. However, the bills remain yet to be approved and the legislation process remains sluggish as lawmakers failed to reach a conclusion regarding the matter.

Still, the two companies refused to disclose whether any payment would be made for the actual sake of network usage fees. SK Broadband had been demanding that Netflix pay the fees regardless of whether the SK subsidiary uses Netflix's cache server or not, while Netflix maintained that its duties end when it helps pay for the OCA installment.

"[I] welcome that the two parties amicably reached a settlement," said Rep. Cho Seung-rae of Democratic Party and secretary of the Science, ICT, Broadcasting and Communications Committee. "However, there still needs to be a revision of policies to fundamentally resolve the network fee issue."

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]