Netflix Files Civil Lawsuit Against SK Broadband Over Network Fees

Video streaming service provider Netflix filed a civil lawsuit against South Korean internet network operator SK Broadband.

Netflix Services Korea Ltd., the Korean division of the streaming giant, filed a complaint at the Seoul Central District Court.

Netflix requested the district court to confirm the company’s absence of debt to the Korean internet provider legally. The company said it has no obligation to pay for using SK Broadband’s internet network, maintenance, expansion, and upgrade costs.

Last year, SK Broadband asked Netflix to share costs for the fair use of network data traffic. However, Netflix did not respond to the negotiations. SK Broadband then filed for arbitration with the Korea Communications Commission (KCC). Netflix skipped arbitration, and the pre-litigation only submitting several statements to the committee.

Netflix chose to file a civil action after the consensus last November through KCC failed.

With over-the-top (OTT) services getting increasingly popular, internet service providers (ISP) dealt with heavy data traffic by asking major content providers to share operations costs. The coronavirus incident revealed the extent of how difficult to handle the additional traffic load surge without cost-sharing.

Netflix emphasized that the company suggested using an installation of an Open Connect Appliance (OCA) to help SK Broadband to ease data traffic. OCAs could efficiently manage traffic by acting as cache servers for ISPs.

However, SK Broadband said that the use of cache servers is a separate issue. Meanwhile, several local ISPs, such as D’Live Co. and LG Uplus, accepted Netflix’s offer to use OCAs.

Netflix said that if SK Broadband collected network usage fees, the company would suffer from double charge. The video streaming service provider argues that the South Korean ISP already receives fees from its users.

Possible Global Precedent

SK Broadband said that the company should jointly prepare necessary measures to solve the increasing traffic of Netflix rapidly.

The situation attracted the attention of other internet providers. They believe the result of the lawsuit could act as a precedent for contracts between telecommunication companies and global content providers. The case would likely become an essential reference for similar global disputes.

Global internet-based firms, such as YouTube, do not need to pay network usage fees to local ISPs, unlike domestic companies, such as Kakao Corp. and Naver Corp.

SK Telecom Co. said that it would decide its next moves after studying Netflix’s suit.

Last year, a local court ruled in favor of Facebook after the company faced a lawsuit involving heavy data traffic. The court said that ISPs are responsible for matters regarding data traffic. The social media giant currently pays fees for network usage to domestic ISPs.

SK Broadband expects KCC’s arbitration results next month.