South Korean ISP Somehow Thinks Netflix Owes It Money Because Squid Game Is Popular

Say That Again

from the troll-tolls dept

We’ve noted for a while how the world’s telecom executives have a fairly entrenched entitlement mindset. As in, they often tend to jealously eye streaming and online ad revenues and assume they’re inherently owed a cut of those revenues just because at some point they traveled on their networks. You saw this hubris at play during AT&T’s claims that “big tech” gets a “free ride” on their networks, which insisted that companies like Google should pay them significant, additional troll tolls “just because” (which triggered the entire net neutrality fight in the States).

AT&T pretty solidly established this entitlement mindset domestically, and I’ve watched it slowly exported overseas. Like this week in South Korea, where South Korean broadband provider SK Broadband sued Netflix simply because its new TV show, Squid Game, is popular. Basically, the lawsuit argues, because the show is so popular and is driving a surge in bandwidth consumption among South Koreans watching it, Netflix is somehow obligated to pay the ISP more money:

“South Korean Internet service provider SK Broadband has sued Netflix to pay for costs from increased network traffic and maintenance work because of a surge of viewers to the U.S. firm’s content, an SK spokesperson said on Friday.

The move comes after a Seoul court said Netflix should “reasonably” give something in return to the internet service provider for network usage, and multiple South Korean lawmakers have spoken out against content providers who do not pay for network usage despite generating explosive traffic.

Except that’s not how any of this works. ISPs design their networks for maximum potential peak load. It’s completely irrelevant how popular some content traveling over your network is. Your job as a telecom operator is to design networks that easily flex to handle a surge in capacity, regardless of traffic type. If you’re failing to do that, it’s because you’re not designing your network and investing in capacity properly. It’s not suddenly the content company’s job to pay you more money to fix a problem you created.

Notice how SK Broadband also trots out the “Netflix doesn’t pay for bandwidth” trope, which is a deeply entrenched talking point in telecom lobbyist circles and also… simply isn’t true. Consumers pay ISPs for bandwidth. Streaming companies like Netflix pay ISPs for bandwidth. The idea that Netflix is somehow getting a “free ride” on telecom networks is just not based on any factual or technical reality. That hasn’t mattered to the South Korean courts, which have been leaning toward the telecom point of view in rulings the last few years:

“the Seoul Central District Court ruled against Netflix in June, saying that SK is seen as providing “a service provided at a cost” and it is “reasonable” for Netflix to be “obligated to provide something in return for the service”.

SK estimated the network usage fee Netflix needed to pay was about 27.2 billion won ($22.9 million) in 2020 alone, the court document said.

Netflix has appealed against the ruling, court records showed, with fresh proceedings to start in late December.

The South Korean courts, shockingly, are wrong. South Korean telecoms have convinced some in the South Korean legal system that content companies should pony up additional cash if something is popular “just because,” even if that makes no technical sense from a network design standpoint. It’s the kind of bizarre legal outlook AT&T dreams of here in the U.S., and the “big tech is getting a free ride” concept is the foundation of the argument, despite not actually being true.

In addition to paying for bandwidth, companies like Netflix and Google also spend massive fortunes on their own transit networks, underseas cables, and in some cases (Google Fiber) their own residential ISPs. In Netflix’s case, the company also operates a Content Delivery Network which helps greatly improve streaming efficiency and overall load, the hardware for which is provided to ISPs around the world, for free. Netflix has also been pretty flexible when it comes to designing adjustable tiers of service to help users on bandwidth caps (which, to be clear, are also bullshit cash grabs) avoid additional bandwidth fees.

So when you see a telecom (or one of their captured regulators, consultants, think tankers, or policy wonks) arguing that somebody is getting a free ride and should be throwing more money at them, what they’re really saying is “we’re too cheap to adequately invest in our networks and want you (Netflix, whoever) to give us money for no reason.” That the South Korean courts have bought into this argument (largely because the content companies in question are U.S. based), is unfortunate.

Again, this whole bumbling, bad faith argument was a cornerstone of the origins of net neutrality, a battle that was (in part) about preventing regional telecom giants from exploiting their gatekeeper power to demand obnoxious, arbitrary troll tolls. Pushed by AT&T, some U.S. regulators (most notably and recently the FCC’s Brendan Carr) are still pushing some variation of this dumb argument today. And the folks pushing it are generally hopeful you’re too dumb to realize that it makes absolutely no technical sense.

Filed Under: bandwidth, free ride, internet, net neutrality, network traffic, south korea, squid game, streaming
Companies: netflix, sk broadband