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South Korean Streaming Fees Will Hurt Innovation: INCOMPAS

Tiles with letters on them that spell the word fees.
(Image credit: Birgit R/EyeEm/Getty Images)

INCOMPAS, whose members include Netflix, Google, and Amazon, said South Korea's proposed mandated network use fees are targeted to U.S. streamers and would create barriers to both consumer choice and content provider market access.

That is according to a new report from INCOMPAS in conjunction with the Information Technology Industry Council (ITI) on the interconnection fees South Korea is considering requiring Netflix and other streamers to pay ISPs there.

Netflix last year sued SK Broadband over exacting such a fee but lost in a Korean court.

Also: INCOMPAS Tells FCC That Interconnections Need Government Minding

Now the South Korean government is considering making such "network use" fees obligatory for larger players, like Netflix.

"The latest legislative proposals would set a dangerous precedent by imposing disruptive and unwarranted taxes on the delivery of online content, which would ultimately raise costs for end users and CPs [content providers], and disincentivize the innovation that has underpinned the growth and socio-economic benefits of the internet-driven economy in Korea and around the globe," the report said.

INCOMPAS said streamers already represent a key part of the online value chain and that such fees would give ISPs "disproportionate and unjustified leverage to extract payments" from content providers. It said the proposed fees ignore the fact that content providers invest heavily on infrastructure -- cables, data centers, caches -- that reduce the traffic "burden" on ISPs.

"End users pay ISPs for an internet connection with the expectation that it will allow them to reach all legal content available on the internet, without discrimination based on whether CPs have paid 'network use fees' or not," the report said. "CPs do not 'push' traffic at ISP customers. Rather, the end users request that content enabled by CPs be delivered to them by their ISP. Similarly, CPs also do not 'use' ISPs' last-mile broadband networks; end users do, and they pay for that network usage. Mandating 'network use fees' would therefore lead to ISPs double charging by assessing CPs for services for which end users have already paid."

The report alleges a mandatory fee would incentivize ISPs to allow traffic congestion or even purposely limit performance.

It would also be a double tax, said the report: "End users pay ISPs for an internet connection with the expectation that it will allow them to reach all legal content available on the internet, without discrimination based on whether CPs have paid 'network use fees' or not. ... Mandating 'network use fees' would therefore lead to ISPs double charging by assessing CPs for services for which end users have already paid." 

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.