SK Broadband vs. Netflix: Bandwidth Fee Dispute

SK Broadband Files Counterclaim Against Netflix

SK Broadband, a South Korean internet service provider and a subsidiary of SK Telecom, has initiated a counterclaim against Netflix. This action seeks compensation for bandwidth utilized by the streaming service over the preceding three years.

Court Ruling and Network Usage Fees

This development follows a South Korean court ruling in June that favored SK Broadband. The court’s decision now allows the ISP to impose network usage fees on streaming platforms that generate substantial bandwidth consumption and contribute to increased network traffic.

Netflix responded with a statement, saying they will review the claim. They also expressed a continued desire for open communication and collaborative solutions with SK Broadband to maintain a positive streaming experience for their mutual customers.

Netflix's Appeal and Original Claim

Following the initial court loss in July, Netflix filed an appeal to a higher court. The original case, initiated by Netflix in 2020, argued that SK Broadband lacked the authority to demand fees for bandwidth usage.

Netflix contends that the ISP is attempting to impose a “double billing” scenario. Subscribers already cover broadband costs, and the ISP now seeks to charge the streaming platform separately for the same service.

Financial Implications and Past Negotiations

Local media reports indicate that SK Broadband intends to charge approximately $23 million annually for network usage. Prior to this, in 2019, SK Broadband requested mediation from the Korea Communication Commission, but the parties were unable to reach a mutually acceptable agreement.

Exponential Traffic Increase

SK Broadband asserts that Netflix’s network traffic has grown dramatically. Specifically, traffic increased roughly 24-fold, rising from 50 Gigabits per second in May 2018 to 1,200 Gigabits per second by September 2021.

Netflix's Economic Impact in South Korea

Netflix highlights its economic contributions to South Korea. According to a Deloitte Consulting report, the company’s content production investments have generated a socio-economic impact valued at $4.7 billion. This encompasses various sectors, including publishing and consumer goods.

Furthermore, Netflix claims to have facilitated the creation of 16,000 jobs within the country since its launch in 2016. As of the end of 2020, Netflix Korea had 3.8 million paid subscribers, compared to a global total of 200 million paid memberships.

"Squid Game" Success and Disney Plus Strategy

Netflix also noted the success of the Korean drama “Squid Game,” predicting it will become the platform’s most popular show ever. It marks the first Korean series to reach the No. 1 position on Netflix in the U.S.

Meanwhile, Disney Plus, another major streaming service, is preparing to launch in South Korea in November. To avoid bandwidth usage fees, Disney Plus reportedly plans to utilize third-party content delivery networks (CDNs) rather than relying on ISP networks.