New Korean Legislation Undermines Internet Standards, Raises Broad Business Concerns - Disruptive Competition Project

New Korean Legislation Undermines Internet Standards, Raises Broad Business Concerns – Disruptive Competition Project

On September 8, Member of the Korean National Assembly, Representative Young-chan introduced an amendment to Korea’s Telecommunications Business Law, dubbed the “Netflix Free Ride Prevention Law.” This invoice, a consolidation of six similar bills introduced over the past year, suffers from the same flaws as its predecessors and does nothing to address the international concerns that have been raised about these bills. If passed, this legislation would (1) directly undermine well-established global standards that allow internet traffic exchange and (2) likely violate Korea’s trade obligations by targeting US content providers and requiring contracts and Mandatory fees for any company respecting the arbitrary transfer of data. thresholds. This unreasonable collection of royalties and this explicit discrimination against a subset of suppliers is inconsistent with a series of trade obligations undertaken by Korea, in particular under the Korea-States Free Trade Agreement States (KORUS).

A more in-depth analysis of the trade and policy implications of these bills (including this latest version) is available here.

The legislation aims to address an alleged problem specific to the Korean market. Korea’s three major Internet Service Providers (ISPs), which together control access to over 90% Korean Internet subscribers have long complained about a problem they call “reverse discrimination”, their alleged inability to charge the same excessive fees that they have managed to charge similar Korean online service providers (e.g. example, Korean search, video, game and communication applications). ) on foreign companies offering content and applications to Korean consumers. Since foreign companies have the ability to exchange traffic outside of Korea and offer popular videos, games and other applications demanded by Korean consumers, foreign companies have so far been in able to fend off unreasonable requests from ISPs.

There is a more assertive approach here that the Korean government should support that would not disadvantage foreign providers: Korea could prohibit ISPs from charging such fees to any content and application provider, domestic or foreign. This would both help domestic content providers and have the added benefit of preventing ISPs from blocking foreign and domestic competitors from accessing ISPs’ own video and game offerings.

With their market power and the help of lawmakers, however, ISPs seek the opposite: a regulatory mandate to impose unreasonable fees on all major companies that depend on Korea’s telecommunications networks to reach internet users. Not only does this upend long-standing global standards governing internet traffic exchange – a process that works everywhere else in the world based on voluntary agreements that generally involve no direct payment between content providers and ISPs – but it also involves the range of commercial obligations detailed later in this analysis.

These obligations include KORUS Article 14.2 (Access and Use)which requires Korea to ensure that all United States service providers are offered access to and use of any public telecommunications network or service on reasonable and non-discriminatory terms.

In addition, the legislation could run counter to Article 14.5 of the KORUS (Competitive Safeguards)a provision that requires Korea to “adopt or maintain appropriate measures for the purpose of preventing suppliers from engaging in or continuing anti-competitive practices”.

Finally, the legislation breaks sharply with the principles of the open Internet set out in CHORUS Article 15.7 and the recent Declaration for the Future of the Internet, in which Korea pledged to maintain a free and open Internet.

Moving forward with this legislation will undermine Korea’s position as a digital policy leader and negatively impact its participation in bilateral and plurilateral initiatives promoting the benefits of digital trade.

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