New Korean legislation undermines Internet norms and raises broad trade concerns

On September 8, the MP of the Korean National Assembly, Rep. Young-chan introduced an amendment to Korea’s telecom business law dubbed the Netflix Free Ride Prevention Act. This invoice, an amalgamation of six similar bills introduced last year, suffers from the same shortcomings as its predecessors and does nothing to address the international concerns that have been raised about these bills. If enacted, this law would (1) directly undermine established global norms that allow internet traffic to be exchanged, and (2) likely violate Korea’s trade obligations by targeting US content providers and requiring mandatory contracts and fees for any company that does arbitrary Data transfers suffers swells. This improper charging and explicit discrimination against a subset of suppliers is at odds with a number of trade commitments Korea has made, most notably under the Korea-United States Free Trade Agreement (KORUS).

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Further analysis of the trade and policy implications of these bills (including this latest version) is available here.

The legislation seeks to address an alleged problem unique to the Korean market. Korea’s three dominant Internet Service Providers (ISPs) collectively control access over 90% of Korean internet subscribers have long complained about an issue they describe as “reverse discrimination,” their alleged inability to charge the same excessive fees they have levied on similar Korean online service providers (e.g.) on foreign companies, offering content and applications to Korean consumers. Because foreign companies have the ability to exchange traffic outside of Korea and offer popular video, gaming and other applications demanded by Korean consumers, foreign companies have been able to resist unreasonable demands from ISPs.

There is a more positive approach here that the Korean government should support and that would not penalize foreign providers: Korea could prohibit ISPs from charging such fees from content and application providers at home or abroad. This would both help domestic content providers and have the added benefit of preventing ISPs from restricting foreign and domestic competitors to the ISPs’ own video and gaming offerings.

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However, with their market power and the help of the legislature, ISPs are aiming for the opposite: a regulatory mandate to impose unreasonable fees on all large companies that rely on Korea’s telecom networks to reach internet users. Not only does this upend long-standing global norms for sharing internet traffic — a process that’s based everywhere else in the world on voluntary agreements that typically don’t involve direct payments between content providers and ISPs — but also implies the breadth of those detailed Trade commitments further in it analysis.

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These duties include KORUS Article 14.2 (Access and Use)which obliges Korea to ensure that all US service providers are offered access to and use of public telecommunications networks or services on reasonable and non-discriminatory terms.

In addition, the legislation could conflict KORUS Article 14.5 (Protection of Competition)a provision obliging Korea to “take or maintain appropriate measures to prevent suppliers from engaging in or continuing in anti-competitive practices.”

Finally, the legislation breaks sharply with the principles of the open Internet articulated therein KORUS Article 15.7 and the recent Future of the Internet Declaration, through which Korea committed to uphold a free and open Internet.

Further development of this legislation will undermine Korea’s leadership in digital politics and adversely affect its participation in bilateral and plurilateral initiatives to promote the benefits of digital commerce.

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