Netflix handed loss in South Korea network usage fee court case

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South Korea is a significant international market for Netflix, which has 3.8 million paid subscribers in the country as of the end of 2020. (Netflix)

Netflix just took a loss in a South Korean court battle with SK Broadband over whether the streaming giant owes interconnection fees to internet service providers.

According to the Korea Economic Daily, the Seoul Central District Court on June 25 shut down a Netflix lawsuit that alleged the streaming service doesn’t need to negotiate over network usage fees.

"It needs to be determined by negotiations between the parties involved whether or not some fees will be paid, or whether they enter an agreement in accordance with the principle of freedom of contract," the court ruled.

The decision corresponds with an April 2020 lawsuit filed by Netflix in South Korea against SK Broadband, which had earlier asked the Korea Communications Commission to intervene in a dispute with Netflix over network maintenance costs.

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"Netflix has not been paying network usage fees, or something equivalent to the fees claimed by SK Broadband, to any one of the ISPs (internet service providers) in the world," Netflix said in a statement obtained by KED. "None of the government agencies, nor courts in the world, forced CPs (content providers) to pay network usage fees to ISPs. It is because there is no legal basis for the fees and they are against internet governance principles."

SK Broadband disputed that characterization, claiming that Netflix has paid network usage fees to telecoms in the U.S. and Japan and therefore also needs to pay them in South Korea.

South Korea is a significant international market for Netflix, which has 3.8 million paid subscribers in the country as of the end of 2020. In February, the company said that it plans to spend $500 million in 2021 on content produced in South Korea.

“Over the last two years, we’ve seen the world falling in love with incredible Korean content, made in Korea and watched by the world on Netflix,” said Ted Sarandos, co-CEO and chief content officer at Netflix, during an event to announce his company’s investment plans in the country, according to CNBC. “Our commitment towards Korea is strong. We will continue to invest and collaborate with Korean storytellers across a wealth of genres and formats.”