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Entertainment

Netflix to strengthen partnerships with ISPs through network technology

The streaming giant says it will respect network usage law if legislated, but offers no concrete plans on payment issues

By Nov 04, 2021 (Gmt+09:00)

Dean Garfield, vice president of global public policy at Netflix, speaks at a press conference in Seoul on Nov. 4
Dean Garfield, vice president of global public policy at Netflix, speaks at a press conference in Seoul on Nov. 4

Netflix Inc. has confirmed it will focus on partnerships with South Korean internet service providers (ISPs) through its in-house distribution network (CDN), which Netflix insists reduces network traffic dramatically. The global streaming giant’s announcement is seen as a way to avoid directly expressing its opinion on network usage fees, one of the most controversial issues in Korea.
 
Dean Garfield, vice president of global public policy at Netflix, said the company has invested more than 1 trillion won ($845 million) to build and provide Open Connect Appliance (OCA), its own CDN, to store Netflix content as close to its users as possible.

“The CDN has proven to help reduce network traffic by at least 95%, and has helped ISPs globally save more than $1.2 billion last year alone,” Garfield said in a press conference in Seoul on Nov. 4. 
 
Netflix provides the OCA technology to more than 1,000 ISPs around 140 countries for free, and global ISPs saved $1.2 billion through the technology in 2020, he said. “Most internet users in Korea pay for use of the network on a 200 megabyte-per-second basis. When you use OCA for watching Netflix, the network traffic is only 3.2 mb per second even at peak times." He explained the actual traffic generated by Netflix users is only 2% of the average network traffic in Korea. 

Netflix has been under criticism that it has discriminated only against Korean ISPs by refusing internet usage payment. The vice president, however, rebutted this saying Netflix isn’t paying any ISPs in the world for network use. He said the partnerships with global ISPs include supporting marketing costs, set-top box-related costs and other financial transactions for businesses, but not network usage fees.

Asked if Netflix is forcing global ISPs to use OCA, Garfield said the ISPs can opt to use OCA or other CDNs for streaming Netflix content. He added, however, the streaming giant needs to discuss with its business partners to reach agreements on using OCA. 

LEGAL BATTLE WITH SK BROADBAND

The conflict between Netflix and SK Broadband Co., a subsidiary of Korea’s leading wireless carrier SK Telecom Co., has been at the center of fee disputes in Korea as a surge in viewers in the country has increased network traffic over the past several years. 

In September, SK Broadband brought a countersuit against Netflix to claim fees for its network use in Korea. “Netflix is free-riding on our network, which we provide at cost based on huge spending in initial establishment and annual maintenance,” the Korean ISP said at the time, adding that Netflix has refused to negotiate on the network usage payment. Before that, Netflix in June lost a Korean court case in the world’s first ruling on a dispute over whether over-the-top (OTT) service providers should pay ISPs for network use. This followed Netflix’s complaint against SK Broadband in April 2020, rejecting payment for network use in Korea.

While Garfield said in the conference Netflix hopes to discuss the issue with SK Broadband, an official from the Korean ISP said it hasn’t received any official meeting request from Netflix as of November 3.

Korean President Moon Jae-in has said global platforms and content providers should meet their responsibilities, pointing to the network usage payment issue. Garfield said he understands the president's comment and fully respects it, adding that Netflix respects each country’s legislative decisions and laws of internet use.

He added that Netflix will compartmentalize the issues surrounding its business in Korea, separating the result of the lawsuit; subscription fees; and payments for internet use.

“Even if we have to pay for the network use, we won’t increase the subscription fee immediately. However, we’ve been reviewing raising subscription fees as there hasn’t been any increase in the fee since Netflix entered the Korean market in 2015.”

Write to Han-Gyeol Seon at always@hankyung.com

Jihyun Kim edited this article.

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