이 기사는 2022년 03월 17일 07시57분 thebell에 표출된 기사입니다

A landmark legal battle between Netflix and South Korean internet service provider SK broadband over network usage fees is entering the next round as the appeal proceedings begin this week.

The Seoul High Court is set to hold the first hearing on the case at 5 p.m. on Wednesday, about seven months after the US streaming giant appealed a lower court’s ruling against it last summer.

The dispute between the two companies began in November 2019 when SK broadband filed a request of arbitration at the Korea Communications Commission after the streaming service refused to pay for using its networks.

Netflix in response sued SK broadband in April 2020, before the government agency came up with an arbitration plan, urging a Seoul court to rule that it is not liable to pay network usage fees. However, the court sided with the internet service provider in June 2021 and the streaming giant filed an appeal against the ruling in the following month.

The appeal proceedings on the case come against the backdrop that mobile network operators around the world are increasingly pressing content platforms to share network costs. The Global System for Mobile Communications Association, also known as GSMA, held a board meeting during the Mobile World Congress 2022 in Barcelona to give the green light to a plan to demand network usage fees from large content providers, although the plan is not binding.

“Network operators have had to make massive investments to upgrade the capacity so far, but this should be changed in the future so that content providers also pay their share of costs,” said Ku Hyeon-mo, South Korean mobile carrier KT Corp’s chief executive and one of the GSMA board members.

There have also been bipartisan efforts by South Korean lawmakers to revise the current law to mandate content providers to share costs for increased network traffic and maintenance. The relevant legislative process could be expedited as the country’s presidential election ended earlier this month.

The legal fight is expected to take years, industry watchers said, because Netflix could take the case to a supreme court if it loses the appeal.

Watershed for network operators

If SK broadband ultimately wins the case, the two companies would hire a third party firm to determine a fair amount of fees Netflix should pay. The internet service provider estimated the network usage fee Netflix needed to pay was about 27.2 billion won ($21.9 million) in 2020 alone, according to court documents.

SK broadband intends to retroactively claim network usage fees over a period starting May 2018 when Netflix began using its dedicated line to deliver high-definition video content to viewers in the country. Some estimate over 20 billion won to be paid for network usage annually for each internet service provider in the country.

That could help alleviate capex spending pressures on South Korean mobile carriers. In 2021, SK broadband’s capex amounted to 822 billion won, equivalent to more than 20% of its revenue in the same period. (Reporting by Jang-jun Lee)