Netflix vs. SK Broadband trial results due this week to have industry-wide ramifications

The Korea network industry is closely watching this week’s results of the first trial on the dispute between global video streaming giant Netflix and Korea’s major broadband internet access provider SK Broadband due to the industry-wide ramifications.

Netflix Korea, the Korean unit of the U.S.-based video streaming giant, filed a law suit against SK Broadband in April, claiming it is not liable to pay fees for using the network of the Korean internet services provider. The first trial is set for Friday.

SK Broadband, a subsidiary of the country’s leading wireless carrier SK Telecom, accuses Netflix of free-riding on its network and causing traffic overload with its high-definition content. It points out that the California-based streamer pays network fees in the U.S. and France but not in Korea, whereas local platform service providers like Naver and Kakao pay fees.

But Netflix argues it cannot stress SK Broadband’s network system owing to its own content delivery network called Open Connect. It logs on to the server installed in Tokyo and Hong Kong via SK Broadband’s network but doesn’t use the network to transfer data and should not be liable to pay extra fees.

No matter who wins, higher charges will likely be translated onto consumers.

If Netflix wins, internet service providers who cannot receive fees from content providers are likely to increase their bills. If SK Broadband wins, Netflix is likely to raise its subscription fees to make up the cost for network usage.

If the ruling comes in favor of Netflix, the country would need to revise the law that currently requires content companies to pay for network use. If content providers don’t need to pay network fees, mobile carriers would lose a combined 1.74 trillion won ($1.5 billion) in sales from high-speed internet service.

SK Broadband’s triumph would possibly prompt other mobile carriers to renegotiate their network usage fees with global content providers. But even if SK Broadband wins the case, the cost for Netflix would be trivial considering its estimated sales of 415.5 billion won and subscribers at 3.8 million in Korea.

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