Compensate for OTT connection failures: Experts

[Image source: Yonhap]

Global over-the-top (OTT) service providers, including Netflix and Disney+, raised their prices recently, accelerating ‘streamflation’ ( ‘streaming’ and ‘inflation’), but a recent analysis highlighted a lack of compensation for connection failures.

According to an analysis conducted by Maeil Business Newspaper on Sunday on the terms and conditions of major OTT providers including Netflix Inc., Disney+, Coupang Play, Wavve, and Tving, Wavve, a subsidiary of SK square Co., was the sole platform that specified compensation guidelines and amounts.

Under the company’s terms and conditions, compensation for user damages due to paid service failures is processed according to the Digital Content User Protection Guidelines. There were instances where compensation was three times the downtime as laid out in the Ministry of Culture, Sports and Tourism’s rules.

“There were cases where compensation was provided in the form of coins, which can be used for individual paid movie viewing, considering consumer complaints,” an official from Wavve said.

But OTT player Netflix states in its terms and conditions that it does not take responsibility for damages suffered by subscribers due to intentional or negligent acts, except for significant negligence beyond the norm.

The lack of specific regulations or definitions for the usual range and significant negligence makes it difficult for subscribers to seek redress.

Regarding a recent two-hour outage last week, Netflix maintains that it has no obligation to compensate subscribers, adding that it communicated with the Ministry of Science and ICT and the Korea Communications Commission.

Disney+ has provisions for compensation for damages but did not disclose the rate.

Experts suggest that as OTT usage becomes more mainstream, there is an urgent need for relevant legal regulations.

According to the country’s Telecommunications Business Act, OTT is classified as an additional communications service provider, and is only obligated to notify subscribers of a failure if it lasts for more than four hours, with no obligation to compensate if the downtime is within that period.

In contrast, telecommunication companies classified as primary communications service providers must compensate users for failures lasting more than two hours.

“The terms are ambiguous and unfair, particularly considering the impact on people’s lives,” Lee Seong-yeob, a professor and head of the Center for Technology Law and Policy at Korea University, said.

He added that the regulations do not reflect the current digital environment.

Meanwhile, OTT services have recently been increasing their subscription fees.

Following the outage on December 12, Netflix blocked new subscriptions for the monthly 9,500 won ($7.3) basic membership for one individual, with the minimum monthly Netflix subscription fee without ads now at 13,500 won.

It also implemented an additional charge of 5,000 won per month for users sharing accounts with those not residing in the same household in November 2023.

Google recently increased the price of its ad-free YouTube Premium membership from 10,450 won to 14,900 won without specifying compensation regulations.

Growing consumer dissatisfaction with streamflation also raises questions about its impact on subscriptions. According to EY Consulting, 36 percent of Korean respondent households have canceled one or more subscriptions to OTT and music streaming services in the past year or plan to cancel in the future.

The main reason for subscription cancellations was cost savings (36 percent).

Only 47 percent of Korean respondents said paid streaming services were worth the subscription fee, the lowest satisfaction rate among eight countries including the United States, Canada, France, and Italy.

“A radical transformation is needed at this point, such as revising current telecommunications laws to prevent sudden increases in subscription service fees or inconvenience due to service failures, through the enactment of a Digital Service Business Law,” Lee said.

The Korea Communications Commission decided to strengthen service disruption notification obligations to prevent confusion and damages for users during digital platform service failures.

According to the Enhancement of User Protection Measures for Digital Platform Service Failures announced by the KCC in October 2023, the notification obligation for additional communications service providers will be shortened from four hours or more of paid service disruption to two hours or more.