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Market Insight

Fees levied on Internet giants in South Korea

May 07, 2012  | Subscribers Only


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The leading South Korean Internet providers have reached an agreement on the charging of major Internet portals for the use of their networks. Korea Telecom, SK Broadband and LG Plus, together with the Korea Telecoms Operators Association unveiled their guidelines on a new cost-sharing scheme on May 3. 

According to these guidelines, major Internet portals such as Naver, Daum and Google will be charged for network usage, alongside interconnection fees. The exact amounts have yet to be set, but it is thought that fees will be in the region of KRW 75 – 100, equivalent to USD 0.09 per gigabyte. The charges levied will be based strictly on data traffic, which will ensure that these portals are charged relative to their earnings. Non-profit websites will be exempt from these fees.

These new charges were announced only months after the attempted blocking of access to Samsung Smart TV applications by KT. The block, which was implemented in an attempt to prevent network congestion from smart TV services impacting KT margins in the long term, was prevented following extensive regulator-mediated negotiations between KT and Samsung. The dispute highlighted concerns over the possible negative impact of allowing content services to deliver broadband hungry content without any regulation (covered in more detail in our report “KT’s blocking of Samsung Smart TVs places net neutrality debate in sharp relief”). 

The telcos in South Korea offer some of the fastest broadband services in world and they intend to keep them this way. As a result, the industry is looking to network usage charges in an attempt to control network traffic, reduce the potential for congestion and importantly, ensure that ISP revenues remain in step with data traffic and costs. However, the fees that the ISPs are reportedly considering would be several times higher than the CDN fees which portals already pay for content distribution - it seems unlikely that fees as high as USD 0.09 per gigabyte will ultimately hit the market.

 

The move from the South Korean telcos may spur other international ISPs in light-touch regulation markets such as Europe to take similar action, levying fees on high-bandwidth services. As yet, the majority of markets outside the US have yet to set in stone any regulations enshrining net neutrality, relying on competition to reduce the risk of traffic shaping which could be considered detrimental to legitimate web services.

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