sk broadband and netflix are embroiled in a lawsuit the korean internet service provider is
calling for network usage fees from the american content provider given the dramatic escalation in
inter traffic in light of the lattice popularity here on the local front for more i have dr rosalyn
leighton at the alborg university live on the line dr layton it's a pleasure to have you with us
dr layton can you hear me
right doctor later let's begin then with a few words right do you hear me now i can hear you
now is it okay yes doctor later let's begin that's completely fine let's begin with a few words then
on the dispute between sk broadband and netflix yes well there's no doubt that the whole world
is watching south korea presently to see how this litigation is going to play out remember netflix
accounts for seven percent of all the traffic in south korea it's a staggering number and if
you look at south korea's broadband customers there's about 23 million but only 5 million
subscribed to netflix sk broadband experienced in a very short period of time that the traffic from
netflix increased by an order of 24 times over sk broadband had to invest a lot of money to
facilitate this traffic and went back to netflix and said how can we recover these costs you know
they didn't want to raise the prices on all the end users because not all of them subscribe
but at any rate netflix um did not as they said we don't have to negotiate with you you have to
deliver our content for free and netflix brought sk broadband to court so um the case has already
had the first round uh ruled in sk broadband's favor and now the next step is underway
right so as you mentioned last year in the central district uh seoul central district court that has
ruled in favor of escape broadband and netflix in response has since appealed the case to the
seoul high court that being said dr layton i understand netflix has proposed an alternative
solution yes indeed they uh netflix would like to provide copies of its content in these big
servers and put them inside sk broadband's network now the problem with that is that that
those are big servers they take up a lot of space and they can only be used for netflix content
so s can broadband can't uh use that capacity for any other content it can't use it during
the rest of the day so it's not a great solution on top of that uh the netflix technology works
that it expands it finds the available capacity in the network and expands and grows based upon
what's there so this is actually a costly solution for sk broadband um it's it's not ideal given that
all the other content that it has to deliver so this is really what the court is going to look at
sk broadband would like uh simply to to work out a payment arrangement with netflix uh similar to
you know cloud providers or any other kind of uh any other kind of of content arrangement um
so so whereas netflix simply says look you're obligated to deliver our traffic for free
remember netflix got started as a dvd by mail company they used to pay the postal service
state you know to deliver their uh content when they went to the internet they sort of said well
gee we don't have postage anymore but if we want to have the investment in networks we have to find
uh policy makers have to find a way to resolve these to to make sure that the costs of
running the network are recovered right and when we while we wait for this decision by the court
itself then dr layton where do you stand with regard to this ongoing legal battle between these
two private companies yes well this needn't be a dispute because we have all over the world for
more than centuries now two-sided markets there are economic models to resolve what's going on
anybody who's ever used a credit card or a newspaper experiences this uh this sk broadband
is a a two-sided market has a platform it serves on the one hand it builds the network to end users
it runs the customer accounts and on the other side it's working with content providers like
netflix or facebook or neighbor or what have you and offering them um delivery and storage security
computing and a different set of services so what netflix wants is for all of the network costs to
be borne by the end user while they pay zero now that is called free riding and if you have that
situation the network will be degraded in order for the the networks to continue to invest and
innovate you have to collect payments from both sides of the market and obviously they're for
different services and different things but this ensures the best outcome for everybody right dr
legend how have disputes between internet service providers and content providers been settled
elsewhere that's beyond south korea absolutely well these are this is certainly not the first
time this has emerged a lot of governments around the world are imposing taxes on netflix they're
imposing regulatory requirements they are wanting to regulate netflix like a broadcaster for example
um you know it needn't be that way i mean we have technology today to enable um a fair cost sharing
if you look at cloud business models you set up a payment in advance based upon the amount
of traffic that you bring into the network and certainly south korea is on the forefront because
its government and parliament has figured out that we need to uh if the company like netflix
refuses to negotiate if it abuses its market power then the government needs to find a way to recover
the costs so that you know that the networks can invest and ensure that they can deliver uh
the content for everyone dr leyton pundits say a final ruling on the case between sk broadband and
netflix looks to have extensive implications what are your thoughts very briefly speaking
yes well there's no doubt the world is watching this case uh it is a david and goliath case you
have a little broadband provider like sk which is standing up to a global giant netflix the david if
you will and i'm sorry the goliath in this story so it it will have global implications because of
the where you've seen the korean policy makers really come together to understand that if you
want to have an uh a broadband ecosystem if you want an internet ecosystem that the different
parties have to be able to recover their costs the business models have to work for the different
actors in the ecosystem so obviously the world is hoping that south korea will provide a solution
that the court will prevail to be able to uh a fine fair cost recovery model and that
the networks will continue to be uh to be top south korea is recognized as the world's number
one broadband model and that really reflects that policymakers have been on the forefront
of solving these disputes right all right dr layton thank you very much
for making the time to join us live at this hour with your thoughts thank you