Outcomes of introducing network fees in South Korea: the impact on consumers and internet experience

Imposing network fees (a newer concept for ‘fair share’) is not an idea exceptional to the European Union. South Korea, a country known for its technological innovation and global leader in internet infrastructure, introduced network fees via its Telecommunications Business Act back in 2016, requiring major content providers to compensate internet service providers (ISPs) for the bandwidth they consume. 

The concept behind the network fee system was straightforward: major content providers generating substantial amounts of data traffic, should pay telecom companies for the stress they put on networks. Telecom operators argued that companies such as YouTube and Netflix, which drive high internet usage, should contribute financially to expanding and maintaining the infrastructure. The more bandwidth-intense services people use, the more stress is endured by the network.  

The same idea, set in the White paper on the EU’s digital infrastructure needs is now being circulated in the European Commission and the Council. 

Outcomes for internet experience and the consumers in Korea 

While Korean internet service providers (ISPs) celebrated the amendments, a number of unintended consequences didn’t take long to appear. Increased operational costs led to the major streaming platform “Twitch” leaving the country in early 2024, straightforwardly saying that network fees are unsustainable:

“Our network fees in Korea are still 10 times more expensive than in most other countries.”

META has also moved their servers outside the country - and while they haven't publicly confirmed this decision is related to network fees, experts believe this decision was made to avoid additional costs, potentially leaving consumers with slower access and degraded service quality. 

Consumer or telco-oriented decision?

While consumer sentiment in Korea on the issue remains mixed, the idea of network fees itself completely overlooks the fact that telecom operators are already making great profits from internet subscription fees paid by consumers.

Charging both content providers and consumers for the same services is not only redundant but inherently unjust and does not benefit the overall business and innovation environment.

From a consumer perspective, high network fees often leads to higher subscription costs, with content providers passing on the load to users. New and emerging platforms are also discouraged from entering the market due to high fees, limiting consumer choice.