Gov't advised to leverage network fee issue against tariff threats

The Google logo at the company's Bay View campus in Mountain View, Calif., Aug. 13, 2024. AFP-Yonhap

U.S. President Donald Trump’s unprecedented move to impose a 25-percent "reciprocal" tariff has rattled Korea, prompting the country to explore every possible measure to counter the trade penalties.

Amid growing calls for Korea to adopt a more strategic approach in response to Washington’s tariff threats, one potential bargaining chip gaining attention is the government’s stance on the proposed network usage fee bill. The bill would require global content providers to pay fees to local internet service providers, potentially serving as leverage in negotiations over other vulnerable sectors.

A recent report by the U.S. Trade Representative flagged the network usage fee issue as a barrier to electronic commerce and digital trade in Korea.

U.S. President Donald Trump holds a "Foreign Trade Barriers" document as he delivers remarks on tariffs in the Rose Garden at the White House in Washington, Wednesday. Reuters-Yonhap

The network usage fees issue has been a hot potato in Korea over the past few years, as the global content platforms have garnered an increasing number of users, especially during the COVID-19 pandemic.

Stressing that the proposed bill is similar to the European Union's Digital Networks Act, the Korean telecommunications industry says that it aims to create a transparent and fair commercial negotiation environment between business operators.

"It is not different from the fundamental operating method of the internet, so it should not be a factor of conflict, contrary to U.S. concerns,” an industry insider said.

However, Lee Seong-yeob, a professor at Korea University's Graduate School of Management of Technology, said that the Korean government is required to carefully examine all consequences of implementing the bill — even while acknowledging the legitimacy of the regulation.

“In truth, from a principled perspective, it seems reasonable to pay for network usage. However, what the U.S. government and its big tech companies are concerned about is that if the legislation passes in Korea, it could trigger a domino effect, forcing them to make similar payments in other countries as well,” he said. “The real issue seems to be their strong resistance to having this obligation codified into law.”

The professor said the key question is how seriously the U.S. government views this issue.

"If enacting such legislation ends up creating more problems than benefits, it will not be advantageous for Korea,” he said. “I believe a thorough analysis and careful forecasting should come first, followed by a decision on whether to proceed with the legislation.”

The Netflix logo is seen at the Netflix Tudum Theater in Los Angeles, Calif., in a file photo from 2022. AFP-Yonhap

According to data from the Ministry of Science and ICT on the average daily traffic volume of major telecommunications firms between 2020 and 2023, U.S. firms accounted for the top three highest traffic volumes, making up nearly half — 42.6 percent — of the total daily traffic.

Google, including YouTube, recorded 30.6 percent of the total in 2023, followed by Netflix at 6.9 percent. Meta, which operates Instagram and Facebook, accounted for 5.1 percent. In comparison, Korean platforms Naver and Kakao made up 2.9 percent and 1.1 percent, respectively.

The local telecom carriers, including KT, SK Broadband, and LG Uplus, are obligated to provide internet access and maintain quality under the Telecommunications Business Act. This law requires them to continually expand network capacity to accommodate increasing traffic. As a result, local content providers have voluntarily contributed network usage fees to help fund infrastructure expansion.

However, global content providers have refused to contribute, sparking a free-rider controversy and prompting lawmakers to push for new regulations that would require all content providers to pay the fee. Currently, three related bills have been proposed and are pending in the National Assembly.