South Korean internet service provider, SK Broadband, sued Netflix on October 1, over non-payment of network usage costs as a result of a surge in viewership of shows like Squid Game, Reuters reported.
Netflix’s data traffic handled by SK jumped 24 times from May 2018, because of the viewership of several popular shows, the service provider said. This amounted to a network usage fee of 27.2 billion won ($22.9 million) in 2020 alone, that Netflix never paid.
The popularity of the hit series Squid Game and other offerings have established Netflix’s status as the country’s second-largest data traffic generator after Google’s YouTube, but the two are the only ones which have not paid network usage fees. Other content providers such as Amazon, Apple and Facebook are paying the fee, SK said.
Squid Game, the survivor thriller series which follows a few contestants playing children’s games having fatal consequences, has become the first South Korean show to top the charts in Netflix US, said co-CEO Ted Sarandos. He also recently hinted that it might become Netflix’s biggest show ever.
The suit was filed with the Korea Communications Commission in November 2019 and followed a Seoul court’s statement that the OTT platform should pay the service provider.
“Netflix is at least receiving network services, including management of the network quality, at a cost,” read a Korea Herald report. Multiple South Korean lawmakers slammed the platforms for avoiding payment despite generating “explosive traffic”.
Netflix said that it will review SK Broadband’s claims but sought assurance that the lawsuit does not affect the customers.
The broadband said that it had first filed a lawsuit when Netflix began using SK’s services starting 2018 to deliver increasingly larger amounts of data-heavy, high-definition video content to viewers in South Korea from servers in Japan and Hong Kong.
In 2020, Netflix filed a lawsuit regarding any obligation that it had to pay SK for network usage, and argued that its “duty ends with creating content and leaving it accessible”. The suit further highlighted court documents which noted that internet provision is “free of charge as a principle” and that SK’s expenses were incurred while fulfilling its contractual obligations to Internet users.
But the Seoul Central District Court ruled against Netflix in June, saying that SK Broadband is seen as providing “a service provided at a cost” and it is “reasonable” for Netflix to be “obligated to provide something in return for the service”.
Netflix had appealed against the ruling, court records showed, with fresh proceedings to start late in December.