A Digital Bad Deal for South Korea

Policies in South Korea are making the Internet less global, more expensive, and less reliable.

On the open, global Internet, networks interconnect voluntarily and exchange traffic according to your needs and how it makes most sense. As a user, you pay your Internet Service Provider (ISP) for accessing websites and services online, and the services you access, in turn, pay their costs of being connected.

‘Sender pays’ refers to a payment model to regulate fees around network usage and connections between networks. The argument is that some networks or services send disproportionate amounts of data traffic and should therefore pay more to network operators.

South Korea has implemented parts of this model, and it has had negative effects on the networks, on the business landscape, and even on the user experience. In 2016, the then-Ministry of Science, ICT, and Future Planning (now called the Ministry of Science and ICT) started to enforce new rules for interconnection. This meant that ISPs had to use a new settlement model of ‘sender pays’, whereby networks had to compensate each other for the traffic they sent.

Being able to share connection costs and exchange traffic freely between networks is one of the fundamental properties of the Internet. While it may sound reasonable to have services sending more traffic pay more–but traffic is requested by users, not generated by service providers and large platforms randomly. Users pay an ISP for being able to access such data, just as online services pay for their own Internet access to send it.

In practice, it would also mean that anyone providing services online may need a separate contract with every ISP their customers might use, resulting in a series of problems: administrative and financial burdens that undermine their ability to operate globally, large ISPs having a built-in advantage over smaller players due to their capacity to arrive to agreements with other companies, which would harm competition, and it could also mean that your ISP may no longer provide access to services you rely on. In a nutshell: a fragmented Internet experience.

In South Korea, these Interconnection Standards for Telecommunication Facilities have led to a number of consequences. A few larger international companies have moved their servers to neighboring countries. For example, Meta moved its servers to Hong Kong, when requested by Korean ISPs to pay these fees, but this has led to latency in the network for Meta users because there’s no longer a cache within South Korea. This regulation also hits domestic providers harder than international ones, and disadvantages South Korean businesses, who may not have the option to move their servers across the border.

The government responded with even more policy. They’ve attempted to implement service stabilization requirements, primarily aimed at international content providers. They demand that content providers guarantee a certain level of quality of service, which can only be met if they move their servers back into South Korea.

The South Korean government also wants to give ISPs the right to charge a ‘network usage fee’. This proposal is still in Parliament but would demand that all data sent over South Korean networks, whether or not it’s transmitted by a customer of the ISP, is subject to a fee. This is their way of trying to get international companies to pay as well, which they hope will mitigate the current disadvantage of domestic services.

But like the interconnection fees, these fees disadvantage smaller players by creating higher entry barriers. They risk fragmenting the Internet by conditioning connectivity on prior contracting with the user’s network. Those costs can also be passed on to end users, which contradicts any intent of fairness that might be motivating these policies.