South Korea broadband firm sues Netflix after traffic surge from 'Squid Game'

SK Broadband estimates the streaming service owes about $22.9m in network usage costs from before the hit show

The popularity of South Korean productions such as 'Squid Game' has led to a huge surge in Netflix traffic in the country. Netflix via AP

South Korean internet service provider SK Broadband sued Netflix to pay for costs from increased network traffic and maintenance work because of a surge of viewers to the US firm's content, an SK official said.

The move comes after a Seoul court said Netflix should “reasonably” give something in return to the internet service provider for network usage.

A number of South Korean assembly members have spoken out against content providers who do not pay for network usage despite generating huge traffic.

Netflix said it will review SK Broadband's claim and seek dialogue and explore ways in the meantime to work with the company to ensure customers are not affected.

The popularity of the hit series Squid Game and other offerings have underlined Netflix's status as the country's second-largest data traffic generator after Google's YouTube.

But the two do not pay network usage fees, which other content providers – such as Amazon, Apple and Facebook do – SK said on Friday.

Netflix's data traffic handled by SK jumped 24 times from May 2018 to 1.2 trillion bits of data processed per second this September, SK said.

This is riding on the success of several Netflix productions from South Korea, including Squid Game and D.P.

SK Broadband said it lodged a lawsuit against Netflix for it to pay for using SK's networks since Netflix began using SK's dedicated line in 2018.

This delivers increasingly larger amounts of data-heavy, high-definition video content to viewers in South Korea from servers in Japan and Hong Kong.

Last year, Netflix had brought its own lawsuit on whether it had any obligation to pay SK for network usage, arguing Netflix's duty ends with creating content and leaving it accessible.

It said SK's expenses were incurred while fulfilling its contractual obligations to internet users, and delivery in the internet world is “free of charge as a principle”, according to court documents.

But the Seoul Central District Court ruled against Netflix in June, saying that SK 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".

SK estimated the network usage fee Netflix needed to pay was about 27.2 billion won ($22.9 million) in 2020 alone, the court document said.

Netflix has appealed against the ruling, court records showed, with fresh proceedings to start in late December.

Netflix said on Wednesday that it contributed to the creation of about 16,000 jobs in South Korea stemming from about 770bn won in investments, as well as an economic effect of about 5.6 trillion won.

Ruling party assembly member Kim Sang-hee said on Wednesday that out of South Korea's top 10 data traffic generators, 78.5 per cent of the traffic came from foreign content providers, up from 73.1 per cent a year earlier, with “Google, YouTube and Netflix that account for the majority turning a blind eye to network usage fees".

In the US, Netflix had paid a fee to broadband provider Comcast Corp for faster streaming speeds.

A Netflix official said the company no longer pays Comcast for network access and works closely with thousands of internet service providers around the world to ease network congestion and lower internet transit costs.