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Netflix faces setbacks in Korean court case over network usage fees

By Kim Ji-won & Kim Tae-gyu, UPI News Korea

SEOUL, June 29 (UPI) -- Netflix was handed a major loss in its network usage fee dispute with a Seoul court ruling against the global video streaming giant in a case that effectively confirmed it needs to pay Internet service providers bandwidth fees.

The Seoul Central District Court on Friday ruled against Netflix Korea in its prolonged battle with SK Broadband -- one of the country's largest Internet service providers and subsidiary of the nation's leading wireless carrier.

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The court dismissed Netflix's requests to confirm that the U.S.-based over-the-top platform does not have to pay network usage fees to SK Broadband.

SK Broadband welcomed the verdict, saying the court confirmed Netflix's obligation to share network costs. Netflix said that it will decide whether to appeal after examining the ruling.

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The legal brawl started in April 2020 when Netflix brought its dispute against SK Broadband to the court over network usage fees.

Complaining about traffic overload, SK Broadband had argued that heavy network users like Netflix should share expenses necessary to operate network traffic.

Based on the principle of net neutrality, Netflix countered that SK Broadband was attempting to shift the responsibility of an Internet service provider to a content provider.

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The court ruling in favor of SK Broadband is expected to prompt other South Korean telecom companies to negotiate their network usage fees with Netflix and other multinational content providers.

SK Telecom chief Park Jung-ho said Monday the country's largest mobile phone operator will commence talks with Netflix.

"It's high time to meet Netflix CEO Reed Hastings," Park told reporters after attending a government meeting. "I think last week's ruling will improve our meetings."

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According to the Korean government, Netflix accounted for 4.8 percent of the country's total network traffic during the fourth quarter of last year. Google accounted for 25.9 percent.

The court case marks another major setback for Netflix's Korean unit as the National Tax Service also wrapped up an eight-month audit of the streaming service that collected some $71 million in taxes on top of fines for its refusal to submit data.

The company saw its 2020 sales more than double to $356 million from a year before but paid just $1.9 million in corporate tax as some 77 percent of its revenues were paid to its parent company -- Netflix International B.V. in the Netherlands -- as fees.

As a result, its 2020 operating profit resulted in a mere $7.8 million.

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The Korean tax authorities took issue with the high fees levying taxes.

"We plan to go through legal procedures to check whether the tax service's measure was proper," a Netflix Korea representative told UPI News Korea.

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