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[Editorial] Collateral damage

Twitch’s surprise move heralds a fierce battle by YouTube and Netflix over network usage fee

Twitch, a popular game streaming platform, dropped its maximum video quality in South Korea on Friday from 1080p to 720p, intensifying disputes over the country’s network usage fee. In a related move, other global platforms such as YouTube and Netflix are expected to stage a tough fight over the fee with local internet service providers.

Twitch, a unit of Amazon, said in an update announcement Thursday that its operating cost in South Korea has been on the rise and the trend appears to be continuing, though it did not directly mention the network usage fee.

But given that the streaming platform’s downgrade of video quality was applied only to South Korea, Twitch is apparently referring to growing costs linked to the network usage fee that it has to pay in proportion to the online traffic it generates with its streaming service.

Twitch’s sudden decision to reduce video quality to slash costs came as a big disappointment for both game streamers and viewers here, as 1080p video definition is increasingly becoming a default setting and some services are even experimenting with a higher quality of 4K.

Twitch’s exclusive downgrade also sends a blow to South Korea’s reputation for advancing esports and building up well-established broadband internet across the nation.

The number of monthly active users in South Korea is estimated to stand at 2.45 million as of June this year, and Twitch routinely broadcasts high-profile esports games such as the League of Legends tournaments.

Last week, Twitch reduced the subscription revenue it shares with some of its major streamers, signaling that it is struggling to find a profitable business model. But it did not downgrade video quality in other countries.

Some industry watchers suggest that Twitch’s latest step is in protest of the forthcoming Korean legislation that would make the network usage fee payment mandatory.

In the National Assembly, Korean lawmakers have so far filed seven revision bills aimed at forcing global content providers such as Twitch, YouTube and Netflix to pay the network usage fee to local internet service providers.

The controversy traces back to 2016, when the Korean government revised the related telecommunications law so that the three major internet service providers in the country -- KT, SK Broadband and LG Uplus -- had to pay extra fees for sending data to each other. In the following years, the streaming service market led by YouTube and Netflix grew at an explosive pace, resulting in soaring extra data costs for the internet service providers.

Korean internet service operators claim that foreign content providers are “free-riding” on the Korean network, as they are allegedly reaping huge profits without paying due fees. In fact, Korean content providers such as Naver and KakaoTalk have been paying the network usage fee in accordance with local regulations.

In contrast, Netflix -- which has been engaged in a legal wrangle with SK Broadband -- and YouTube argue that end-users are supposed to pay network usage fees, not content providers, and no other country has a law requiring content firms to foot the bill for network usage.

On Sept. 20, when lawmakers held a public forum on the network usage fee, YouTube issued a statement saying that the proposed revision bill will impose extra costs on content firms, which in turn will put content providers as well as creators at a disadvantage. “Nowhere in the world exists such law, and there is a good reason for that,” YouTube said, adding that it may have to change the way it does business in South Korea if the revision passes.

The stakes are high. According to government data, Netflix and YouTube operator Google account for a combined 34.3 percent of total internet traffic in Korea. If the revision goes ahead, both firms are expected to pay a huge sum of money to Korean internet service providers.

Rep. Jung Chung-rae of the main opposition Democratic Party of Korea raised concerns that Korean lawmakers’ attempt to protect a few internet service providers could result in undercutting Korean content providers.

In assessing the pros and cons of the network usage fee, lawmakers should bear in mind that a policy misstep would become collateral damage for not only local content providers but also ordinary users -- as painfully demonstrated by Twitch’s video quality downgrade.

By Korea Herald (
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