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International IT firms’ unfair tactics are targeted

Mar 08,2019
Google, Facebook and other international IT companies could be forced to suspend operations in Korea if they violate domestic law, even if the offenses were committed overseas.

The government will also be writing legislation and publishing guidelines designed to prevent streaming services, such as Netflix and YouTube, from forcing local networks to sign unfair contracts for bandwidth.

The Korea Communication Commission (KCC) “will actively push for regulations to resolve the issue of reverse discrimination against local companies as global businesses actively enter our market,” said Lee Hyo-seong, KCC chairman, who announced the commission’s policy goals for this year on Thursday.

”We plan to adopt a system that would temporarily suspend services of overseas businesses that fail to address violations.”

Naver and other local IT companies have complained that despite major IT companies, such as Google and Facebook, generating huge profits from business in Korea, they have not been subject to local laws. There is no legal basis for imposing regulations on companies headquartered overseas with servers offshore.

Yet if these companies are required to have a local presence, they will be subject to local law.

The relevant legislation will be put to the National Assembly for approval on March 19. Foreign companies with annual revenue of more than 1 trillion won ($ 885.6 million) - or those which made more than 10 billion won from ICT services and have more than 1 million daily users - will have to have a local agency.

Those failing to create a local presence will face a fine of up to 20 million won. The temporary suspensions will only apply to companies that fail to comply with regulations three times.

Large foreign providers will also be subject to the KCC’s user-protection evaluation, which currently covers local IT companies. The goal of the evaluation is to improve responses to customer complaints. The KCC said that in requiring the evaluation, it is not enforcing corrective measures for violations of the law. It simply wants companies to improve their service through voluntary compliance.

The KCC said it will also create a legal foundation to cover business malpractice by major foreign “content providers,” including Netflix and YouTube.

Netflix is reported to have gained a large number of subscriptions recently, especially with the popularity of “Kingdom,” its Korean zombie series.

Korean competitors Naver and AfreecaTV must make payments to telecommunication companies for utilizing the network for video streaming. Netflix is accused of freeloading.

The local telecommunication companies - such as SK Telecom and KT - are arguing that since November they have had to expand their internet infrastructure due to the increase in internet traffic due to the U.S. video streaming companies.

The KCC said it has almost completed guidelines that will establish fair payments for network use.

“There have been growing concerns over foreign content providers consuming massive data yet not properly paying the capacity,” said a KCC official. “Currently there’s no regulation preventing these practices.”


BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]