In February, Twitch, the leading global platform in live-streaming, announced the shutdown of its business in Korea. While Korean streamers may still stream, they can no longer profit from their streams, nor can viewers spend money on the platform.

In previous years, Twitch has made many efforts to cut operational costs in Korea, including downgrading the video quality available to viewers in the country. Nevertheless, the company ultimately decided to shut down its business, due to the “seriously high costs of operating in the country,” citing one core contributor—South Korea’s unnaturally high network fees.

Twitch is not the only foreign media company that has been struggling with Korea’s high network fees. Recently, Netflix was involved in a legal skirmish with SK Telecom after refusing to pay its network fees, deeming those fees to be unnecessarily high.

This makes us wonder—just how expensive are the network fees in Korea? Twitch remarked that Korea’s network fees are approximately 10 times higher than that of most other countries. A 2016 blog post by Cloudflare, a major CDN (Content Delivery Network) service, also stated that Korea’s transit fees (a form of network fees) are about 15 times higher than a European or North American counterpart, being “perhaps the only country in the world where bandwidth costs are going up.”

Why is this? Most of this local price increase stems from a legal amendment to the Telecommunications Business Act in 2016, called the “Notification on Interconnection (상호접속고시).” To understand why this amendment is significant, we must first look at how the internet functions.

The internet is made up of three main actors: Content Providers (CPs) like Twitch and Netflix which provide media, Internet Service Providers (ISPs) such as SKT and KT which manage the network the media travel through, and the end users who consume this media using their devices.

A crucial fact about the internet is that it is not a system managed by a single ISP, but a collection of thousands of networks run by individual ISPs throughout the world. When you are watching a YouTube video or a Twitch livestream, the media may have jumped through multiple networks managed by different ISPs before reaching your phone.

The “Interconnection” in the amendment refers to this—data transmitted through the different ISP networks, specifically, networks by the three major Korean ISPs: KT, SKT, and LG U+. Previously, data was allowed to be transferred between the three Korean ISP networks free of charge, allowing foreign CPs to strike a deal with just one ISP. End users for all three services would get the media without ISPs paying extra. However, the amendment to this law enforces pricing on the interconnected data to be paid by the sender ISP. Therefore, Korean ISPs are now inclined to pass this fee onto the CPs, making network fees more expensive.

Proponents of the legislation state that it encourages media-producing giants to pay their network usage fees. Previously, this free interconnection was seen as allowing “free-riding” on the network: these large CPs could provide tons of traffic while not paying as much. However, this type of regulation is unlike most conventional approaches to the internet—which promote ISPs to use their discretion on interconnection—and has come with some negative effects.

One early service that was impacted by this amendment was Facebook, which had operated a cache server (which provides end users with content) within KT. Facebook users using SKT or LG U+ previously had free access to this server. The amendment, however, made it so that KT was being charged by SKT and LG U+ every time those users accessed the website, and the fees were ultimately passed onto Facebook. To avoid having to pay a premium, Facebook has had to re-route its data for SKT and LG U+ users from servers in Hong Kong, which has caused a significant increase in loading time for users accessing the website.

As we can see with Facebook’s problems and Twitch’s shutdown, the increase in network fees brought on by the amendment has caused CPs to provide “lower-quality” content or to leave Korea altogether, which has come as an inconvenience for end users. But there is potentially a larger implication behind this amendment, having to do with the concept of net neutrality and fair access to the internet.

Often brought up in the discussion of network usage fees, net neutrality is the concept that ISPs should treat all media delivered through their networks without discrimination. For instance, ISPs should not offer differential pricing when you are accessing Google versus Naver if the data usage is the same for both websites. There is considerable debate over net neutrality, and many proponents argue that it has significance beyond just being an agreement that ensures end users access to all websites. For example, it could be directly related to ensuring freedom of speech in the online world.

A statement by Human Rights Watch in 2021 pointed out that one of the further proposed amendments to the Telecommunications Business Act was that ISPs can ban certain CPs for not providing network fees. Though this was just a proposal, it shows that increased regulation in network fees may allow ISPs to prioritize certain paying CPs, which may ultimately harm net neutrality. Various CPs terminating services nationwide due to high costs may also have a similar effect on end users as it disallows fair access to the internet—a core concept in net neutrality.

The shutdown of Twitch may have been an inconvenience to a small number of people who used the website, but it has a significance that reaches the wider public. We must remember that the online space is not just a platform for conducting business. It is a new type of space that allows anyone to share knowledge, culture, and ideas throughout the globe. Importantly for Korea—online platforms, such as Netflix and YouTube, have been the primary distributors of culture in the modern world. With policies supporting the globalization of Korean culture, having network fees that are so high they scare away foreign businesses only does more harm than good to the nation’s goal. As such, the non-economic functions of the internet must be further considered in the ongoing discussion about Korea’s network fees.