Twitch, a popular global streaming platform, announced its business withdrawal from South Korea on the 6th of December and ended its service from the country on the 27th of February. Even though the company ensured that it would support users and streamers moving to other local streaming platforms, this still split the original Twitch community. It was broadly stated that the cause of their business withdrawal was high operating costs, but it is almost certain that the main reason is South Korea’s high network usage fees.
Network usage fees are fees that whenever a service is used, the content provider or company of said service has to pay to the internet service provider or ISP for short. For example, if somebody watches Netflix using the internet provided by a certain company, then Netflix will have to pay the said company a network usage fee. This is not a concept unique to South Korea, but it’s not common either, the fees are especially high, and for the past few years the three major ISPs have been trying to enforce the fees to foreign companies. It is true that local companies have to pay for these fees as well, which makes it sound unfair, but these same companies don’t pay fees to foreign ISPs either.
To make sure they can maintain their services, Twitch reduced its maximum resolution from 1080p to 720p on the 30th of September of 2022 to lower the fees they had to pay, but that didn’t solve the problem completely, and eventually led to a business withdrawal. It is not known how much Twitch has paid to the ISPs, but according to Cloudflare, it is estimated that the cost per mbps of Amazon Web Services, or AWS in South Korea is approximately 31.25 times higher than the US and Canada. Considering this, we could also assume that it is much more expensive for Twitch to provide service within South Korea in contrast to other countries.
Network usage fees are not only a problem for companies but to consumers as well. If they’re too high, services’ prices will have to be increased or the quality will have to be decreased to reduce loss. Consumers will have worse experiences; just imagine how it would feel to watch Netflix at 720p with limited content. It also reduces international interactions. As seen with Twitch, South Koreans are not able to watch foreign streamers, and foreign users aren’t able to watch foreign streamers. A specific audience has been disconnected from the global community, and if this keeps happening, South Korea will be isolated.
A solution to getting rid of network usage fees is to eliminate the cause. South Korea’s ISPs receive the fees because of their own fees they have to pay. ISP have tiers, ranging from 1 to 3, where tier 1 is the highest. Tier 1 ISPs don’t have to pay access fees when receiving data from ANY tier ISPs. In contrast, tier 2 and 3 ISPs have to pay tier 1 ISPs when receiving data from them. The problem is that most of Korea’s ISPs are tier 2 or below, meaning that they have to pay those fees. Many people argue that if the ISPs invest more in their facility, their tier might be increased to 1, and thus eliminating the cause. But this is something that requires the will of ISPs, and it doesn’t seem like they’re planning on doing that any time soon. According to SBS, it has been revealed that the 3 major ISPs haven’t invested on 5G technology for years even though they had promised, and only used it to justify the expensive price of their “5G plan”.
Twitch’s withdrawal is a great example of the consequences of network usage fees. It shows us how the three major ISPs in Korea have too much power. In the future, we might see even more major foreign services being removed from the country. Consumers are on a bad position as well, because with the network usage fees, they have less services to choose from. But at the same time, if they’re gone, ISPs will try to increase their plan prices and justify them. Maybe that will be the time when there’s a much bigger change.
