US-Korea Digital Trade Disputes: Case of ‘Network Usage Fee’ Bill

Kyung Sin Park

 

ABSTRACT: KORUS was one of the most advanced treaties in pushing for revitalization of digital trade between any two countries. It has combined both the GATS Annex on Telecommunication obligations, to provide open access to telecommunication networks as a mode of transport for sectoral services, and the 2008 Agreement on Basic Telecommunication Services obligation to regulate major incumbent telecommunication providers’ anti-competitive behaviour within the sectoral service area. Also, it is the first document that confirmed the commitment to network neutrality in the Electronic Commerce Chapter.

When the cost of data delivery on the internet has been defrayed so far under the ‘bill and keep’ model, i.e., charging only for the bandwidth of connection but not for traffic volume, the new ‘network usage fee’ law in any country will have placed financial burdens on the data senders and therefore can be easily postulated to hamper the aforementioned access to that country’s telecommunication network and to solidify the oligopolistic position of the country’s incumbent internet service providers receiving the data from overseas. Indeed, under influence of the 2016 sender pay rule that removed competition among the big 3 ISPs, South Korea witnessed an increase in the transit fees to 8-10 times Europe, 5-6 times US, and 2 times Japan, which was reflected on the peering fees charged on the foreign data senders into the country. The 2016 sender pay rule also strengthened the bargaining position of the big 3 ISPs and their ability to engage in anti-competitive behaviour not just by self-preferencing but also refusing to peer unless the high fees comparable to the aforesaid transit fees are paid. Furthermore, the new law will contradict the net neutrality side letter between KORUS negotiators, which already explicitly denounced a rushed regulation that would have disabled an efficient market response through voluntary commercial arrangements, 20 years ago.