South Korea “Sender Pays” Is a Warning, Not a Model, or Why (Almost) Everyone Keeps Telling the EU This Is a VERY Bad Idea

Many telecommunications companies are reviving the idea of having content companies pay for last-mile network connections because of the profit it would generate. South Korea serves as a useful predictor of how the bad consequences of this idea play out in real-time. Back in 2016, South Korea adopted a new interconnection rule based on a long-standing telco compensation rule called “sending party network pays” (SPNP). SPNP has deep roots in the world of telecom “settlement” (the fancy word for who pays whom in international calling) and how networks compensated each other for exchanging traffic. Those opposed to adopting this approach predicted that it would prove impossible to enforce without super intrusive government oversight and would introduce severe latency into South Korea’s networks as the “sending networks” (such as Netflix, but also gaming companies and others with high-resolution visual content) routed traffic in clever ways to avoid paying significant charges. To the surprise of no one except the advocates for the proposal, the predicted badness happened. Ultimately, the cost of transit skyrocketed, latency dramatically increased, and the Korean government keeps needing to consider new and more intrusive ways to (a) stop companies from avoiding the fees to ISPs while (b) trying to target foreign content providers while protecting domestic uses they like — such as video chat and video games. Though, despite the Korean example, EU telcos continue to lobby representatives in the European Council to consider the idea. Put clearly, South Korea is not a model for the EU, the US, or anywhere else. It is a warning.