As the OTT service market, which is changing the paradigm of the media industry, grows rapidly, the domestic platform industry is expressing concerns about the ‘Platform Competition Promotion Act (tentative name)’ announced by the government.

On December 19, Fair Trade Commission Chairman Han Ki-jung announced at a Cabinet meeting chaired by President Yoon Seok-yeol that he would push for the ‘Platform Competition Promotion Act.’ The bill aims to prohibit unfair practices such as preferential treatment for a small number of core platforms and restrictions on multi-homing, and to strengthen the competitiveness of startups.

■ Will the On-Play Law kill native OTT?

The Digital Economy Alliance strongly opposed the enactment of the On-line Payment Act by issuing a statement opposing it. Industry experts argued in a statement, “The domestic online platform market is in fierce competition with overseas platform companies,” and “With AliExpress recently rising to second place in terms of number of domestic users, prior regulation of online platforms is like giving poison to the already struggling domestic online platforms.”

In addition, they expressed their bewilderment, saying, “Since self-regulation is being implemented in accordance with the current government’s keynote, hasty prior regulation will lead to an increase in consumer prices, and the side effects of introducing new regulations while the current Fair Trade Act is in operation, such as market shrinkage and administrative waste, will return as a burden to businesses and the public.”

This is a policy that follows the EU's introduction of the Digital Markets Act (DMA) to pre-regulate Amazon, Apple, Meta, and MS. However, the US is maintaining a policy direction that is tailored to its own situation, as it has abolished platform-related laws in the name of protecting the industry in order to compete for digital hegemony.

Experts argued that “South Korea should find its own solution while its own platform companies are protecting domestic industries, and should be careful not to let excessive online platform regulations rob the domestic digital economy of its growth potential.”

According to the Korea Broadcast Advertising Promotion Corporation, Netflix recorded a 38% share of the domestic OTT market as of 2022. It was followed by Tving (18%), Wave (14%), Coupang Play (11%), Disney Plus (5%), and Watcha (3.7%). Domestic operators Tving and Season merged to compete with Netflix and YouTube. At the end of November, Tving announced that it was also considering a merger with Wave, and the merger ratio is expected to be decided early next year.

Hye-min Byun, a researcher at the Korea Broadcasting Advertising Promotion Corporation, said, “As global OTT operators are increasing their domestic market share and domestic OTT operators are also making moves to expand overseas, we need a plan to support the overseas expansion of domestic OTT operators.”

He also added, “Compared to global OTTs, domestic OTTs have a smaller investment scale, but as content acquisition costs increase, operating losses are continuously increasing,” and “This could lead directly to a crisis in the survival of domestic OTTs and the domestic media industry, so long-term support for domestic OTT operators is needed.”

■ Need to find effective, cross-platform solutions

Before regulating domestic platform operators, the Fair Trade Commission should first establish a mechanism to protect domestic users from the platform. All platform operators should be regulated from raising prices unreasonably, and preventing domestic platform operators from monopolizing prices should be a secondary priority.

Consumers are free to choose the platform they want based on appropriate price, usefulness of content, quality, etc. Netflix, Wave user A said, “It’s convenient to have a platform, but if the fees rise to a level that makes it burdensome to pay, I am willing to cancel my subscription to that platform.” In other words, this is a situation where a specific online platform operator cannot abuse its dominance. The government should seek ways to provide domestic consumers with reasonable grounds for usage fees and scopes from all online platform operators, rather than restricting regulations to overseas or domestic platforms.

Recently, Google raised the price of YouTube Premium in Korea by 43% from 14,500 won to 14,900 won per month. Netflix requires an additional 5,000 won per month for account sharing if you are not living in the same household, and you have to pay at least 13,500 won to choose the standard plan without ads. Disney Plus also raised the price of its 9,900 won per month plan by 4,000 won compared to the previous plan by classifying it as premium. Meanwhile, Tving in Korea also raised the price of its basic plan from 7,900 won to 9,500 won per month.

The act of CPs (content providers) raising prices is inevitable due to factors such as the increase in content production costs, network usage fees, and network commissions in accordance with the flow of the market economy. On the 21st, the Korea Communications Commission inspected whether the details of rate increases, terms of use, and user notifications by business operator were in violation of the Telecommunications Business Act.

However, even if global platform operators raise usage fees within a monopoly structure, there is still no way for the government to regulate fees in a free economic system. Therefore, an effective management system that can protect platform users is being called for.

For example, one solution could be to obtain an explicit legal basis for calculating network usage fees, identify network usage trends, and establish transparent standards. Network usage fees are the amount paid by CPs such as Netflix and Google to ISPs (Internet Service Providers) for network usage. Network usage fees are an important factor in determining the price of OTT services, and as a result, the cost burden passed on to consumers may increase.

Global CPs and ISPs have been in conflict for several years. OTT operators claim that our country's network usage fees are excessive, while mobile carriers (ISPs) claim that the network usage fees are justified. Internet broadcasting platform Twitch also cited network usage fees as the reason for its withdrawal from Korea in February next year. In addition, SK Broadband and Netflix have been in a long fight over network usage fees for three years and six months since 2020. The two companies have now settled the conflict by forming a partnership, but since the relevant ruling has not been made public, the industry is only speculating that Netflix has proposed a plan to SK Broadband that will allow it to make significant profits.

Currently, eight bills related to network usage fees pending in the National Assembly have been proposed from December 2020 to this year. However, with no significant bills being introduced, there is a need to establish clear standards for network usage fees at the policy level. At the confirmation hearing for the chairman of the National Assembly’s Broadcasting and Communications Commission on the 27th, nominee Kim Hong-il said, “If there are any excessive network usage fees, they should be corrected.”

If standards for network usage fees, which are currently unclear and set on a business-to-business basis in the industry, are clearly established, it is expected that platform operators will be able to prevent disputes with telecommunications companies and secure fairness in usage fees from platform users.