Korea’s failure and Indonesia’s success in fighting two lane Internet

 Session Organizer: Korea University Law School’s Internet Law Clinic, Open Net Association

The internet is different from telephone or postal services.  The product called the internet is inherently global and cannot be sold to even one person without covering the whole world - There is no one buying, for instance, ‘Korea-only internet’ - and such coverage requires transactions with hundreds of ISPs. If these ISPs settle for sending or receiving data, the transaction costs alone will break down the internet. So the prevailing rule is that ISPs will not charge one another for delivery but will only pay to inter-connect. Thanks to this rule, we have left the world where we have to incur exorbitant costs to make international phone calls and entered a new world where hundreds can join a Zoom call exchanging hours of video and voice nearly for free. 
Such nature of the internet is crucial to OGP.  The government and people rely on the internet to scale to the massive any-to-any communication needed for civil participation, open data, and community empowerment.
However, whether Korea’s and Indonesia’s net neutrality rules and interconnection rules are activating or suppressing the merits of the internet is a question that we will discuss through this session with ramifications on the rest of Asia with the following experts:

Nelson proposed to evaluate “new proposals to undo the business model of internet which has been so successful” and how they are threatening to IOT and cloud, the next set of online services. In such evaluation, he discussed three important concepts, (1) Metcalf’s law (2) Open interconnection (3) Online services (and how they are delivered). He deplored the tendencies of the policy makers to treat Internet as a broadcast medium like television when it is much more than that, i.e., one-to-one, many-to-many. He related to his White House experience when it costed USD 250K for a video conferencing with world leaders when such call is nearly free through Zoom. 

Metcalf’s law is that, if you increase number of nodes on a network, the power or value of that goes up by square. The internet has been successful because so many people want to connect one another, increasing the nodes from 100K 30 years ago to 4 billion nodes now. 

Now, a few countries and telcos are trying to profit from the internet’s business model, through subsidy-like regulations in favor of big telcos so that small networks and content providers pay.  Such regulation was proposed by European Telecom Network Operators (ETNO) back in 2012 but was rejected by all European countries. However, Australia, Indonesia are tinkering with the idea unfortunately. 

Michael emphasized the need to counter the idea that big players can become gate keepers. also, “Electric car companies should not be asked to pay power companies for more power used by electric car owners. The Sending Party Network Pays rule  goes against Metcalf’s law.” One party demanding to profit from the win-win situation will break the business model of the internet.  

Starzak started out marveling at how the internet has scaled up to meet and absorb the growing demand, including 40% pandemic-related spikes.  One such scale-up is Cloudflare, caching for many websites free for many, which lowers the cost of local ISPs in meeting the expectations of their customers to access all contents around the world. Cloudflare is free-peering with 10K ISPs because of this benefit to them but unfortunately that business model is breaking down: Korea’s big ISPs are charging Cloudflare bandwidth prices 30 times US and 40 times most of Europe, making serving traffic from (POPs) insider Korea almost impossible.  Many online business have to serve Koreans from outside Korea, causing latency tax for them. Only those big business willing to defray the cost of interconnecting with Korea’s big ISPs can serve their content from within in Korea. This is creating a two-lane road for most Korean users accessing big websites vs small websites.  Cloudflare is free-peering with small ISPs in IXPs within Korea and therefore can compare to their users’ access is to small overseas websites through Cloudflare, and the big ISP’s customers’ access is 187% slower! This is not an issue of vehemoths v vehemoths. It is about how the internet should be.  

Juniarto began with a statement of net neutrality: data transmission may not be performed or prioritized for payment. By removing gatekeepers who might otherwise charge data transmission, the internet has helped equal economic opportunity and democracy. Indonesia is a multi-ethinic country where, most of us are using mobile to connect to the internet. In eastern Indonesia far from the capital, a government-owned telco has monopoly and charges by zones where huge differentials exist. Also, the telco charges by the amount of data used, e.g., 

$10 for 20G month, $20 for unlimited, $2 for just messages.  Eastern Indonesia people resisted against this.  Net neutrality is violated when the telco monopoly is charging whatever price they want, creating a discriminatory barrier against people who cannot pay.  The Indonesian telco’s intent is show clearly when Netflix was actually blocked by them for 4 years until mid-2020 b/c the telcos’ affiliate video services. Also, early this year, article 15 of the new regulation required that all content providers servicing the Indonesian territory must establish “partnership” with ISPs, which would have allowed ISPs to charge separate fees for data transmission. Open Net, SAFE Net responded with a statement that the provision is no longer there.  

Kim first compared Korea’s big ISPs benefitting from entry barriers, i.e., strict licensing schemes to CPs not subject to any entry barrier. She then argued that the ISPs’ such natural monopoly was even more hardened by the Korean Sending Party Network Pays regulation which required that big ISPs should get paid by small ISPs and also required paid peering even amongst ISPs of the same tiers in terms of data transmission fees.  As a result, the ISPs ended up shifting the burden of data transmission fees over to CPs, and CPs are paying very high internet access fees. 

She then discussed the current issues: such as “CPs are already paying access fee, should they also pay usage fee?”  That would bring back the pay-as-you-go system of telephone. This type of SPNP arrangement was rejected by OECD and BEREC by 10 years ago. But Korea’s 2020 Netflix law (imposing service stabilization obligations on CPs) is threatening to become the legal basis for imposing data transmission fees on CPs. 

This is important because international traffic into Korea has increased a lot, now about 70%, and Korean ISPs must pay huge transit fees because of that and they want to shift the burden of that to CPs. Also, there is no Internet Exchange Point in Korea where all big ISPs participate: they are refusing to participate there, and are running their own IXPs.