Ministry of Science and ICT Comes with an Improved Internet Network Interconnection System

Dec 23, 2019

Key to Ministry of Science and ICT’s way to improve the internet network interconnection system is having telecommunications companies pay each other internet interconnection fee based on traffic and greatly reducing the access fee amount similar to the amount before the system was implemented.
CPs (Content Provider) that have opposed the internet network interconnection system will benefit from reduced access fee that they have been aiming for while Ministry of Science and ICT (MSIT) will be able to maintain the system.
It is difficult to say that the current conflict between ISPs (Internet Service Provider) and CPs over the internet network interconnection system has been resolved completely. After MSIT improves the system, it needs to continue to accumulate data to find more effective ways and improve the system flexibly.
◊Background to the improvement
When Ministry of Science, ICT and Future Planning implemented the system in 2016, conflict between CPs and ISPs has been amplified.
The essence of the system requires KT, SK Broadband, and LG Uplus to pay each other for interconnection fee and changes the rate from Gbps system to data traffic-based (TB) system.
Ministry of Science, ICT and Future Planning’s intention was to prepare a fair access rule based on clear standards to prepare for a sudden explosion of data traffic, create a foundation for network investments, and promote competitions between businesses.
After the system was implemented, the internet interconnection access fee market had grown to be worth tens of millions of dollars and had given ISPs more powers to make investments.
However, CPs such as Naver, Kakao, Google, and Facebook have opposed the system by stating that internet interconnection access fee has been passed on to the cost of using ISP’s network (exclusive line fee) and that internet interconnection access fee has increased exclusive line fee. CPs raised the issue through a parliamentary inspection of the administration by stating that increased exclusive line fee will not help develop South Korea’s contents industry.
On the other hand, ISPs have opposed CPs’ position by stating that it is difficult for them to go back to the previous system when their network is provided at a dirt-cheap price.
MSIT had listened to opinions from both sides for about a year and has come up with a way to improve the system.

Ministry of Science and ICT Comes with an Improved Internet Network Interconnection System

◊MSIT adjusts how the settlement of access fee between telecommunications companies is calculated
MSIT’s way to improve the system is seen as a compromise measure that greatly reduces the amount of access fee while maintaining the current form of the system.
Internet interconnection access fee is calculated based on a formula that multiples data traffic and access rate. MSIT’s remedy revises the system so that KT, SK Broadband, and LG Uplus do not have to pay each other if the ratio of data traffic between them is equal to or less than 1 to 1.8. This means that they do not have to pay each other access fee if the ratio is equal or less thana 1 to 1.8 even if there is a difference in data traffic that is exchanged between them. This will also lower the total amount of data traffic.
It will be inevitable that the total amount of access fee that is exchanged between them will be reduced rapidly. According to MSIT, there was not single moment when the access rate between telecommunications companies was over 1 to 1.5 in the past year. MSIT’s remedy ultimately changes the system back to the old way when telecommunications companies did not have to pay each other.
However, MSIT did not accept a position from CPs that wanted abolition of the system or wanted telecommunication companies not to pay each other the access fee. Considering possible changes in data traffic trend in the future, MSIT has left a room so that the section that talks about settlement can be adjusted if needed.
If multinational CPs such as Google that cause huge amount of data traffic enter the South Korean market, ISPs can face burden from additional access fee. As a result, MSIT has maintained the system so that multinational CPs will have to pay fair cost of using internet network in South Korea.
◊MSIT looking to support small to midsize telecommunications companies with reduced access fee
If the section about settlement is a measure to reduce entirety of the access fee market, reduction in access rate is a measure to lessen the amount of burden for small to midsize telecommunications companies.
MSIT is planning to reduce the upper limit of transit connection rate to 30% at the maximum starting from next year. Transit connection fee is an access fee when second-tier telecommunications companies such as Sejlong Telecom and CJ Hello pay major telecommunications companies for connecting CPs’ data that they have attracted to the network of major telecommunications companies. Major telecommunications companies decide on the amount of access fee on their own within the MSIT’s guideline.
As of now, the transit connection rate between equal-standing companies is $27.25 (31,596 won) per TB while the rate between companies in different standings is $29.04 (33,671 won) per TB. MSIT is planning to lessen burdens for small to midsize companies by lowering transit connection rate, which had had low reduction rates between 7 to 13% annually, to 30% at the maximum depending on the type of transit connection rate.
MSIT is looking to promote competitions throughout the CP market while allowing small to midsize telecommunications companies attract CPs through the access fee that has become reasonable. CPs can also use lines from major telecommunications companies or select various forms of access through relay operators.
MSIT has mostly applied CPs’ request of wanting to reduce the cost of using network resulting from increased interconnection fee between telecommunications companies. Although partial reduction in profits from access fee has become inevitable for telecommunications companies, it is regretful that the exact cause-and-effect relationship between interconnection fee and increased exclusive line fee has not been disclosed.
It is difficult to see that the current conflict between ISPs and CPs has been resolved completely. MSIT needs to operate its revised system first and continue to look for more effective ways after accumulating data.
Ultimately, MSIT needs to continue to put in efforts into having multinational CPs that cause enormous amount of traffic share the expenses of investments on networks and pay a fair cost of using networks.
“Based on data that we collect and market conditions after we implement the revised system, we will adjust the access rate and the settlement ratio if needed.” said a representative for MSIT. “We will continue to put in efforts to achieve fairness within the internet market.”
Staff Reporter Park, Jisung | jisung@etnews.com

Interpretation & Translation_Service Center

Refund Help Center