Twitch has finally pulled the plug on providing services in South Korea, with the final switch will be turned off on February 27, 2024.

Last night Dan Clancy, Twitch’s CEO posted a blog outlining the reasons for the exit from the market.

“Twitch has been operating in Korea at a significant loss, and unfortunately there is no pathway forward for our business to run more sustainably in that country.”

This decision was not abrupt, and follows a series of scale down efforts by Twitch to be able to stay competitive in the market. Last year, Twitch suspended VOD service in South Korea and has curtailed streaming options to Korean content creators over this past year.

The way the S. Korean government proceeds on this issue could impact services from Netflix, Google and Meta and all other foreign entities operating in the country. Parliamentary debates and discussions over increasing network usage fees are heating up.

Additionally, Twitch exiting the market may be a start of a domino effect of protest exits and turn into a case study for the entire world on how to tackle network usage fees as an idea.

Why are “network usage fees” and “sender pays” rules a hot topic?

No other country has imposed mandatory fees between ISPs the way South Korea has. It all stems from several amendments in the Interconnection Standards for Telecommunication Facilities law passed in 2016, and amended in 2020 and 2021.

The law covers many aspects of ISP and VSP provider interactions, but does mandate that all providers big or small pay each other fees for traffic sent (sender pays) from one toward the other. Furthermore, providers are unable to negotiate free-peering and transit and make mutually “beneficial” agreements. The 2020 amendments also opened the door for content providers to be charged a fees to access the interconnected network. This essentially incentivizes providers to charge double fees on both end-users and CPs to provide infrastructure access to both, as well as charge fees from one ISP to another for peering and transit.

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Since the amendments went into effect originally, Korean companies had to respect the law and pay network usage fees. However, companies like Amazon, Netflix, Meta and Google have not or paid, or only paid minimal fees for access. Back in May 2022, The Internet Society did a great job at covering the impact of the changes and potential ramifications on the South Korean ISP market. ITI and Incompass have also published their views on the matter.

Credit: Twitch

Meanwhile, debates about imposing network usage fees are present in Europe as well. Deutsche Telekom has long pushed for legislation with European regulators to impose similar network usage fees to foreign content providers that are “free loading” on their infrastructure. Any law change would likely introduce similar transit or free peering deals currently established by mandating a less open market for fee negotiation.

It’s clear that operating costs for most foreign content providers are highest in South Korea when compared to all other markets. At some point this may become a simple math equation. If the cost of operation outweighs the benefit of operating in the market, companies may simply pull the plug on all operations in the country.

In the end, Twitch exiting South Korea may be the start of a larger protest by companies against the South Korean Govt. intervening in the market and legislating mandatory fees between ISPs, CPs and VSPs.

The end result may be a deterioration on variety in services available to South Korean end-consumers, and curtailing their freedom of access to content.

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