Twitch is leaving Korea after telecom providers in that country demanded so-called “network fees”. Creators are now looking elsewhere.
When you obtain internet access, you more often then not are paying a telecom company for the access. As a result, the telecom company is paid for providing the service. Similarly, web services and websites pay for bandwidth costs and server space through web hosting companies (unless they maintain their own infrastructure of course). As a result, the service pays their share of the exchange.
For decades, this is how it has always worked. Everyone got paid for providing a service and everyone was happy. However, in recent years, ISPs, fuelled by their growing monopolistic power, have been trying to find new ways of squeezing money out of the situation. They did all sorts of things like throttling bandwidth and demanding web services pay ransom payments or risk having data flowing to and from their services be severely limited. It’s efforts like these that have fuelled the network neutrality fight where, mercifully, the customer came out on top (sort of). The battle rages on as ISPs continue to try and overturn the results of years of debate, killing network neutrality wherever possible.
In South Korea, a similar story is playing out. ISPs are trying to double dip and charge for the same bandwidth twice. Not only are they extracting the revenues from the customers so they can receive data, but they are also demanding that online services also be charged for sending that data as well (the traffic really goes both ways, but the double charge concept still applies). Services like Twitch are being asked to pay so-called “network fees” so they can continue operating in that country. While Twitch tried to make it all work by downgrading the video quality to 720p, the costs being demanded ended up being too high. As a result, last week, they announced that they would be shutting down their services in the country:
This morning, I shared with our community in Korea that we’ve made the difficult decision to shut down the Twitch business in Korea on February 27, 2024 KST. We understand that this is extremely disappointing news, and we want to explain why we made this decision and how we are planning to support those impacted.
Ultimately, the cost to operate Twitch in Korea is prohibitively expensive and we have spent significant effort working to reduce these costs so that we could find a way for the Twitch business to remain in Korea. First, we experimented with a peer-to-peer model for source quality. Then, we adjusted source quality to a maximum of 720p. While we have lowered costs from these efforts, our network fees in Korea are still 10 times more expensive than in most other countries. 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.
To all of our global communities, we want to make it clear that this is a unique situation. Operating costs in Korea are significantly higher than they are in other countries and we have been open about this challenge for some time.
Twitch streamers in Korea have devoted significant time and effort into building their communities, and we plan to help these communities find new homes — even if it’s regrettably not on Twitch. We will work to help Twitch streamers in Korea move their communities to alternative livestreaming services in Korea. We are also reaching out to several of these services to help with the transition and will communicate with impacted streamers as those discussions progress.
I want to reiterate that this was a very difficult decision and one we are very disappointed we had to make. Korea has always and will continue to play a special role in the international esports community and we are incredibly grateful for the communities they built on Twitch.
Probably the silver lining, if there is one, is that the creators on this platform aren’t getting left high and dry completely. The problem is that they are going to be forced to build things from scratch if they happened to make Twitch their home. Still, it’s a very bad situation for those creators – many of whom are, no doubt, upset of what is happening. Karl Bode on TechDirt offered some discussion on why this effort to double charge is ridiculous:
Under Korea’s model, edge providers (like Netflix) are forced to pay “network service fees” to ISPs. Basically, ISPs there have claimed that they’re inherently owed more money if a TV show on Netflix is super popular, claiming they should be compensated for extra bandwidth costs.
Of course, bandwidth provisioning doesn’t really work like that. ISPs are supposed to build networks that can handle any peak capacity spikes caused by normal consumer demand. The origins of those demands are irrelevant. Consumers and edge providers have already paid an arm and a leg for bandwidth, particularly if regional monopolization has driven down any incentive to compete on price.
All they’re really doing here is trying to offload network operations and maintenance costs to someone else. In this case: Korean game streamers or Netflix users.
Demanding that popular companies pay more to telecoms just for being popular is an inherently stupid idea, but it’s been dressed up by telecom lobbyists as serious adult policy under terms such as “sender pays” or sometimes “Sending Party Network Pays” (SPNP). I’ve been dumbfounded by how these proposals have been treated as serious policy.
The efforts always begin with false claims that companies like Google and Netflix are somehow “getting a free ride” on the internet, despite spending billions in bandwidth, CDNs, undersea cables, and cloud infrastructure. From there, they usually involve some flavor of false claim that this model will help expand broadband availability to those in need. But its only real function is to fatten telecoms’ purses.
Like many countries, Korean regulators largely favor just three big major ISPs, which then influence policy determinations to an extremely lopsided degree. This muted competition, combined with regulatory capture, plus the SPNP model, has driven up costs for Korean consumers (see Michael Nelson’s good 2021 piece on this, or this 2022 Techdirt story by Konstantinos Komaitis).
Now, regulatory capture is driving edge companies out of business, and driving up both bandwidth and content costs for consumers. It’s all predatory nonsense created by regulatory capture and corruption, and the telecom policy marionettes pushing the idea aren’t operating in good faith. They’ve hijacked regulators to implement systems that deliver telecoms billions of additional dollars for doing nothing.
The story does offer some insight into how things really operate in multiple Canadian debates. For years, now, people pushing stupid laws like the Online Streaming Act or the Online News Act seem to operate on a mentality that large platforms are operating with unlimited money – money that legacy corporations are somehow owed when that money wasn’t earned by those legacy companies in the first place. So, in response, they get this insane idea that they can slap any price they please onto these platforms under the assumption that they’ll pay anything to keep doing business in a given country.
The reality is that, although there is a good deal of wealth generated by these platforms, it certainly isn’t unlimited. What’s more, despite what legacy companies think, blocking whole countries is something that these platforms can easily do when the cost of doing business gets too high. The platforms absolutely don’t need every single country to maintain their wealth, so there absolutely is a limit – especially when it comes to low value content like mainstream news.
What is happening in Korea offers a cautionary tale of what happens when legacy corporations get excessively greedy. It backfires spectacularly just like when Meta dropped news links in Canada back in August. The benefits of having such a player in the market evaporates and the legacy players get absolutely nothing for their efforts on top of it all.
Increasingly, the perception of regulators has been a governmental body designed to carry out the marching orders of legacy companies. Whether it is to make life easier for those legacy players or stamp out competition in a given marketplace. As a result, we see corrupt thought experiments like link taxes, green lighting monopolistic takeovers, “network fees”, or a whole range of other obviously bad policy idea’s. Every day consumers and small businesses operating in that country has little choice but to accept whatever decision comes down and, in many cases, go out of business as the regulator intends.
A major problem, however, is when these bad policies get applied to multinational players. Simply put, if the regulations get changed to the point where it makes no sense to operate in a given country, then those players can simply leave that country altogether or pull select services that are impacted from the country. Contrary to the belief of legacy players, that is an option that the platforms can use. In the case of Twitch and Korea, that decision was, in fact made which is how we got here today. While Twitch does go out of its way to say that this is a unique situation, it is far from the first time a platform has looked at a bad regulation and chose to take their business elsewhere. It’s unfortunate that there are circumstances where the only way legacy players will ever learn this is through the hard way.
Drew Wilson on Twitter: @icecube85 and Facebook.
