South Korea’s Web Visitors Tax: An Instance for Europe To Comply with? (Spoiler Alert: It Isn’t, Right here’s Why)

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Europe’s largest incumbent telecom operators are making an attempt to revive the thought that tech firms ought to pay them when responding to customers’ requests for information. That’s, the exact same customers that already pay telcos to get web entry, would now should pay a second time for a similar content material via pricier streaming subscriptions or cloud providers. 

This telco pipe dream is at present being analysed by European regulators and politicians. Curiously, world wide just one nation has ever carried out such an web visitors tax. South Korea started introducing the Sending Get together Community Pays (SPNP) idea in 2016 and specialists agree that the experiment has failed. Shopper costs went up dramatically, the content material providing turned a lot much less numerous, latency is now among the many highest of OECD international locations, and community investments are falling. 

That begs the query: is that this actually the regulatory mannequin Europe needs? 

SPNP is the technical title for what we name an web visitors tax. It signifies that the occasion sending visitors over the Web to an finish consumer (a streaming platform like Netflix or Spotify for instance) is obliged to pay a price to that consumer’s web service supplier (ISP) – resembling a telco – to ensure that the visitors to really be delivered. 

In 2016 South Korea launched the SPNP mannequin, with ISPs charging charges for information visitors they obtain from one another. 4 years later, the SPNP mannequin was expanded to additionally cowl massive home and overseas (e.g. Google, Fb, and Netflix) suppliers of purposes and content material. These suppliers have since been obliged to pay community charges for the web visitors they ship over the networks of ISPs in response to customers’ requests.

The introduction of this web visitors tax had main penalties, each for South Korean customers and their nationwide web ecosystem as an entire. 

Varied research discovered that shopper costs elevated considerably since 2016. South Korea is now among the many international locations the place customers pay the highest charges for cellular information on the planet. To provide an thought, the common price of 1GB of cellular information in South Korea is greater than €12, whereas the European common (throughout all operators) is simply €1.85. South Korean shopper costs for cellular information are additionally seven occasions greater than the European common and over twice as a lot as in Finland, the EU nation with the best charges (€5.90 per GB). 

Along with far more costly information plans, South Korean customers have additionally seen the value of their Netflix subscription go up by 12.5 % in recent times. It is a direct results of an ongoing authorized dispute between the streaming platform and Korean ISP SK Broadband. What’s extra, South Korea now has the worst latency charges of all OECD international locations, latency being the period of time it takes for information to journey from one place to a different – the quantity of delay you expertise in a video name for instance.

Certainly, latency has solely gotten worse since South Korea carried out the SPNP mannequin, beginning at roughly 120 milliseconds in 2018 and reaching virtually 160 milliseconds simply two years later, because the OECD present in a current research. However, European international locations have proven a pattern in direction of lowering latency in recent times. Denmark, for instance, went from 60 milliseconds to roughly 50 milliseconds.

Together with these shortcomings that customers are experiencing straight, the SPNP mannequin additionally impacts them not directly, because it creates a much less aggressive market and reduces the inducement for community investments. 

As a direct results of the duty to pay excessive community charges to ISPs, quite a few South Korean and overseas content material suppliers have degraded the providers they supply to Korean clients or just determined to exit the market. For a similar motive, smaller Korean content material suppliers and startups more and more encounter difficulties coming into the market or increasing their market share. This has tremendously diminished competitors in South Korea and led to sharp decreases by way of the extent of service supplied and the content material providing out there to customers. 

As if that wasn’t unhealthy sufficient, the South Korean market can also be experiencing a structural decline in community funding, each by native and overseas firms. Some fear that main infrastructure tasks resembling Google’s Apricot and Fb’s Echo submarine cables could now skip South Korea altogether for these causes. Surprisingly maybe, the roll-out of 5G networks in South Korea can also be slowing down, regardless that the nation is perceived as a cellular tech champion by many overseas.

The state of affairs in South Korea speaks for itself. An web visitors tax removes the inducement to put money into high-speed community infrastructure. What greater than this real-life experiment can clarify how unhealthy the introduction of the SPNP mannequin could be for Europe?

If the European Union goals to really attain its formidable 2030 digital targets, absolutely a Sending Get together Community Pays mannequin is the very last thing it wants.

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