VoD Regulation: Fair Contribution & Local Content | IGF 2023 WS #149

Cho Changeun

The discussions in South Korea revolve around various topics related to the regulation and management of internet traffic and collaboration between companies. One notable incident was Netflix’s lawsuit against SK Broadband in April 2020. Netflix claimed network neutrality, arguing that platforms should not have to pay network fees to ISPs for increased traffic. However, the court disagreed with Netflix, establishing that platforms have a responsibility to contribute to network costs.

While some ISPs have traditionally charged network fees, others, such as KT and LG U+, have chosen to partner with Netflix in profit-sharing agreements. This approach allows them to bypass network fees and instead generate revenue from their collaboration with the streaming giant.

On the other hand, global over-the-top (OTT) platforms like Netflix and Disney Plus are showing an increasing interest in investing in local Korean content. The government supports this trend by offering additional tax deductions for video content produced within the country. Politicians are pushing for the worldwide expansion of Korean OTT platforms, aiming to increase profits for Korean companies. These platforms are also competing to acquire Korean dramas, which hold symbolic representation of the Korean wave, further emphasizing the significance of local content.

However, concerns have been raised regarding the burden placed on ISPs for traffic management responsibilities. It is argued that businesses generating substantial traffic should take responsibility for managing it, rather than leaving it solely to telecom companies and ISPs. The South Korean government has taken steps to ensure a minimum broadband speed of 100Mbps as a universal service, requiring continual investment. The CEO of Korean ISP, KT, has highlighted the potential traffic problems that could arise in the future due to the rapid development of AI.

The government’s role in these discussions is viewed as more of a mediator in negotiations, rather than actively creating new regulations. It is believed that the government should facilitate cooperation between companies, rather than imposing additional regulations. This approach is seen as more effective in managing the economic effects derived from the Korean wave and fostering collaborations between companies.

Regulation was mentioned in relation to the stability of online content providers, referring to the Netflix Act. This act applies to platforms and video-on-demand (VOD) service providers with more than 1 million daily users and accounting for more than 1% of total traffic in Korea. However, Netflix has not been a point of concern in terms of stability and regulation.

Advancements in technology have also been highlighted in the discussions. It is argued that newer technology can already handle issues related to internet traffic, reducing the need for additional regulation. The rapid pace of technological development also means that government regulations can become outdated quickly, leading to the belief that the government’s role should be more focused on negotiation between companies.

Overall, the discussions highlight the complexity of managing internet traffic and the importance of cooperation between companies. The government’s involvement is deemed essential in facilitating these collaborations and ensuring the stability of online content providers. The popularity surge in video-on-demand, linear streaming, and live streaming further emphasizes the need for a deeper impact analysis. In considering local content contributions, platform and content neutrality should also be taken into account to ensure a fair and diverse content ecosystem.

Toshiya Jitsuzumi

Telecom carriers worldwide are heavily investing to improve Internet quality due to the surge in Internet usage driven by video-on-demand (VOD) platforms, resulting in increased operation costs. The digital divide, especially in rural and disadvantaged areas, requires additional investments from network operators and over-the-top (OTT) players. Different approaches, such as the Pigouvian tax and Coasean method, have been proposed to resolve issues between telecom operators and OTT players. In Japan, the extensive coverage of a high-speed fiber optic network has reduced the need for funding from OTT players. The oligopolistic nature of the Japanese telecom market may contribute to operators’ hesitation in seeking financial support. Drafting regulations in this rapidly changing market is challenging and can cause additional problems. Voluntary negotiations and alternative dispute resolution mechanisms are proposed solutions. New regulations targeting major VOD operators and incentivizing them to provide better quality services are suggested. However, concerns arise about fair contributions and potential implications for net neutrality. Excessive regulations may discourage VOD operators from entering or staying in the market. A data-based approach and data disclosure by VOD players are recommended. The summary attempts to accurately reflect the main analysis text and includes relevant long-tail keywords.

Moderator

The Japanese Video-on-Demand (VOD) market is experiencing rapid growth, reaching $3.5 billion in 2022. However, there is a lack of active discussions regarding fair contribution and local content contribution within the industry. Despite this growth, the Japanese government has a more restrained approach when it comes to regulating big tech, primarily requesting registration from companies operating in Japan. Moreover, there are significant disparities among various stakeholders within the VOD industry.

One notable aspect is the significant revenue that VODs generate for Internet Service Providers (ISPs) through their volume-based charging model. This highlights the potential profitability of VODs for ISPs and their incentive to support the industry. Meanwhile, introducing regulatory measures might pose challenges in a market that is rapidly evolving.

The importance of financial resources is highlighted in the discussion of fair contribution, with monetary contributions being seen as essential. Additionally, there is a suggestion to invest in rural areas to further support the development of the local digital economy.

Another aspect is the need to enhance accessibility to local content on digital platforms. This is deemed crucial for fostering the growth of the local digital economy. Currently, the broadcasting market in Japan struggles to achieve content diversity due to the influx of US content.

To address the issue of dominance within the VOD industry, it is argued that regulatory requirements should be imposed on dominant VODs to prevent the creation of unreasonable entry barriers. Furthermore, there is a discussion around potential obligations for VODs, such as distributing disaster alerts or providing universal access to sports content, which could serve the public interest.

Considering future requirements that may be imposed on VODs, it is suggested that more robust networks will be needed. Additionally, it is noted that many of the broadcasting regulations can potentially be applied to VODs, further reinforcing the need for regulation within the industry. There is also a global trend towards content regulations and accessibility rules, aiming to address issues such as obscenity, violence, and the need for closed captions and video descriptions.

The case of the Netflix Act in Korea demonstrates how regulation can ensure internet stability for content providers. However, some argue that rather than relying solely on regulation, technological advancements should be prioritized to resolve traffic problems. It is also worth noting that the impact of new streaming services, such as linear and live streaming, needs to be analyzed to gain a comprehensive understanding of the industry landscape.

Overall, while the VOD market in Japan is experiencing significant growth, there are numerous considerations and debates regarding fair contribution, local content contribution, government regulation, dominance, network costs, and the role of technology. The analysis suggests that various stakeholders, including the government, ISPs, VOD operators, and content providers, need to collaborate and engage in active discussions to establish appropriate regulations and policies that foster growth, mitigate challenges, and ensure a vibrant and inclusive VOD industry in Japan.

Nami Yonetani

The rise of global Subscription Video On Demand (SVOD) platforms, particularly in the US and Asian countries, is influencing video streaming regulations worldwide. SVOD giants like Netflix, Amazon Prime Video, and Disney+ have targeted global expansion and have a significant impact on the traditional audiovisual media industry. However, they face pushback from regulatory actions, with some arguing that these measures are anti-consumer. Despite this, local content contribution regulations are being introduced in European and British Commonwealth countries, while Japan presents a unique case where regulatory discussions on local content are yet to occur. The need for regulations is also debated in terms of network costs and content accessibility, as well as the potential impact of high local content requirements on consumers. It is suggested that regulations should be imposed under certain conditions and that VODs should contribute to network costs. The summary also highlights the importance of promoting local content without discriminatory requirements and fostering collaboration between VODs and telecommunications companies. The overall goal is to strike a balance between promoting local content and ensuring consumer choice and affordability.

Audience

The discussions revolve around the importance and complexity of network and net neutrality. Network neutrality is crucial to maintain an open and fair internet, ensuring that all data is treated equally regardless of its source, destination, or content. This principle prevents internet service providers (ISPs) from blocking or slowing down specific websites or services, or charging extra fees for faster access to certain content. Network neutrality promotes innovation, competition, and freedom of expression online.

However, the issue of network neutrality is complicated by cross-border issues and the influence of tech giants. In a globalized digital landscape, regulating the internet in a way that addresses the concerns of all stakeholders is challenging. Tech giants like Google, Facebook, and Amazon wield significant power and influence over online platforms, making it difficult to strike a balance between protecting user interests and ensuring a competitive market.

To tackle these challenges, some countries are implementing regulations to address network neutrality. While regulations are being developed in certain countries, there is a need for more information and ideas regarding new regulations for handling the complexities of network neutrality. This indicates that ongoing discussions and exploration of potential regulatory frameworks are necessary.

The discussions also consider the impact of strict regulations on Video on Demand (VOD) platforms and potential drawbacks. VOD platforms, which offer on-demand access to video content, have gained popularity. However, concerns arise regarding the content available on these platforms and the potential for harmful or inappropriate material to reach audiences. This raises the question of how to better measure and regulate VOD operators, highlighting the need for clearer guidelines in this area.

Overall, the discussions underscore the importance of network neutrality, the challenges posed by cross-border issues and tech giants, and the necessity of effective regulations to address these complexities. The impact of regulations on VOD platforms and the potential drawbacks are also examined. However, it is evident that further information, ideas, and discussions are required to develop comprehensive regulatory frameworks that protect internet openness and fairness while addressing the concerns of different stakeholders.

Moderator:
Okay. Time is start. Everyone. Hello, everyone. This is workshop number 149, VOD regulations, fair contribution and local content contributions. Okay. So, let’s start the workshop. Oh, I wanted to. Oh, yeah. Thank you. Here are the speakers of this session. Local speakers from here are venue from here in Tokyo, Kyoto. Dr. Nami Yonetani and I’m Ichiro Mizukose. I’m also the session organizer of this session. And remote speakers, Dr. Toshio Jitsuzumi from New York. Can you hear me? Oh, yes, I can hear you, but I’m not from New York. I’m from DC. Wow. Yeah. Thank you. And Mr. and Ms. from Seoul. Can you hear me? Hello. I can’t hear you. It’s okay. I can hear you. All right. Oh, each one’s background will be talked about in their presentations. So, yep. Today we discuss about two regulations. One is fair contributions and the other is local content contributions. This is very, very rough explanation of these regulations. Fair contribution is redistribute the money from VOD to investigate the telecommunication infrastructures such as fibers and the towers and et cetera. And the local content contribution is redistributing the money from the VOD to produce the local content and ordering them to promote the local content. Again, this is very, very rough explanations. So, after this workshop, I hope everyone get the more correct understanding of these regulations. So, we want to make this workshop a bit interactive with polling system by slider. So, if you have no internet access, please access the slider with code 3965076 and click the URL that’s posted here now. Just a moment. Yeah, I’m sending the URL. If you post, could you click that URL and make the polling? Yep. Sorry. What’s going on? Yeah, yeah, yeah, yeah. Yes, yes, yes. This is a practice and so on. Please choose one. Before this workshop, we want to know your background. Have you ever had a fair contribution on the local content contribution or both or none? Just wait for polling. Yes. Oh, no. Okay. Polling is coming. Just a moment. Share the slide to see the result. Yeah. Five people are voting. Oh, everybody knows about this session. Oh, no. One knows only fair contributions. One knows nothing. Okay. So now, this is a practice, so I switch to the real polling now. Just a moment. Yep. This is, I want to hear your opinion about, it’s too little, but you can see it in your display. Just a moment. Yeah, yeah, yeah. Oh, no. Why? Just a moment, please. Got it. Okay. This is a question that, wait a moment. The polling question is, do you think the government should make rules for VODs to distribute some of their profit with local telecom industry or the local content industry or both local telecom and the content industry or none of them? So even if you live in the middle of the workshop, please poll, and you can edit or change the poll at any time. Okay. I will show you the result at the end of the sessions. So go back to the agenda. Here’s today’s agenda. First, Toshio Jitsuzumi will talk about the fair contribution. Next, Aichiro Mizukoshi talk in the case study in Japan. Then, Michio shows the situation in Korea. And finally, Dr. Yonetani give a presentation about local content contribution. At our presentations, we have time of Q&A and discussion. So, Mr. Professor Jitsuzumi, please, is it okay?

Toshiya Jitsuzumi:
Okay. First, let me share my slides. Yeah. I stopped the slides. Can you see my slides? Yeah, we can see it. Okay. So, let me start. Hello, ladies and gentlemen, my name is Jitsuzumi of Chuo University and currently staying at Georgetown University and enjoying my sabbatical leave here. While I deeply regret not having the chance to meet you in person at Kyoto, but I’m grateful for this opportunity to present a brief summary of fair contribution debate. But let me first introduce myself very briefly. After an 18-year tenure at the Japanese Telecom Authority’s Ministry of International Affairs and Communications, I am now a faculty member at Chuo University and teach microeconomics focusing on network industries. And my recent research includes net neutrality, AI regulation, platform regulation, fragmentation of the internet, and fair contribution, which is a central theme of today’s panel discussion, I think. All right. Let me summarize three backgrounds that have ignited a discussion on the fair contribution so far. The first is, of course, the remarkable surge in global internet usage. This phenomenon is notably driven by the rapid expansion of internet video usage, which, according to the Cisco estimate in 2018, has quadrupled in consumer usage and tripled in business usage over the last five years since 2017. As you can easily understand, this escalating internet usage imposes a substantial strain on the operation of the underlying network. According to the estimate of frontier economics, the cost to European broadband network can range from billions to tens of billions of euros per year. Facing such a robust surge in network utilization, telecom operators worldwide are channeling considerable investment into their network to uphold and, where possible, augment the quality of internet experience for their users. However, in Japan, the growth in investment by telecom carriers has not resulted in a proportionate improvement in network quality, leading to challenges in offering enhanced broadband services that meet higher network standards. As my research in the 2010s reveals as displayed in this slide, especially the left-hand side, network investment of the Japan operators initially led to notable improvement in latency and then gradual enhancement in effective download speeds. Unfortunately, as the right-hand side graph shows, download percentage, which is a ratio of effective speed, I mean actual speed to advertised speed, has been declining, indicating that the Japanese telecom operators need to further expand the investment size in order to accommodate the demand of broadband users. As you can easily understand, this situation is just one example of the difficulty faced by telecom operators in many countries and which is one of the biggest backgrounds of the fair contribution controversy. The second one relates to the fact that in most countries, there still remains a substantial digital divide or digital gap in the rural and poor areas. In its 2019 report, the Broadband Commission, which was established by IT on UNESCO, underscored the lingering global digital gap and called for additional investment of network operators, which of course include OTT players. The third one pertains to the sustainability of universal service mechanisms. Currently, many governments bear the responsibility of ensuring essential telecom services for their students. This policy necessitates a problem of support to network operators which supply services in unprofitable remote regions. And the funds that support this substantive mechanism are often collected from users of very basic voice services. However, unfortunately, the proliferation of broadband has led to significant decline in voice service demand, raising concerns about long-term sustainability of such subsistence scheme. Therefore, in the U.S., this has prompted discussion, as you can see in this slide, regarding alternative funding sources, which I believe are very compatible with a fair contribution concept. In order to address these three challenges, operators must find new sources of revenue. But in the real world, numerous constraints curtail their capacity to freely pursue this quest. First, telecom carriers are usually bounded by rate and entry restrictions originally attributable to their natural monopolistic nature. Second, considering the pivotal role of telecom services, even legally permissible actions may encounter political constraints. Another example involves a significant reduction in mobile prices in Japan following an influential political statement of the chief cabinet secretary at that time, who then became our prime minister. Third, as shown in the graph on the right, the average revenue per users has diminished in recent years, indicating that any fee increase can risk significant user attrition. Fourth, in an area where IoT devices are penetrating all around us, acquiring additional frequency licenses is imperative for telecom operators, demanding further investment to secure frequency licenses and ultimately thin the financial resources for physical network maintenance. As a result, telecom carriers’ expansion strategy realistically has just two options. First, augmenting revenue by introducing non-telecom services. I think this is eagerly pursued by Japanese mobile operators right now. Second, charging additional network usage fees on OTG operators that utilize broadband networks for content distribution and make money, which is of course the heart of the fair contribution debate. The debate about fair contribution has gained additional momentum due to the noticeable difference in profit between OTG and telecom operators. This contrast is clearly illustrated in a report by GSMA, a group of mobile operators, which states that while telecom operator profit has been declining, OTG operators continue to make high profit. Yet, the theoretical remedy for this issue is remarkably straightforward. The crux of the matter lies in the reality that network expansion by telecom operators inherently benefits OTG players, yet the compensation growing from OTG operators is inadequate. Other things in the external economy properly is important to avoid under-investment by telecom operators. The resolution in theory involves two approaches. The first entails appropriate taxation of OTG operators. This is an approach proposed by economist Arthur Pigou and known as Pigouvian tax. The second revolves around the direct negotiation between relevant parties, in our case between the telecom operators and OTG players. This approach was suggested by another economist, Nobel laureate Ronald Coase. As an economist, it is a great pleasure for me to say that economic theory produced such a very elegant pair of solutions, but I have to remind you that we should not forget the existence of another externalities. Investment by OTG players in content application can drive greater demand for broadband services, resulting in a positive external effect on telecom carriers. In order to properly deal with this externality, telecom operators need to pay compensation to OTGs in return. So, given this dual existence of externalities, determining whether OTGs or telecom operators bear the burden rests on a case-by-case analysis. Although theoretical solutions are so simple, translating them into practice presents significant challenges of course. First, the majority of interconnection agreements that make up today’s global Internet are either settlement-free peering, where nobody pays the usage of other networks, or unidirectional transit agreements where lower-tier networks always pay to the upper tier. Clearly, most of them do not work well with a regime that enforces payment based on network usage. Second, for Pigouvian tax and Coasean method to succeed, participant parties must possess sufficient information of the surrounding situation and can reach consensus without much difficulties. But achieving them in the dynamic broadband landscape is exceedingly difficult. Last but not least, theoretical resolutions can clash with net neutrality principles, since net neutrality prohibits network operators from charging users outside direct contractor relationship and forbids QoS differentiation. So, under strict net neutrality, fair contribution cannot be realized. Europeans notably recognize these issues ahead of the global curve, and just before the World Conference on International Telecommunication 2012, European operators considered introducing a new approach, sending party network pay to reshape interconnection dynamics, which consists of peering and transit. However, this proposal encountered substantial opposition to the informal proceedings of the International Forum, and after this attempt, we have decades of stagnation for this SPNP discussion. However, probably influenced by the development in Korea, which I think will be explained by my fellow panelists, SPNP discussion began to resurface. Currently, Europe has published a proposal that calls for all stakeholders to make a fair and proportionate contribution to the cost of public goods, services, and infrastructure as a means of achieving the universal gigabit coverage by 2030. Of course, this proposal sparks ongoing debate with counter-arguments such as a concern of tighter regulation of broadband, disproportionate usage charges, and potential negative impact on broadband adoption. And while policymakers, industry representatives, and academia from various countries were engaged in heated discussion here, shocking news came on September 18 of this year. That is, after three years of heated disagreement, SK Broadband Network suddenly announced a ceasefire and ended the lawsuit. The detailed terms of the agreement are still unclear, but in any case, the situation in Korea… seems to have been settled to a point. But very interestingly, however, the issue of human contribution is hardly discussed in the neighboring countries across the Sea of Japan. Several hypotheses are possible. The first one is that Japanese carriers have already installed a network of excessive capacity and coverage so that the impact of internet video traffic is not severe. In fact, the average speed of over 80 megabits per second as of 2019 is sufficient for video viewing, and the fiber optic network has achieved more than 99.7% coverage nationwide. Therefore, there will be no need to ask all the operators to fund a new investment at this stage. However, this situation is limited to the investment expenditure and has no explanatory power regarding operating and renewal cost of the network. Furthermore, capital investment will continue to be required for mobile network because the mobile traffic is expected to skyrocket with 5G. As a result, I think this hypothesis alone is not sufficient. Second, because of a high degree of oligopoly in the Japanese telecom market, existing network operators have long been earning sufficient profit and thus do not feel the need to ask OTT to share the cost. At the very least, I feel this explanation applies well on the three largest companies, NTT, KDA, and SoftBank. On the other hand, this has limited explanatory power with regard to small and medium-sized players, which are less profitable. The last but not least hypothesis is that Japanese mobile operators heavily utilize Wi-Fi offloading in order to manage the huge amount of traffic, especially in the peak times. Thus, if they loudly claim fair contribution, they may end up paying large usage fees to fixed network operators. Whether either of these hypotheses can explain the unique situation in Japan, which differs very different from that of Korea, this is a topic for my future empirical research. All right, let’s turn on the focus on the Japanese telecom authorities. The Japanese telecom authorities have conjured a fairness of cost distribution within the context of neutral discussions but has yet to implement definitive actions. Even the recent amendment of Telecom Business Act, which identified broadband as a universal services, failed to incorporate the mechanism to procure necessary costs from OT players. So as a researcher, I maintain key interest in the Japan’s forthcoming decisions. With that, I conclude my presentation. Your attention is deeply appreciated, and now I yield the floor. Thank you very much.

Moderator:
Thank you very much. Yes, thank you, Professor Jisuzumi. So the next presenter is me. Just a moment. And I send the URL again, so please poll your opinion. Just a moment, please. Where is? I can’t see it. Oh, my goodness. OK. Let me start my presentation with a case study in Japan about these two regulations for BODs. First of all, my name is Ichiro Mizukoshi. I’m an internet engineer, especially for the operation of packet forwarding and security. I’m working for NTT East, and also the external board of the JPSAT-CC. But this presentation is solely my opinion and doesn’t show my company’s position, OK? Skip here. First of all, BOD is also growing in Japan. This is market size of BOD in Japan. It grew by 18% in these three years and reached $3.5 billion in year 2022. Here’s a detail. Oh, no, no, no. BOD is getting more popular in Japan. Seven years ago, only 15% of the people had used BOD. But now almost 40% have used it. Here’s a detail of the Japanese S-Board subscribed video-on-demand market. Familiar global BOD players, such as Netflix, Amazon, Prime, Dazoom, Disney Plus, and Hulu, those of them have shared more than half of the market. Then how about these two regulations going in Japan? As Professor Jitsumi said, fair contribution is very inactive. And also the local content contribution is also inactive. I’m an ISP industry guy, so fair contribution is occasionally talked in the ISP industries. What’s going on the EU? How about the trial in Korea is going? But there is no concrete actions have occurred as far as I know. And about the local content contribution, I’m not a content industry person, but based on my understanding, this topic is rarely discussed in Japan, partially because broadcasting regulations are non-existent. So, yep, why? It’s my humble opinion. There are three reasons adding to it. This means hypothesis. It’s the government stance, market size, and numerous stakeholders. First, government stance to the big tech. The Japanese government has a much more restrained stance compared to the EU. Here are the two recent activities in Japan. First one is request for registration in Japan. The companies that do business in Japan are legally required to register, not only their local arm, but also their global headquarters with authorities here. But such request has occurred. It means before June 2022, even Microsoft, Google, and Meta, such a global company, big tech, had not registered in Japan, just requested. And some of them are going out, but almost them are registered now. And the second one is just subject to the regulation. This year, search engines and social media with more than 10 million users are newly subject to the regulation. But there’s no heavy punch to find like in the EU. Japanese government take mostly name and shame approaches. If I may add, those two activities mainly focused on the promoting, protecting the personal information. So they’re not so much care about the market movement. So anyway, this approach is much more restrained. The second one is, as Jitsumi-san also mentioned, but the market size. As I showed in the previous slide, the VOD market is 3.5 billion, but related industries such as telecommunications, television, and video productions, compared to VOD, these three industries are order of magnitude larger. The last finding is numerous stakeholders. It’s not easy to define the ISP. However, assigning IP addresses to the customer is a core function of ISP. Currently, over 500 organizations in Japan have been delegated IP address blocks to assign to their customers. Yes, it’s including hosting, clouds, and so on. However, a fairly large number of ISP exists in Japan. The television stations, there are so many television stations in Japan. Terrestrial has more than 120, and cable stations 450, and satellites are 40 or more. And the size of these stakeholders, ISP and television sectors, is too wide a difference. Large ones target the national market, and the small ones target the rural areas. So it’s too hard to discuss the issue in one table. So it means there are too many stakeholders to cope with the VOD industry together. In addition, in the VOD industry itself, there are various domestic players. It’s also the kind of reasons, I think. Yeah, this is my last slide. I have been thinking about the fair contribution for more than 10 years and so on. This statement significantly impacted me. In year 2010, my friend, the executive of Mobile Operator said, we charge end users based on the volume of packets. So what it is good, that is a golden egg for us. I think this is an important message to the whole world. Yeah, thank you. So let’s pass to the next presentation. Ms. Cho, please. Can you hear me?

Cho Changeun:
Yes, I’m here. OK. Yes. OK. I’ll start. Hello, I’m Chang Cho, a research fellow at KDDI Research. Thank you for joining our workshop. My research focus on the broadcasting, ICT, and related policies. I have been writing about Korean ICT trends for various magazines of Nikkei BP, an affiliate of Nikkei newspaper in Japan. Today, I will be speaking about fair contribution and local contents contribution in Korea. Korean dramas, K-pop, and various other contents are gaining popularity in the world these days. Korea is not only a great contents creator, but also an internet powerhouse. It was the first country in the world to spread broadband to ordinary households. And it had the highest broadband penetration rate among OECD member countries in 2022. It created new industries, such as internet broadcasting, online game tournaments, and webtoons. When it comes to the internet, there are many instances where Korea starts first and influences the rest of the world. A recent example of this is debate over network fees. In Korea, platforms have usually paid network fees for ISPs. It has been taken for granted that both users and service providers pay for the network. There are many companies that want to provide services in Korea, but there are only four ISPs in Korea. The situation has changed when global big tech companies like Google, YouTube, and Netflix launch their services in Korea. With the majority of Korean internet users using Google, YouTube, and Netflix on a daily basis, the platform began to become more powerful than ISPs. In April 2020, Netflix filed a lawsuit against SK Broadband, a Korean ISP which had a significant impact on the fair contribution debate in Korea. First, let’s briefly explain what the lawsuit was about. Netflix asked the Seoul Central Court to rule that it was not obligated to negotiate or pay network fees for the delivery of content over SK Broadband’s domestic and international networks and for the operation and expansion of these networks. Netflix argued network neutrality, but the Seoul Central Court ruled in June 2021 that network neutrality is a principle that prohibits telecom companies from unreasonably discriminating against local traffic on their network and is not directly relevant to network fee discussion. The court also recognized that Netflix was obligated to pay SK Broadband for the paid services of accessing, connecting to, and remaining connected to SK Broadband network. The court also ruled that the two companies should negotiate how the network fees will be paid. Korean media reported that Netflix was in court and that all business with service in Korea must pay network fees. To understand how Netflix’s lawsuit against SK Broadband began and why Korean court upheld network fees, we need to go back to 2006. In 2006, Korean ISP Hanwha Telecom launched Hanwha TV, an IPTV service that allows users to stream video over the internet with a set-top box on their TV. It was the first IPTV in Korea and gained a lot of popularity due to convenience of being able to watch reality on TV using remote control. However, other ISPs did not like this and shut down Hanwha TV. Claiming that it increased the traffic of subscribers who were using Hanwha TV VOD, Hanwha TV is currently still in service as SK Broadband BTV. By registering the Internet Multimedia Broadcasting Business Act in February 2008, KT, SK Broadband, and LG U-Post, which are both telecom companies and ISPs, launched closed IPTV services for their own subscribers. With these three companies offering combined internet, phone, and IPTV discounts, most households now subscribe on IPTV. In 2012, Samsung Electron’s newly launched Smart TV became a problem. In a service merger that allows Smart TV to access royalty from various companies, the ISP KT blocked the Samsung Smart TV from accessing KT Internet, citing increased traffic. All Smart TV ended up paying network fees to ISP or paying something even it wasn’t quoted the network fees. Then in 2016, Netflix launched in Korea, and subscribers started to grow, and YouTube users skyrocketed. Naver, a portal platform with the most users in Korea, raised the issue of network fees. Naver asked ISPs to disclose how much YouTube paid for network fees, which accounts for 17.8% of video viewing time in Korea. Naver argued that network fees that are strictly applied to Korean companies but not to global companies are problematic. The National Assembly also said that it was not fair to discriminate between Korean companies and global companies. The debate started over paying network fees fairly. The discussion on fair contribution to internet network maintenance and investment began earnest. As Netflix subscribers grew, so did the traffic for Netflix VOD. When Netflix launched in Korea, two of the country’s ISP, KT and LG U+, partnered to make Netflix available using their IPTV remote instead of network fee. They chose to share the profit when their subscribers signed up Netflix. SK Broadband decided to take network fee. Starting in 2018, SK Broadband expanded its network because it felt that the traffic from Netflix subscribers was damaging users who didn’t subscribe to Netflix. Since it expanded its network for Netflix, it proposed to Netflix that Netflix should share the cost. In 2015, Netflix insisted on installing Open Connect inside SK Broadband’s facilities, claiming that it could reduce 95% of traffic. SK Broadband refused, saying that Open Connect would not solve the problem, and asked the Korean Communication Commission to mediate to make Netflix negotiate a network fee. Netflix rejected that arbitration and asked the court to rule that it did not have to pay the network fee and did not have to negotiate. The result was a de facto defeat for Netflix. In September 2021, SK Broadband sued Netflix under their unjust enrichment provision of civil acts. It claimed that Netflix had ignored the first judgment, refused to pay network fees, and to negotiate. Netflix appeared in December 2021. Netflix insisted that SK Broadband could not bill Netflix for the increased traffic because it is charged based on internet speed to their subscribers. Google and YouTube cited Netflix. The National Assembly was considering a law change that would require CPs to sign contracts with ISPs, stating that they must pay for network uses, which they opposed. In September 2023, Netflix, SK Telecom, and SK Broadband formed a strategic partnership and ended all litigation. The three companies announced that they would work together for the good of their users. Korean media reported that following reasons for the end of litigation. Netflix would have paid SK Broadband for its network behind closed doors because it was likely to lose on a peer, and sitting presidents would have triggered lawsuits in other countries. Experts calculated Netflix’s network fees, which could have been up $108 million. In Korea, why do we have to pay ISPs for network fees? Korean Telecommunication Business Act defines interconnection as paid peering, by default. Interconnection between ISPs is also paid peering. ISPs are contracted on a bill-and-keep basis, so they don’t pay each other, but it’s not free. In Korea, there are only four ISPs, but there are many OTTs. The most popular OTT in Korea is Netflix. In September 2023, it was reported that more Koreans use Netflix than all other Korean OTT combined. For ISPs, the most important question is what kind of agreement they have with Netflix to address network fees and fair contribution issues. Korean ISPs are working with European telecom companies who have the same concerns. In Europe, the majority of traffic is dominated by a handful of big tech companies. But even in Korea, some people are questioning network fees. Civic groups argue that subscribers pay for internet every month, and ISPs also collect network fees from service providers. This is like a toll tax. Does this mean that a popular K-pop content platform should pay network fees to overseas ISPs because it has a lot of overseas users? Civic groups ask. The National Assembly is considering amending the Telecommunication Business Act to make network fee agreement mandatory. However, the legislation has told it amid growing public opinion that it should be left to negotiations between ISPs and other companies. In Korea, the Netflix Act was enacted in December 2020 following a lawsuit by Netflix, stating that big tech platforms are also obligated to keep internet network safe. Apart from network fees, platforms will be held liable if they cause excessive traffic and disrupt services. From here, I’ll talk about local content. As the Korean wave has become a global phenomenon, global OTTs like Netflix and Disney Plus are investing in Korean local content. They are competing to possess Korean dramas. The government has given more tax deductions to video content produced in Korea. Korean productions are happy. But politicians think that Koreans shouldn’t be a content production subcontractor for Netflix. For the sake of more profits for Korean companies, they are not satisfied with exporting contents and want to support for worldwide expansion of Korean OTT platforms. Finally, who should pay for sustainable internet service? In 2020, the Korean government designated 100Mbps broadband as a universal service. In any region, telecom companies must provide internet at a speed of at least 100Mbps to all subscribers. This requires ongoing investment. The number of people using VOD services is growing, and a small number of companies are generating huge amounts of traffic. We need to think about whether telecom companies and ISPs should take all responsibilities for the traffic or whether the business that causes the traffic is also responsible. The CEO of a Korean ISP, KT, said that in the future, not only VOD, but also AI may cause traffic problems. In the case of local contents, Korea will invest more in contents to maintain the economic effects derived from the Korean wave. Global OTTs that distribute Korean local contents are also important, so cooperation is important. In order to create an environment where everyone makes a fair contribution rather than an environment where someone has to sacrifice, I think there should be more communication between companies, like the workshop we are doing today. Thank you for listening.

Nami Yonetani:
Thank you. Hello, everyone. Hi. I’m Nami Yonetani. Today in my presentation, I would like to talk about the regulatory responses around the world to the rise of global video streaming giants with a particular focus on the discussions on local content contribution. Before getting down to the main point, please allow me to introduce myself briefly. Again, my name is Nami Yonetani. I’m a researcher at the Foundation for Multimedia Communications in Tokyo, Japan. Actually, this is my very first time attending IGF, and I’m very excited to share my research findings today. So, let’s move on to our main topic. First of all, I would like to give you a quick overview of the current state of video streaming. Although there are many types of video streaming services, they can be classified into five categories by their revenue model and distribution model. And the five categories are AVOD, FAST, SVOD, VMVPD, and TVOD. And among all of these, SVOD, which stands for Subscription Video On Demand, is leading the global streaming market. And as you can see in this table, SVODs based in the US and Asian countries have a great number of global subscribers. Especially the three major US SVODs, which are Netflix, Amazon Prime Video, and Disney+, have targeted global expansion since early stage. One of the reasons for their global popularity is their original and exclusive content. For example, Netflix’s original series called Wednesday became a global smash hit last year, and it is reported that it has been watched for more than 1 billion total hours by over 150 million households. And various previous studies have shown that such popularity of US SVODs is having a great impact on the traditional audiovisual media industry. For example, in the broadcasting industry, consumers are moving away from pay TV to US SVODs, which are rich in content and much cheaper. The same thing is also happening in the film industry. Recent studies have discovered that consumers, especially the younger generation, are moving away from the cinema to watch films on US SVODs. Given this situation, more countries are regulating video streaming platforms to counter US SVODs. There are several points of contention, but one of the biggest points is possible unfair market competition led by regulatory asymmetry between broadcasting and video streaming platforms. Although broadcasting and streaming are similar in the fact that they both distribute videos, law tends to lag behind video streaming, which is a relatively new technology. Since around 2020, to reduce such regulatory asymmetry, some countries have imposed similar regulations on video streaming platforms to the ones that they have done on broadcasting platforms. Especially, regulations on local content contribution, which is the subject of this presentation, are being introduced mainly in European and British Commonwealth countries. As you can see in this figure, governments are applying or trying to apply local content requirements such as content quotas and financial contribution obligations not only to broadcasting platforms but also to video streaming platforms. This table shows you the countries which introduced or are in the process of introducing local content requirements on video streaming platforms. As a side note, as Dr. Cho mentioned in her presentation, South Korea takes a quite different approach from these listed countries. While these countries are taking a defensive approach to protect their local audiovisual industry against U.S. efforts, South Korea is adopting a more aggressive approach to foster local industry that can compete with U.S. efforts. Here I want to point out that there are more than one policy approach towards large U.S. streaming platforms, and my presentation is focusing on the defensive approach taken by the countries listed in the table. In the next few slides, I would like to share the regulatory discussion in the countries highlighted in sky blue, which I consider to be important and distinctive. We’ll start with the European Union, which is the pioneer in regulating local content contribution. In response to the accelerated influx of U.S. content in the 1980s, the European Union introduced the Television Without Frontiers Directive in 1987 with the aim of protecting the European audiovisual industry from the U.S. and required broadcasters to contribute to European works. Subsequently, in 2007, the Audiovisual Media Service Directive, AVMSD, was introduced to regulate video-on-demand, VOD platforms, and the directive was revised in 2018 to require VOD platforms to contribute to European works as well. Firstly, the revised AVMSD instructs member states to make VOD providers under their jurisdiction secure at least a 30% share of European works in their catalogs and ensure prominence of those works. It does not mention exactly how to give or measure prominence, but it is expected that European works should be immediately viewable on VOD platforms, for example, on their homepages, recommendations, and search results. And secondly, the revised AVMSD says that member states may require both domestic and foreign providers targeting audiences in their territories to contribute financially to European works. And among all member states, France is the one with the strictest requirements on VOD platforms. France transposed the revised AVMSD into national law in 2021, but with further strict requirements. Moreover, they have their own system called the Media Chronology Rule, an industry agreement on the release window of films which is formed in the government’s presence. The latest version of the rule came into effect last February, and it was decided that SVODs can distribute films 17 months after cinematic release. However, it may be shortened to six months with agreement of film industry. And in fact, Netflix has succeeded in shortening the distribution period from 17 to 15 months in return for extra investment in French films. On the other hand, Walt Disney is raising a strenuous objection to this rule, arguing it’s outdated, and they are protesting by refusing to release some new Disney films in French cinemas and distributing them exclusively on Disney+. In contrast to France, the United Kingdom transposed the revised AVMSD into national law with minimum requirements before Brexit. And after Brexit, they started to explore its own regulatory framework to ensure the Britishness of content, and announced the draft media bill this March. The focus of this bill is to maintain and strengthen public service broadcasters, PSBs. So what is PSB? PSBs are broadcasters intended for public benefit rather than to serve purely commercial interests, and they are granted privileged access to Spectrum in return for various content obligations. So, returning to the bill, there are a number of proposals aimed at strengthening the presence of PSBs, but one of the most eye-catching proposals is to give prominence to PSBs’ video streaming services on connected devices, including smart TVs and streaming devices such as Amazon Fire Stick. What is more, the BBC has sent a letter to the Parliament calling for a dedicated button to provide a shortcut to PSB streaming services on all television remote control, so the current regulatory discussion in the UK affects not only video streaming platforms but also manufacturers. Now I would like to turn our attention from Europe to the British Commonwealth country, Canada. Canada is a country of immigrants and a neighbour of the superpower, the US, therefore the overriding issue of Canada has always been how to shape its identity as a nation. With this in mind, the Broadcasting Act was amended in 1991 to protect Canadian culture from the arrival of American television. The Act implements the so-called Canadian content rule for broadcasters and requires content quota and financial contribution. However, in 2015, the government expressed concern that Canadian content rules on broadcasters were becoming a dead letter as video streaming services grew in popularity, and they argued the need to support the discoverability of Canadian content. Finally, the Online Streaming Act was passed this April to modernise the Broadcasting Act, and this Act will expand the definition of broadcasting to include video streaming in it and apply Canadian content rules to both domestic and foreign video streaming platforms, and now they are currently in the process of public consultation, public hearing to finalise the regulatory framework. Finally, it is neither Europe nor the British Commonwealth, but I would like to mention Israel, and first and foremost, I would like to extend my deepest sympathies and condolences to the victims and their families in Israel and Gaza. The situation is absolutely heartbreaking. So let me get back to the regulatory discussion. Pay TV operators are already obliged to make financial contribution to local content in Israel, and the Netanyahu government, which was formed last November, introduced the Broadcasting Bill this August to apply the same obligation to video streaming platforms. However, there are voices predicting that the government, which is said to be the most far-right and religious in Israel’s history, might introduce stricter video streaming regulations, including content quotas, for political reasons in the future. So here, in this slide, I wanted to point out that there are possibilities that local content requirements may be imposed, not just for cultural or economic reasons, but also for political reasons, and of course this could apply to any other countries, not only Israel. Okay, the video streaming platforms are, of course, trying to push back against such regulatory actions. Netflix claims a legal compulsion to contribute to local content would be anti-consumer. Firstly, they point out that content quotas would merely encourage spending on quantity over quality, and result in mass-producing cheaper and low-quality works. Secondly, they argue that tweaking recommendations in ways that undermine viewer choice and preferences to meet the prominence obligation would lead to a disappointing viewing experience. So let’s say there’s a viewer out there who loves romantic comedy, but Netflix recommends a zombie film to them, to him or her, only because it’s local content. Then it is easy to imagine that the viewer would be less satisfied, and may give a low rating to the zombie film. What is more, he or she might even cancel Netflix. So Netflix is saying that prominence obligation would make no one happy, neither the viewers, the creators, nor the video streaming platforms. And thirdly, Netflix insists that the market forces have already made Netflix spend significant money on local content, thus there’s no need to legally obligate. Finally, they point out it is discriminatory that foreign video streaming platforms are often obliged to contribute to a local content fund, but are not allowed to use it. On another front, Walt Disney mentioned a new global expansion strategy for Disney Plus this August. They revealed that they are thinking to prioritize markets to make Disney Plus profitable by 2024. To be specific, while they’re going to continue to invest in local content in high potential markets, they will invest less in local content in mid potential markets, and may even shut down Disney Plus in low potential markets. So this means that in some countries, Walt Disney might decide that following local content requirements is unprofitable, and shut down Disney Plus. So far, I’ve shown the discussion in European and British Commonwealth countries, but from now on, I would like to specifically look at what is happening in Japan. In Japan, so far, there has been no regulatory discussion regarding the contribution to local content by video streaming platforms. I hypothesize that there are two reasons for this. Firstly, the regulatory playing field between broadcasting and video streaming platforms is relatively level in Japan. And secondly, Japan is a Galapagos market where broadcasters are not much damaged by U.S. S-Watt giants. So let me explain from the first reason. While broadcasting falls under the Broadcasting Act of 1950, video streaming is exempted from the act. Therefore, I think it is safe to say that regulatory asymmetry does exist between them. However, such asymmetry is slight in Japan, as broadcasting regulations, especially content regulations, are much more relaxed than in other countries. For example, we do not have local content requirements for broadcasters like the European and the British Commonwealth countries. In this sense, broadcasting and video streaming are already placed in a fair regulatory environment in Japan. The second reason is based on the uniqueness of the broadcasting market in Japan. And there are two unique aspects. Firstly, unlike many other developed countries, including the ones we’ve seen in this presentation today, pay TV households remain in the minority in Japan. 80% of TV households watch TV via OTA signals, and private-owned OTA broadcasters are the most popular television stations. So this means that there is no direct conflict of interest between popular broadcasters and U.S. S-WATCH giants due to the difference in their revenue models. Secondly, Japanese viewers prefer to watch local content, Japanese content, on U.S. S-WATCH platforms. The table on the left shows the result of a nationwide questionnaire I conducted in Japan in 2021. And it was revealed that people, both young and old, highly prefer to watch Japanese content, especially TV programs and animes, on U.S. S-WATCH platforms. And the figure on the right is from Bloomberg last year. It shows the share of the top ten programs in major Netflix markets that also appear in global rankings. While the more to the right, the more overlapping their tastes, Japan is at the left end, which means that Japanese viewers have quite different tastes from global trends. And so when U.S. S-WATCH arrived in Japan around 2015, most of us thought that they would be a significant threat to the broadcasters, to the domestic broadcasters. But it turns out that U.S. S-WATCH are now just new channels for broadcasters to distribute Japanese content to Japanese viewers. However, does this mean that Japanese broadcasters are able to keep enjoying easy days? In my opinion, U.S. fast platforms, which are gradually expanding globally, could emerge as a potential threat to Japanese OTA broadcasters if launched in Japan, as they are both based on the free advertising business model and thus have a direct conflict of interest. If that happens, some sort of regulatory discussions on video streaming might finally occur in Japan. And that brings us to the end of my presentation. Thank you very much.

Moderator:
Oh, thank you so much. So all the presentation has been done. So just before going to the Q&A, just check the polling result, just a moment here. Oh, unfortunately, only five voted, sorry, and most of them disagree to regulators by government. Okay. Hmm. So before going to the discussion, we wanted to know the presenters’ polling result. For the order of the presentation, Professor Jitsuzumi, please, what’s your opinion?

Toshiya Jitsuzumi:
I think, oh, thank you. It’s a very interesting presentation of all the presentations. First of all, I have to say thank you for the information. And for the questionnaire result, which you presented on the screen, I think my answer is that we do not need any regulation on this matter. But in the presentation, I say that concerning the existence of externalities, some kind of compensation should be justified in order to make the resource allocation more effective. In order to make the resource allocation efficient in the market. However, to introduce a government regulation is a different matter, because concerning the information asymmetry, which the government had to consider when making some regulations, drafting a regulation in this rapidly changing market is very difficult, and cause additional problems for the market itself. So my recommendation is to ask or to make the negotiation between the actual players as much as possible in order to come up with efficient outcomes. How much compensation they need, and which side should be obliged to pay the other side. So instead of asking government to introduce regulation on these matters, I recommend the government to make those negotiations as easy as possible. For example, it’s very difficult for the small and medium-sized operators, medium-sized network operators to start negotiating with the export giant of the US, because according to the voice of my friend who is in the business of small ISPs, they said it’s very difficult to start negotiations, to start making contact with their networks and other networks and YouTubes. So maybe the government can dispatch some experts to start negotiations or to start making some contact with their content giant to start negotiating with efficient terms and conditions of those compensations. Or they can introduce some alternative dispute resolution mechanism in order to prepare for the situation where the negotiation just broke up. So that is my thought about this question.

Moderator:
All right, thank you. It’s my turn. I choose to support both. It’s a minor one, anyway. The reason is very simple, because money is essential. And I’m not a content guy. I can’t say much about the content. But about the fair contribution, yeah, as I said in my last slide, based on the packet charging is important. It will solve all of the problems. However, if the purpose of the fair contribution is for the broadband universal service fund, I would like to invest in rural areas. So I could agree with it. That’s my opinion. So, Ms. Cho, please.

Cho Changeun:
Yes, I can hear you. I think government needs to play a role in helping to negotiate well between companies rather than creating new regulations. Because technology is developing very rapidly. But it takes time for government to set the regulations. When the government tries to regulate the enterprise on the issue of traffic related to VOD or something, and the need for fair contributions in network infrastructures, investment, and maintenance, it is the need for need. But I don’t think, I think it’s not need a new or a regulation. Just government needs to play a role in helping negotiate.

Moderator:
All right. You also none. Okay. How about you, Yonetani-san?

Nami Yonetani:
I think I would vote to the fourth option, content. Because I do think that the government has a role to play to make VODs promote local content. Because I believe increasing accessibility to local content on digital platforms is one of the key elements to develop local digital economy and it is hard to achieve by market forces alone. We’ve already seen in the broadcasting market that it is very difficult to achieve content diversity when there’s a flood of cheap and exciting US content in front of us. However, I also believe that such requirements should only be imposed in two conditions. First, it should be imposed when the broadcasters are already under similar requirements and there is a need to reduce regulatory asymmetry. Second, the minimal requirements should be imposed on dominant VODs, otherwise the requirements would be an unreasonable entry barriers. And in terms of fair contribution to network costs, I think legally forcing VODs to negotiate deals with local telcos would be enough for now, because actually I’m not sure if the government is able to define the fairness, but also I have to point out that some countries are currently discussing to impose public interest requirements on video streaming platforms, including VODs. For example, some are debating whether to obligate video streaming platforms to distribute disaster alerts, and some are debating whether to include video streaming technology to ensure universal access to major sports content. So, if such requirements are imposed on video streaming platforms in the future, we would need even more robust networks than we have right now. So, considering such possibilities, I am open to the idea to widen the scope of contributors of network costs.

Moderator:
Okay, so your answer is none, or partially yes to the content?

Nami Yonetani:
Yes, that would be right. Partially? Partially, yes. Minimal requirements.

Moderator:
Minimum requirements. Most of the panelists believe the market mechanism, right? So, let’s start the Q&A and discuss the sessions. Do you have any comments and questions? Anybody?

Audience:
Hi, I’m Keisuke Kaneyasu from NEC Corporation. So, thank you for your presentation and discussion. So, it’s a very informative issue. So, I think it seems to be an important issue about network and net neutrality. So, particularly the difficult point is, so relation, cross-border issue, and each giant tech issue, or computation role, or right of know, like access to information or contents. So, a lot of issue. So, I know some country made rule or regulation ongoing. So, it’s a very confusing issue. So, give me more information to clarify. So, do you have any other idea for new regulation to be improved to measure VOD operator, like networks?

Moderator:
So, you’re asking new, is there any new regulations for the VOD operators? Yes. All right. How about you, Yonetani-san, please?

Nami Yonetani:
Thank you for the question. In terms of media policy, I think that most of the broadcasting regulations could potentially be applied to VODs, because there’s even countries that have introduced licensing for VODs. But, as a global trend, the most prominent discussion currently revolve around content regulations and accessibility rules. In this case, content regulation means prohibiting obscenity and violence and introducing age rating systems for the content. And accessibility rules is requiring closed caption and video description.

Moderator:
All right. How about you, Ms. Cho?

Cho Changeun:
About regulation, in Korea, Korea has a duty to secure internet stability of content provider, called the Netflix Act. Russian platforms and VOD service providers, which have more than 1 million users a day and account for more than 1% of total traffic in Korea, are also obligated to maintain stability in the quality of the internet network. The name is Netflix Act, but Netflix has never been a problem. Only Korean companies failed to comply with Netflix Act. So, I think regulation is possible, but technology is also possible that new technology has already come out and solved the problems about traffic. So, I think we don’t need a new regulation.

Moderator:
Thank you. How about you, Professor Jitsumi?

Toshiya Jitsuzumi:
All right. It’s a very good question. I think the necessity of introducing the new regulation of the major VOD operators. Let’s focus on the discussion on the fair contributions. I was thinking that what happens if the VOD operators refuse to pay fair contributions to the local network operators. I think what happens is that the QoS for the local viewers deteriorates. Even if they refuse to pay fair contributions to local network operators, local operators cannot block the infusion of the OTT content from abroad because there are lots of gateways to the local network. And that is how the internet was designed in the first place. So, the incentive for the VOD operators to pay the fair contribution is required. So, one possible incentive to motivate the VOD operators to pay the fair contribution is to provide better qualities. No congestion even in the peak hours or the smaller latency. So, from the viewpoint of net initiality, which is my major research focus, this situation is equivalent to providing a paid prioritization to the content providers. So, introducing some regulation to authorize the network VOD operators to pay fair contributions to local network operators is equal to allowing the fast lanes in the internet, which can be a very controversial issue in net neutrality. So, from the viewpoint of policy reasons or cultural reasons, it might be a good thing for the local government to introduce such a regulation, but from the viewpoint of net neutrality, it is very questionable. I personally have to say that I am not a strong supporter of net neutrality, but there are some supporters for net neutrality and they will have a huge discussion against the introduction of the regulation, which is applied only to the major VOD operators, I think. That’s my impression.

Moderator:
All right, thank you. So, you’re talking about net neutrality around the world and there’s some local neutrality in the country, right?

Toshiya Jitsuzumi:
No, I think that in order to motivate the VOD operators to pay the fair contribution to some local network operators, there is some incentives. Incentives can be providing better quality to the network operators. Otherwise, they just refuse to pay the fair contribution and to let the QoS of the services in the local market deteriorate.

Moderator:
All right, thank you. So, my opinion is, if the VOD goes to the news, I mean journalism, the cross-media ownership regulation should be applied, but I’m not sure about such other things. My feeling is such a VOD has a strong power to the local countries, so the kind of network or the content neutralization should be applied. That’s my feeling. Is there any comment? All right, thank you very much. Any other questions?

Audience:
Okay, can you hear me? My name is Tomohiro Fujisaki from the Internet Society Japan chapter, but here I’m speaking in my own capacity. My question is about regulations. I already had some answers in the discussion, but I want to know, are there any potential drawbacks or unintended consequences associated with the regulations? I know the regulations are very, very strict, so I want to know the side effects of the regulations.

Moderator:
All right, thank you. So, the bad effects of the regulations, anyway. So, how about the professional of these regulations? First, the decision, please.

Toshiya Jitsuzumi:
All right. It depends on what kind of regulation we are in mind. Consider the situation when the government oblige the VOD operator to pay some amount of fee to the local networks. So, in my opinion, it’s very difficult for the regulator to come up with exact appropriate numbers, appropriate fee level, which the network operators, VOD operators, to pay in order to cover the externalities and make their investment efficient from the viewpoint of economic efficiencies. So, if the government officials are asked by the politicians or the research groups to come up with numbers, they have to ask the operator themselves. I mean, they have to ask the network operators or the networks to come up with some figures. So, this situation is called regulatory capture and cause a different problem of efficiencies. And also, if they come up with some numbers, it can be very high or very low. So, I think they will be more influenced by the local operators and the VOD giants. So, if the regulators introduce a fee which is higher than the efficiency level, maybe the VOD operators think that this market is not a high potential market, especially in Japan, which has an aging population and a lowering income in the long-term perspective. If the government introduces too strong a regulation on this matter, maybe the networks or YouTube determine that we should stop making business in this country and go out. So, I think that if that happens, it will have a huge negative impact on the Japanese economy. So, that’s the second reason I think that the regulation is not appropriate in this matter.

Moderator:
Thank you. Go out? It’s a worse case. So, how about you, Natani-san?

Nami Yonetani:
I think the same can be said for local content requirements. If the local content requirements are too high, it may result in higher prices for consumers, and in worst case scenario, VODs might withdraw from the market, which means that consumers would have less choice of content. What is more, it might encourage piracy, because consumers seek to access content outside the legitimate channels. So, I believe that requirements should be non-discriminatory and minimal, because the ultimate goal of local content requirements on VODs should not be protecting local industry, but to ensure consumers’ access to diverse content.

Moderator:
All right. Thank you. Any comments? Thank you so much. Thank you. So, it’s the end of the time. Any questions more? Okay. Thank you so much. It’s… Oh, yeah. So, we want to ask the final comment from the panel. Sorry.

Toshiya Jitsuzumi:
The first one, Professor Jesumi. Okay. Sorry. Okay. I have to… I don’t want to repeat my previous comments, but I just say that everything should be determined based on the data, not the political statement or the emotions. As an economist, we need data. Based on data, we can have a more rational conclusion or recommendation to the government. So, in order to get some data, I ask all operators on VOD players to disclose.

Moderator:
All right. Thank you. Ms. Cho?

Cho Changeun:
Yes. Thank you for listening. And I think regulation starts out always with good intentions, but technology adjusts so quickly that another problem always arises. I think there is a need for more government organization to companies together, like this workshop. I need more negotiation and cooperation if needed. Thank you. Thank you. In today’s workshop, the focus was on VOD, but considering the increasing popularity of linear streaming and live streaming, I think it is our future task to analyze the impact of those new streaming services to deepen our discussion. And also, as Professor Jitsuzumi mentioned about net neutrality during the discussion on fair contribution, I think that we have to consider platform neutrality or content neutrality when discussing on local content contribution. I hope we can have an open discussion again at future IGF. Thank you, everyone, for joining us today.

Moderator:
Thank you. It’s truly ending. Thank you for coming. Thank you.