A group of lawmakers have set out to strengthen the regulation of foreign internet companies operating here, responding to complaints that they are not bound by the same laws that apply to competing South Korean firms in the sector.

Led by Rep Byun Jae-il of the ruling Democratic Party of Korea, 10 lawmakers recently proposed four bills aimed at “creating a level playing ground” and resolving the “reverse discrimination” problem in Korea’s information and communication technology sector.

Among them is an amendment to the Act on Promotion of Information and Communications Network Utilization and Information Protection, mandating foreign internet companies like Google, Facebook and Netflix to install physical servers within Korea in order to operate here.

If passed, the stipulation would mandate foreign internet firms deliver more stabilized services to Korean users, as well as put them on a level playing field with Korean ICT firms, Byun said. Those who do not abide by the proposed law would face a penalty.

The bill was introduced in response to an incident last year in which Korean users experienced a slowdown with Facebook’s services due to a spat between the social network operator and local telecom companies, as they negotiated network maintenance and operational cost arrangements.

In March, the Korea Communications Commission issued a penalty of 396 million won ($367,000) to Facebook Korea on grounds it violated the local telecommunications law by deliberately slowed down two local internet service providers’ connection speeds to Facebook’s apps while negotiating network usage fees.

The case reignited persistent criticism that global internet-based service operators, despite generating massive user traffic in Korea and reaping high profits, have benefited from a lack of regulatory surveillance because their servers are based overseas.

Korean ICT firms, such as web portal giant Naver, have claimed it is unfair that their global counterparts, due to their servers being based overseas, are not subject to the same Korean ICT regulations and tax laws that local businesses are mandated to follow.

Alongside the Korea-based server requirement, the 10 lawmakers also proposed an amendment to the Internet Multimedia Broadcast Services Act that would define and set up regulations for over-the-top media service platforms such as YouTube and Netflix.

Korea currently lacks regulations, let alone a legal definition, for OTT services, and thus the industry has remained largely unregulated. This situation had sparked fairness complaints from traditional paid broadcast service providers such as IPTV and cable TV operators.

The proposed bill sets a definition of OTT services and claims jurisdiction over companies’ actions, even if performed overseas, if they impact the Korean market or users.

In addition, the lawmakers have proposed amending the Framework Act on Broadcasting Communications Development to mandate OTT service providers pay a portion of their revenue as a contribution to the Korea Broadcasting Development Fund, as do paid broadcast service firms.

The remaining bill seeks to amend the Broadcasting Act to mandate OTT service providers report annually to the KCC’s Broadcasting Market Competition Evaluation Committee, which collects information and evaluates the status of competition in Korea’s broadcasting market every year.

By Sohn Ji-young (jys@heraldcorp.com)