Sung-Joon ChoiKCC Chairman

OTT Video Services in Korea

: Network Neutrality

1

Contents

OTT Issues: Overview 2

Network Neutrality3

Government-level responses4

Asian-Pacific Cooperation5

Changes in the Video Industry1

2

3

Contents

OTT Issues: Overview 2

Network Neutrality3

Government-level responses4

Asian-Pacific Cooperation5

Changes in the Video Industry1

3

4

OTT : Current status at global level

Broadcast$428b

2017

Online Video$37b

8%92%

OTT will be 37b US$ by 2017Broadcast market estimatedat $430b globally, by 2017

2011 2012 2013 2014 2015 2016 2017

Bil

lio

n U

S$

0

10

20

30

Average annualgrowth of

TransactionsSubscriptionsAdvertising

29%

5

OTT in Korea

2014 2015 2016 2017 2018 2019 2020

Revenue

1.926 억

2,587 억3,069 억

4,149 억

5,136 억

6,345 억

7,801 억

2014(e) 2015(e)

Subscribers

22.5 mil

2.2 mil

30 mil

3.5 mil

pay

free

While many subs,

not many pay users!

Why?

6

OTT in the U.S.

OTT Video Service

(time shift + multi-device + everywhere)

Netflix

Amazon

Apple

Hulu

Xfinity

HBO Go

Very High Price ($30~$80/m)

Low Price & Conve-nience

Expand Rev-enue

No Flexibility (Time, Space, Screen)

US Video Indus-try

Abundant Videos

Revenue Compensa-tion

Chromecast

Low Price & Conve-nience

7

Broadband Revolution

The background of emerging OTT

Changes in the users

Source : Akamai

South Korea

Japan

Switzerland

Netherlands

Hong Kong

Latvia

United States

77%54%

45%

44%

43%

37%

36%

Participating Users(Social viewing)

Mobile Users(Mobile)

On-demand Users(Non-linear)

The Republic of Korea 1st for High Speed Internet Penetration

Sam

Smart Revolution Global Smartphone Shipments Share Q1 2015

Source : Counterpoint Research, April 2015

Others37.20%

Lenovo6.50%

Huawei5.10%

Xiaomi4.50%

Samsung,24.4%

Apple,17.9%

LG,4.5%

8

Overseas OTT players Korean OTT players

Major OTT players

DedicatedOTT Player

Pay TVPlayer

InternetPlayer

ContentsProvider

PublicBroadcaster

9

Contents

OTT Issues: Overview 2

Network Neutrality3

Government-level responses4

Asian-Pacific Cooperation5

Changes in the Video Industry1

2

10

Example: Asymmetric regulation issue

Smart PhoneTablet PCDMB

VS

TV

OTT : Relatively low regulationLegacy player : Strict regulation

11

Example: Equal Access to Content/Program

Fair Competition

Equal Access to NBC/Comcast Contents

terrestrial broadcasters stopped to provide their content to 3 mobile carri-ers('15. July)

TerrestrialBroadcasters

Major

OTT

12

Cross-border IssueDomestic Issue

OTT Issues

C vs. P - Fair Trading- Re-Transmission- Revenue sharing

C/P vs. N= Network cost sharing issues

Inter & Intra

Domestic & International

fair trading issue re-transmission issue content regulation issue

jurisdiction issue copy right issues unequal trade issues censorship issues

player

player

Intra-layer Issu

e

Inter-Layer Issue

For Platforms = Asymmetric regulation For Devices = Compatibility For Networks For contents player

“Network Neutrality” issue

13

Contents

OTT Issues: Overview 2

Network Neutrality3

Government-level responses4

Asian-Pacific Cooperation5

Changes in the Video Industry1

2

14

Cases for Network Neutrality Conflict

Players PlayersPlayers

OTT vs. ISP(Cable) IT(youtube) vs. ISP(mobile)

H/W vs. ISP (NP)

Agreement Google pays to Orange Temporarily suspended

15

Network Neutrality Case in Korea (’12. Feb.)

Contents(or Service) Provider

Network Provider

i

Play-ers

Argu-ment

Smart TV service leads to network congestionNetwork cost should be shared!

No discrimination for the IP service! No responsibility for the cost.

Posi-tion

No.1 broadband Provider in Korea Smart TV set Maker (Global No.1)

Action Request for negotiation to solve cost issueBlocking Smart TV service by Samsung

Refuse to pay any network costFiling a lawsuit against KT

Result Stop blocking Still unhappy!

Withdraw the lawsuitStill uncomfortable!

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Contents

OTT Issues: Overview 2

Network Neutrality3

Government-level responses4

Asian-Pacific Cooperation5

Changes in the Video Industry1

2

17

Examples at overseas

Relatively Low Regulation Horizontal Framework

Implications

Free Market (Laissez-Faire)

Audiovisual Media Directory Services Directive

When enacting Broadcasting Act, regulation on video content on the Internet excluded

(Ex-post regulation) The private sector sets the regulation and public organizations oversee the compliance and implementation

18

Since ’08 - By Comcast’ Blocking P2P services

‘10 FCC made “the Open Internet Rules”

- No blocking - No discrimination

’15.2. FCC decided rules - No blocking - No throttling - No paid prioritization

’13. a ‘Single Market in Tele-coms’ proposed

- including network neutrality guidelines

‘14.3. - the European parliament passed the amendment with the clause on specialized services erased

’15. 3. - the European council tilted towards allow-ing the service.

mVoIP is allowed conditionally.

Prioritization is not recommended.

- traffic management for different data plans is not banned

To be monitored and revised, if necessary

Network Neutrality Policies

19

Other efforts made by the Korean Government

Terrestrial Broadcasters Pay TV PP Internet-based OTT

Assessment of competition in the broadcasting sector

Developing 5 base technology

Pilot ServiceR&D('15~'20)

Fostering the industry

Pilot investigation (Starting from the second half of 2015)

Investigation of Combined Viewer Rating

TV Smartphone PCTV

ImmersiveMedia

AdFramework

SpaceMedia

Internet ofMedia

Media ofSensitivity

Transfer of technology

Real-time + Non Real-time (VoD)Real-time

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Changes in Framework

Fair Competition Issues : The Same Rule for the Same Service

Distinction between different sectors inBroadcasting and communications blurred

Platform-centered competition in the ecosystem

Music

Movie

Broadcasting

Telecom

Information

Publication

ETCConvergence

Global Jurisdiction

Contents

OTT Issues 2

Government-level responses3

Remaining Tasks4

Asian-Pacific Cooperation5

Changes in the ICT Ecosystem1

19

22

Asian-Pacific Cooperation

Issues about to be faced by countries inAsia-Pacific region1

2 Asia-Pacific Regional Roundtable

Thank YouOTT Video Services in Korea : Network Neutrality

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