Twitch exits South Korea over ‘prohibitive’ costs—and a net neutrality violation is to blame

The e-sports streamer Twitch is pulling out of South Korea because it’s gotten “prohibitively expensive” to run its service there. The Amazon-owned platform will stop serving the country on Feb. 27.

Welcome to the inevitable consequences of the so-called “fair share” concept in telecommunications, which I’ve already written about a couple of times this year—EU digital chief Thierry Breton, a former telecoms CEO, ran a consultation about introducing it in Europe, only to back off when almost everyone who wasn’t a big telco said it was a terrible idea.

The “fair share” argument goes roughly like this: Maintaining and upgrading telecom networks is expensive, so the biggest online service providers, whose growing data volumes necessitate the upgrades, ought to bear some of the costs. Critics have consistently pointed out that this is effectively a “sender-pays” proposal that flies in the face of the net-neutrality principle—which says network providers should treat all content equally—and that end users already pay the network providers for carrying the traffic, so the telcos are just trying to double-charge.

India and Brazil are currently considering implementing "fair share," but South Korea, which led the way in 2016, is still the only country that’s actually introduced it. Korea Telecom has used the principle to extract large fees from foreign providers in particular. South Koreans have already suffered deteriorating service quality as a result, with Facebook having routed its Korean users to caches in other countries, to avoid paying KT for the privilege of running a cache in its network—the resulting quadrupling of latency prompted KT to complain that Facebook was playing hardball in fee negotiations, only for a court to rule that Facebook could route its traffic as it pleases.

Which brings us back to Twitch’s exit from the market. Twitch already lost some popularity when, due to those high network usage costs, it last year downgraded its video resolution to 720p. According to a blog post from CEO Dan Clancy yesterday, that wasn’t enough: “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.”

This doesn’t smell like a fee-negotiating tactic. Clancy wrote that Twitch will “work to help Twitch streamers in Korea move their communities to alternative livestreaming services in Korea,” and is “reaching out to several of these services to help with the transition and will communicate with impacted streamers as those discussions progress.” You don’t actively hand your customers over to your rivals (in this case, YouTube and local player AfreecaTV) if you plan on coming back.

“Twitch is the most established gaming and streaming community, and to be losing it is unfathomable,” livestreamer Alexandria Brooks, an American in South Korea, told the New York Times.

Sadly it's all too fathomable. This entirely predictable mess should serve as a cautionary tale for anyone who feels like subverting how the internet works—hope you’re watching, India and Brazil. More news below.

David Meyer

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This story was originally featured on Fortune.com