Who may be affected?
A narrow requirement for very large foreign online services
Providing a website, application, cloud service or SaaS product to Korean users does not by itself create a domestic-representative obligation. The service classification, the foreign provider’s Korean presence, two cumulative scale thresholds and any controlled Korean corporation must be reviewed together.
What is a value-added telecommunications business?
The Act uses telecommunications service broadly. It means using telecommunications facilities to carry or mediate another person’s communications, or making telecommunications facilities available for another person’s communications.
Facilities-based telecommunications services are the underlying connectivity services that transmit voice, data or video without changing their content or form, such as telephone and internet-access services, and services that lease telecommunications lines. A value-added telecommunications service is a telecommunications service outside that facilities-based category. In practical terms, Article 22-8 concerns the provider of the relevant online service rather than the Korean carrier or internet-service provider that merely carries its traffic.
The classification is functional. A company’s description of itself as a software company, SaaS provider, platform, cloud provider, marketplace or content company is not decisive. The review should identify what service the customer receives, whether that service mediates or enables communications or the exchange, storage, transmission or delivery of data or content, and which legal entity actually provides it. Merely operating online does not by itself resolve the classification.
Who is the relevant foreign provider?
The test is applied to the foreign legal entity that provides the relevant service. In a corporate group, that may be the entity contracting with users, operating the platform or otherwise legally providing the service – not automatically the parent company, technology developer, hosting provider or entire corporate group. The service architecture, contracts, terms of use and division of operational responsibility should be reviewed together.
Services that may require classification review
- Large social, community, messaging or communications platforms
- Online video, digital-content and other high-traffic platform services
- Cloud-based communications, collaboration or data-exchange services
- App, marketplace and other online services that may constitute value-added telecommunications services
Preliminary applicability test
Article 22-8 applies only when all four conditions below are satisfied. The first two identify the covered foreign provider. The last two are cumulative scale thresholds.
- Covered service: The foreign legal entity provides a value-added telecommunications service under the Korean statutory definitions.
- No Korean presence: That foreign provider itself has no address or place of business in Korea.
- User threshold: During the three months immediately preceding the end of the previous year, the service had an average of at least one million users in Korea per day.
- Traffic threshold: During the same period, the service’s average daily traffic generated in Korea represented at least 1% of the total domestic internet traffic carried through the relevant networks of Korean facilities-based telecommunications providers.
How should “users in Korea” be understood?
The decree uses the daily average number of domestic users during the final three months of the previous year. This is not automatically the company’s global registered-account count or monthly active-user figure. A defensible assessment should document how users in Korea are identified and how repeated access, multiple accounts or devices, automated traffic and other measurement issues are treated.
Traffic means network data volume – not visits or revenue
The 1% test compares the service’s average daily traffic generated in Korea with the total domestic internet traffic carried on the relevant Korean networks during the same period. Website visits, page views, transactions and revenue do not establish this test. The numerator and denominator may require carrier, network or MSIT information in addition to the provider’s internal analytics.
When the representative is likely not required
The Article 22-8 representative is generally not required if the service is not a value-added telecommunications service, the foreign provider has its own Korean address or place of business, or either of the two scale thresholds is not met. Accordingly, a foreign SaaS, cloud or online-service provider that falls below either scale threshold does not fall within this specific representative requirement.
Mandatory use of a controlled Korean corporation
If the qualifying foreign provider has a Korean corporation that it established, or a Korean corporation over which it exercises dominant influence regarding officer composition or business operations, the representative must be selected from among those Korean corporations. In this situation, an unrelated third-party representative cannot be selected instead.
This rule does not apply merely because the foreign provider has a Korean distributor, reseller, customer, minority investment or commercial partner. The incorporation history, shareholding, governance rights, officer-appointment powers and actual influence over business operations should be reviewed. A separate Korean subsidiary also does not automatically mean that the foreign provider itself has a Korean address or place of business; these are two distinct questions.
Administrative fine
Failure to appoint a required domestic representative, or appointing a representative contrary to the mandatory Korean-corporation rule, may result in an administrative fine of up to KRW 20 million.