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Australia’s internet speeds limiting productivity

Australia’s broadband networks, already among the world’s slowest, could be further strained by the emergence of virtual and augmented reality

Ooyala, Telstra’s specialist video subsidiary, has called into question the quality of Australia’s telecommunications infrastructure and the impact that is having on productivity.

The most recent internet speed test results from Ookla ranked Australia 55th in the world, just behind Kazakhstan.

Steve Davis, vice-president and general manager for Ooyala in Asia-Pacific and Japan, said Australia’s ranking is not good enough “for anywhere that is not a third-world country”.

Although he acknowledged that the current infrastructure was not limiting people’s ability to watch on-demand video, it was having a productivity impact. “In Singapore you can get more done,” he said. Singapore’s fixed broadband speed was ranked first globally by Ookla.

The irony for Ooyala is that its parent company is receiving A$11bn from NBN Co for access to much of the network underpinnings for the national broadband network currently being rolled out.

Despite “third-world” internet speeds in Australia, which also lags the rest of the world in adopting video applications, Davis was optimistic about the prospects of video in the media and entertainment arena, which remains Ooyala’s core focus, but also increasingly in enterprise applications.

In 2018, Ooyala would put “massive focus” on driving video adoption among enterprises in the financial, retail and manufacturing industries, according to Davis.

Examples of businesses starting to roll out video-based information include automaker Audi which displays video in its dealerships, and Wisconsin-based American Financial Services which uses video for marketing and training purposes.

Video traffic is certainly rising. Cisco’s forecast of internet video traffic reveals volumes growing 31% a year, which means this internet video traffic, estimated at 75 petabyte per month, could soar to 159 petabytes a month by 2021. Asia-Pacific’s internet traffic is in lockstep with the global trend, rising 30% a year until 2021.

Much of this growth in video traffic will likely be carried by mobile networks. Davis predicted that in the first half of 2018, 60% of video consumption will take place on mobile devices.

Strained networks

The emergence of virtual reality and augmented reality, which will be tested by Intel and Ooyala during the upcoming Winter Olympics broadcasts, could further strain Australia’s underlying communications networks.

Already, consumers on data-capped internet plans are feeling the impact of higher definition entertainment video streaming services.

Read more about broadband in Australia

A January blogpost from NBN revealed more details of the impact of 4K and ultra-high definition streaming options, noting that standard YouTube viewing consumed around 264MB per hour while full high-definition snaffled 1.65GB per hour.

Meanwhile, Netflix, which remains the most popular streaming service in Australia with more than 50% market share, needs 300MB per hour for the lowest quality but gobbles up 7GB per hour for 4K streaming. 

In 2017, NBN CEO Bill Morrow acknowledged the quality of the broadband network was not matching customer expectations. However, he pinned the blame on ISPs, noting that if they “don’t open enough lanes to cross from their network to our network, it will slow people down”.

Ooyala's value questioned

Separately, Telstra has once again questioned the value of Ooyala, this time taking an impairment charge of A$273m, effectively taking the book value of Ooyala to zero.

In 2014, Telstra raised its stake in Ooyala to 98% from an initial 9% stake two years earlier. By 2016, it was questioning the value of the investment and made a first impairment charge. It now thinks Ooyala is essentially worthless because of its failure to achieve “sufficient scale”.

There were no signals of the looming brouhaha when Ooyala vice president Steve Davis met Australian media in Sydney this week – just two days before Telstra made its announcement to the Australian Stock Exchange. He declined to take any questions about Telstra or comment about Ooyala’s financial performance.

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