Telco Watch: Court ruling destructive for Cloud computing?

Telco Watch: Court ruling destructive for Cloud computing?

The ramifications of the Optus TV Now court case could affect the mammoth Cloud computing industry in Australia.

When Optus TV Now was launched in July 2011, the telco probably didn’t expect to withdraw the service less than a year later. It probably didn’t predict the court case over Optus TV Now would have broader ramifications for the Cloud computing industry.

The service enabled customers to record and playback free-to-air TV content on their smartphones with only a short delay. The recorded content would be stored by Optus in the Cloud.

But football bodies, the AFL and the NRL, were not pleased about the new service. They perceived it as an infringement of copyright and it put the AFL’s live games mobile broadcasting deal with Telstra, worth millions of dollars, in jeopardy.

Sensing trouble, Optus pre-emptively launched a Federal Court case against the AFL and NRL to prove it wasn’t breaking any copyright laws with Optus TV Now. The sporting codes filed counterclaims and Telstra joined in on the Court stoush.

Optus scored an initial win in Court with the presiding judge claiming the telco didn’t infringe copyright in the way the footy codes claimed. But upon appeal, the decision was overturned in late April. The Federal Court has now ruled in favour of the AFL, NRL, and Telstra.

Optus has since pulled the TV Now service.

Stymie growth

The new Court decision has the potential to stymie the growth of Cloud computing in Australia, according to Ovum research director and telco analyst, David Kennedy.

Earlier this month, a report from KPMG highlighted while Cloud computing is still considered a nascent technology in Australia, it has the potential to contribute $3.32 billion per annum to the country’s economy. The condition is that businesses move 75 per cent of their IT functions into the Cloud which, according to the advisory firm, is absolutely doable.

Kennedy thought the original decision in favour of Optus was correct and the new judgement is destructive to the local burgeoning Cloud industry. “If Cloud is going to be treated differently from the local infrastructure, well, that kind of blows the whole Cloud business case out of the water,” he said. “Or at the very least it complicates the whole process of businesses transitioning to Cloud provisioning of services.”

A range of Cloud products are currently available in Australia including Infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS), and software-as-a-service (SaaS).

These kinds of offerings have garnered a large amount of interest since they are scalable, have utilities-based pricing models, can be provisioned with ease, and – most importantly – obviate the need for large capital investment into for IT infrastructure.

A number of new players have entered the Cloud market in hopes of taking advantage of this lucrative business.

But new Cloud entrants may be deterred by the recent Court decision on the Optus case. Essentially, what this means is Cloud service providers maybe have a new legal hurdle to surmount.

“Cloud providers are in the infrastructure business, really – that’s where they want to be, supporting applications that are being run by their customers,” Kennedy said.

“If legally Cloud providers are going to be treated like they’re running the applications themselves and have to accept all the legal liabilities that arise from that, it is going to make the business of providing Cloud and infrastructure platforms a lot more risky.

“It will add a lot of complexity to people moving things like customer data and software licences out of local infrastructure into the Cloud.”

Commercial solution

This is what may prove very damaging to the Cloud business. Kennedy predicts more interest groups will become more vocal on the topic because of the ruling.

But the Ovum analyst saw a commercial solution as the answer to this Cloud conundrum. “The AFL needs to deliver its own over the top channel,” he said. “That’s the answer – if they were to do that, Optus TV Now will merely be a value-added service on top and on the edge of the whole AFL play.”

Though his would mean the content third-party companies can access will be less exclusive. “That’s where I think it’s heading anyway,” Kennedy said. “The current battle between the footy codes and Optus will be seen as something of a sideline that is actually a commercial chain in the industry that is happening.

Optus is appealing the decision in the High Court.

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