Let's Not Get Washed Away By The Data Tsunami

Here comes the flood.

15/09/2016 1:50 PM AEST | Updated 15/09/2016 1:50 PM AEST
Henrik Sorensen
"To manage the digital deluge, we will need wider pipes."

Some technology predictions are hard to make, but here's an easy one: the future of the Internet is video. Netflix already makes up 35 percent of the web traffic in North America. Add YouTube, and the figure rises to 50 percent. Within a few years, roughly 80 percent of all Internet traffic worldwide will be video.

Gaming will swell this rising tide of imagery, as streaming services from Sony, Microsoft, Nvidia and others come online. So will TV programming; last year, more than 400 scripted original series were produced in the US alone, nearly twice the number five years ago. Virtual reality (VR), a technology that has suffered false dawns in the past, seems poised for a comeback. Augmented reality, which layers virtual elements on top of the real world (Pokémon GO is an example), could profoundly change the way people interact with their physical environments, at work and at home.

Even non-traditional players are getting into video. BT, a British telco, runs a subscription service that streams soccer and rugby matches. is producing online TV programs and last year released its first original movie., the Chinese e-tail giant, is now one of China's largest film companies.

All of this video content will end up online, as will the data that keeps businesses running and consumers connected. This growing data surge will quickly impose progressively greater demands on digital networks.

Like any largely invisible system that works well most of the time, data infrastructure is often taken for granted. But to manage the digital deluge, we will need "wider pipes" with more bandwidth and less delay. Without new investment in the pipe, consumers and enterprises will soon experience bottlenecks in connectivity and bandwidth that could prevent the adoption of innovative new services delivered over broadband networks. Eventually, the flood of immersive video, business intelligence, and other data will overwhelm the ability of our digital infrastructure to support it.

What will that be like for consumers? Instead of enjoying VR and immersive video in all their streaming glory, they'll get jerky, pixilated video that buffers endlessly or has an annoying audio lag. The effects will be keenly felt by families, especially households with multiple viewers simultaneously watching bandwidth-hungry 4K video.

But there are larger concerns. Think about the industry sectors that rely on telecoms technology, such as healthcare and banking. The whole idea behind e-health is to allow dissemination of medical data that lets doctors make timely decisions for patients. An overloaded network with sluggish traffic will delay potentially critical diagnoses. In the financial services industry, an outmoded and overwhelmed network could impede transmission in a way that affects everything from financial markets to mortgage payments.

Improvements in network infrastructure will be crucial for coping with the onslaught of data. Investment is needed in technology that widens the pipe by allowing more data to move more quickly.

Who will make these investments?

Traditionally, it has been telecoms companies themselves that lay out the funds needed to upgrade and expand the network, particularly the "incumbents": former government-controlled monopolies, which for many years benefited from taxpayer dollars that allowed them to construct the network in the first place.

Today, however, telecoms operators face stiffening competition that makes such investments burdensome. Consultancy firm Ovum predicts that, in the five years leading up to 2018, operators will lose up to US$386 billion in revenue from free, Internet-based services such as Skype, or from paid services such as Netflix. Those services use the Internet to deliver content, but they aren't responsible for upgrading the network. As a result, none of the cash they generate will go toward building new infrastructure to handle the rising tide of data.

Clearly, a new model is needed. One possibility, sometimes referred to as business-to-business-to consumer (B2B2C), envisions a symbiosis where telecoms companies guarantee network quality and resilience, while other innovative companies use the network as a conduit for content they create. Under this model, telcos get some of the revenue that previously went only to the content providers, while the providers tap into the telcos' (usually huge) customer base. Both parties win -- as do the businesses and consumers who are using the networks more heavily every day.

As a society, we have grown increasingly dependent on the network, and our dependence will deepen over time as driverless cars, VR, 3D printing, robotics, remote healthcare delivery, and other technologies add a digital dimension to nearly every aspect of our lives. In a precarious and unevenly developed global economy, fresh rounds of investment in broadband infrastructure would provide a shot in the arm, not only to developed markets, but also to underserved populations in poorer countries.

Large telecoms operators are indeed rushing to upgrade networks. But if their incentives to invest are diminished, the networks may languish, increasing societal inequity and widening the Digital Divide -- the socioeconomic gap between those with Internet access and those without it.

A vastly better outcome would be for the telcos to re-engineer their business models in a way that gives them the incentive, and the resources, to make the necessary investments. That way, the rising digital tide can flow freely, laying a solid foundation for the next round of growth in the global economy.

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