Streaming video provider, Ooyala has raised $35 million in new capital, with the lead investment coming from Telstra Applications and Ventures Group, a subsidiary of Australia’s largest telecommunications and information services company Telstra. Prior investors Sierra Ventures, Rembrandt Venture Partners and CID Group also participated in the funding round.  The investment by Telstra serves several purposes. First, in Australia, Ooyala will allow Telstra to provide video entertainment without necessarily having to operate a traditional “cable TV” service, and make such services available on fixed or mobile networks.

In a sense, that is in line with other efforts by telcos to provide video entertainment without investing in traditional "home grown" video services. Many telcos have resold partner services, such as satellite TV offerings, to create triple play without creating a branded service "from scratch." 

More recently, some telcos have started experimenting with offers based on streaming video, such as Hulu, as part of broadband access packages.

The Ooyala investment gives Telstra more revenue upside in the over the top video apps space, potentially important in the future if and when online video really starts to erode traditional subscription TV revenue.

Telstra and Ooyala apparently have not finalized thecommercial agreement, but it is expected that Telstra will become a major Ooyala customer and reseller, deploying Ooyala software, analytics and service offerings throughout Australia.

But there are other angles. One advantage of over the top applications and services, when offered by service providers, is that such services often can be sold and leveraged on a global basis, and not simply within the traditional cable or telco service boundaries.

That doesn’t mean that Telstra will attempt to do so, but its ownership in Ooyala means it will profit as Ooyala can do so.

So it is that Ooyala will use the new capital to fuel its market momentum with cable TV providers and TV programmers. Ooyala also expects to expand operations outside of the United States, building on its existing footprint in Europe, Asia, Australia and Latin America. Over half of Ooyala’s business is outside the United States.