DPI Technology Sought by Wireless Firms

Bobbie is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Deep packet inspection (DPI) software is used by telecom providers to analyze traffic across their networks.  DPI may be finding a new niche with wireless providers making stocks like Procera Networks (NASDAQ: PKT) and Allot Communications (NASDAQ: ALLT) more attractive for investors.

Internet service providers (ISP) in the United States have stepped away from using DPI in fixed line networks because of potential net neutrality and privacy issues. Congress agreed with consumer groups regarding the worries of online privacy advising ISPs to avoid using DPI technology for the purpose of targeting advertising.

DPI, however, has been making headway in wireless phone networks. Foreign regulators have given wireless servicers a long leash when using DPI technology as a way to help them make networks flow more freely. Despite these allowances, the influx of smartphones is still creating shortages throughout the spectrum in the U.S. as well as other countries.

DPI can be used by wireless companies to inspect mobile data packages in order to determine priority in routing. For security reasons it cannot be used to mine the personal data that moves through the system. Wireless firms are keeping these limitations in mind as they develop new ways to use DPI. One of the new concepts being considered for DPI technology involves launching services that are aimed at generating revenue like helping with complex billing types.

Infonetics Research estimates that the sales of specialized DPI products from companies like Allot, Procera, Canada’s Sandvine, and Arbor Networks will reach $1.6 billion by 2015. These estimates do not include network routers that have been integrated with DPI tech sold by Cisco Systems or Ericsson.

It is believed that the U.S. has not been aggressive in implementing the use of DPI technology whereas Western European countries and Asia have been keenly practical in putting the technology to use in emerging markets. One of the main reasons for the U.S. lag in active use has been because of net neutrality regulations that require all web traffic be treated equally. The federal Communications Commission (FCC) did released new rules in 2010 that granted wireless firms more options for managing mobile phone traffic that essentially comes down to prioritizing or limiting traffic resulting from data hungry mobile devices; this is where DPI could play an important role. Allot could be close to making a U.S. market break through as the company expects to win contracts in the U.S. carrier market by year end.

One of DPI’s main features is traffic analysis which includes categorizing data packet types; video, audio, images, etc. One of the potential ways that DPI could assist in easing network congestion is by identifying streaming videos and switching them to public Wi-Fi systems.  This type of easing would be beneficial to companies like Verizon Wireless, owned by Verizon Communications (NYSE: VZ) and Vodafone Group (NASDAQ: VOD), who have put into place “video optimization” policies regarding the data plans associated with smartphones.

DPI has the capability to track “data hogs,” those consumers who use up an inordinate amount of data siphoning disproportionate shares of bandwidth. It is expected that DPI will be used more with the latest generations of 4G networks that use LTE data technology. Meanwhile, AT&T Inc has placed policies that specifically curtail unlimited data plans while floating the possibility of billing content and mobile app makers for bandwidth intensive data applications rather than billing customers. 

AT&T’s idea for billing mobile app makers has merit; European firms are already making content companies share the cost.  For instance, France Telecom has put into play a data plan that allows for “unlimited” web browsing as long as it is only used for Twitter or Facebook accounts.  While AT&T and France Telecom are moving in the right direction, what they really need is more intelligent networks. DPI offers application specific tools for exactly these circumstances.

Overall, DPI technology is poised to make a huge entrance in the industry this year. 

Motley Fool newsletter services recommend Vodafone Group Plc (ADR). The Motley Fool has no positions in the stocks mentioned above. BobbieJohnson has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

blog comments powered by Disqus