NPRG: If anything, Cisco VNI underestimates 'data deluge'

As Cisco rolls out its increasingly influential Visual Networking Index (VNI) results this morning, a pair of equally influential industry insiders is contending that Cisco is underestimating the explosion in demand for wireless data services, a reality that could potentially change the very structure of the mobile industry.

That message comes from New Paradigm Resources Group (NPRG) senior directors Al Boschulte and Victor Schnee, who claim the “bottom-up” approach of their recent study The Mobile Traffic Deluge & the Real Implications For The Communications Industryoffers a better snapshot of the challenges faced by mobile operators. Boshulte is best known as the former CEO of Nynex Mobile; Schnee is a long-time industry prognosticator dating back to the AT&T break-up days.

In a wide-ranging conversation with Connected Planet, the pair made the case that not only are mobile operators facing massive network challenges, they risk losing the wireless market to “Web-era” (and now mobile era) players like Google and Facebook. Such “dumb-pipe” arguments are hardly new, but backed by a deep dive into mobile network trends, the analysis bears added weight.

It all starts with what the pair believes is a vast underestimating – by a factor of ten or even more – of the true growth facing today’s mobile networks. Schnee went so far as to call the Cisco VNI as “not very sound…hand-waving,” relying too much on past wireline growth trends and models. Mobile data growth will likely be much different, he said.

“We decided to take a look at what is actually going to happen in the next five years and beyond, what it will look like at the cell site in terms of traffic. We started modeling users and apps and looking at those areas from the bottom up,” Schnee said. “The mobile Internet really has no resemblance to what’s gone on in the past.”

In particular, mobile devices are proliferating much more quickly than PC devices did in the past (a point the latest Cisco VNI stresses as well), and the sheer number of mobile apps and services – including video-based apps – are growing rapidly as well. Most importantly, the introduction and growth of those apps is almost totally out of the control of service providers – which means they won’t be able to manage demand as they did in the past either, added NPRG’s Boschulte.

“This is a shock that keeps coming into the system,” Boschulte said, adding that even as they watch it happen, network planners still don’t have a firm grip on the true impact. In short, mobile operators “don’t understand the behavioral patterns of these users or these applications,” he said.

“This is not something that is going to happen in ten years, it is happening right now. The industry was never prepared for all this,” said Schnee, adding that Verizon’s recent LTE outage (CP: ) was not only a sign of the challenge, but also “outrageous” for an industry known for its five-nines network reliability.

The bigger dilemma for mobile operators, though, is on the business side.While the wireless divisions of AT&T and Verizon, for instance, see massive traffic growth, they are not seeing that growth reflected in their stocks, while public companies like Google and Apple and private companies like Facebook and Twitter are in turn realizing vast financial gain from the same underlying network trends, Schnee said.

“There is something very unsound about this situation,” he said, adding that it might take something like the “creative destruction” that hit the computer industry to turn the telecom industry into something that operators more rationally – and profitably. “We really look for fundamental changes in how the communications business is owned and run,” Schnee said.