Easily the most exciting thing in telecom this year is the surge in usage of mobile internet services. Industry moves towards open-network business models and flat-rate data plans can only accelerate this push into the mass market.

The idea behind open networks is that greater independence in the way infrastructure, devices, and applications evolve creates incentives for more participants to enter the market. Combined with greater subscriber choice of services and payment schemes, this is expected to underpin a massive expansion of the overall mobile Internet services market.

How mobile operators will manage the millions of new data users that will come onto their networks over the next few years, and ensure that the foundations are in place to support simple and reliable services, is the subject of the new Unstrung Insider report, Open Mobile Networks & Internet Gateways.

The report examines a new category of mobile Internet gateway equipment that bridges the Internet with mobile services and enables operators to simultaneously improve user services and manage their networks more efficiently. While there's not yet a clear definition of the exact functions a mobile Internet gateway should support, operators can help the market expand and ensure that they capture an appropriate share of the value created by enhancing users' Internet sessions with Layer 4-7 traffic management and adapting the way Web pages and video content are presented to a mobile device. It's about being a "smart pipe" rather than a "bit pipe."

At the network level, large European mobile operators are now seeing aggregate data volumes on the order of a terabyte per day – roughly a fourfold increase over a year ago, and still increasing rapidly. To handle this surge in traffic, they're turning to deep packet inspection (DPI) technology from vendors such as Allot Ltd. (Nasdaq: ALLT), Ellacoya Networks Inc. , and Sandvine Inc. . The aim is to ensure fairness in how capacity is allocated among subscribers and create commercial flexibility through tiered services and price plans. Packet core equipment vendors such as Nokia Networks and Starent Networks Corp. (Nasdaq: STAR) are looking to integrate DPI-like functionality and more into their packet core equipment, arguing that this is simpler to manage and introduces less latency than a series of in-line proxy devices.

Optimization and compression technologies are already widely used in 3G networks. This is due to the latency and variability inherent in mobile radio links. TCP, for example, interprets delay as congestion and causes user sessions to slow, even though variations in radio performance are readily accommodated by the physical and link layers. Optimization vendors such as Bytemobile Inc. , Flash Networks , and Venturi Wireless are looking to inject their technology into mobile Internet gateway platforms through a mixture of partnership and in-house development of functions such as network-based video transcoding or content control.

More noticeable to users, and more controversial even than DPI, is the emergence of network-based content adaptation. The idea is to allow low-powered mobile browsers to display regular Web content. This ensures that when a user enters a URL into a phone's browser, a Web page is returned rather than an error message, as is often the case today.

The adaptation of Web pages for mobile devices has been around for a long time, but is typically deployed as portal-based technology, such as by Google (Nasdaq: GOOG) or Yahoo Inc. (Nasdaq: YHOO). Or it is used in an over-the-top client/server application, such as the Opera Mini browser from Opera Software ASA . More recently, operators have begun to provide content adaptation services themselves, either via their mobile home pages, or by moving this transcoder function into the network.

Vendors of network-based content adaptation technology discussed in this report include InfoGin Ltd. , Novarra Inc. , Openwave Systems Inc. (Nasdaq: OPWV), Opera Software, and Volantis Systems Ltd. . All of these firms point to statistics showing increased usage of the Web in terms of traffic, site visits, page views, and session duration, following the introduction of content adaptation by mobile operators. According to vendors, such products can generate somewhere in the region of $4 to $8 per subscriber in service revenues over an 18-month period, easily offsetting the technology costs of $2 per user.

For some, the very concept of an Internet gateway is anathema to the idea of an open network. A purist view would require an open network to allow users to simply route packets containing whatever payload they desired. However, this is not the realists' view: For reasons of network efficiency, the desire to add value to basic bit pipes, and to optimize the performance and usability of applications, mobile operators will continue to mediate access to the Internet.

— Gabriel Brown, Chief Analyst, Unstrung Insider

The report, Open Mobile Networks & Internet Gateways, is available as part of an annual subscription (12 monthly issues) to Unstrung Insider, priced at $1,595. Individual reports are available for $900. To subscribe, please visit: www.unstrung.com/insider.