Mobile packet core spending will touch $18 billion through 2017, said ABI Research.

The growth driver will be the substantial increase in the worldwide traffic in 3G and 4G. Telecom operators will invest to expand their network capacity to address customer demands for better mobile broadband.

Cisco’s Visual Networking Index said the global mobile data traffic grew 81 percent in 2013, while the number of mobile connections grew by another half billion.

LTE connections increased 151 percent in North America to touch the 100 million mark in 2013 and represent half of all LTE connections worldwide. In North America and Latin America, 3GPP mobile broadband (LTE and HSPA) grew to 417 million connections in one year ending December 2013, and now represents over one third of all mobile connections in the Americas region, said 4G Americas.

ABI Research today said mobile broadband in North America, Japan, and Korea propelled the initial increase, and now the rest of the world provides the needed thrust for the market to take off.

Joe Hoffman, practice director, ABI Research, said: “Advances in semiconductor technology manifest in commercial IT scale economies make Packet Core virtualization part of a compelling business transformation. Network Functions Virtualization built on WebScale IT is poised to radically upend the existing order of vendors.”

There are challenges for telecom operators.

Earlier, Deloitte predicts that in 2014 instant messaging services on mobile phones (MIM) will carry more than twice the volume (50 billion versus 21 billion per day) of messages sent via a short messaging service (SMS). This is a significantly greater ratio than in 2012, when 1.1 instant messages were sent for every text message. Growth in MIM is coming at the expense of SMS and mobile carriers.

ABI Research says even with mobile broadband traffic growth, packet core spending will taper as the efficiencies, scale economies, and software-oriented business transformations take hold. As the telecom market transforms to WebScale, infrastructure vendors should face this reality head-on and fasten their seatbelts as it’s going to be a bumpy flight, said Hoffman.

Dell’Oro Group said the overall Wireless Packet Core market grew two percent in the fourth quarter of 2013 versus the year-ago period.  The higher growth portion of the market that is used to manage LTE wireless networks, called Evolved Packet Core (EPC), experienced significantly higher growth than the total market.

In 2014, the telecom market will see significant shifts in the packet core market.

Chris DePuy, vice president of Wireless Packet CoreResearch at Dell’Oro Group, said: “The introduction of NFV systems and new LTE projects emerging outside of US, Korea and Japan will offer both challenges and opportunities for the wireless packet core market.”

North American growth slowed significantly. Asia-Pacific growth, specifically, China, is expected to contribute significantly to growth in 2014. Vendors with significant exposure to Chinese EPC contracts include Alcatel-Lucent, Ericsson, Huawei, NSN, ZTE, and others.