At this point, it's no secret that smartphones have become an integral part of many people's lives. The adoption of these devices has grown rapidly, and by the end of 2011 the vast majority of American cell phones were smartphones. Overall, analysts estimate that global usage of the mini-computers will continue to explode upwards. To that end, the technology sub-sector funds like the First Trust NASDAQ CEA Smartphone ETF (Nasdaq:FONE) have also grown in popularity as investors try to cash in on the trend. However, as these devices have become commonplace, a new problem has been created: a mobile data crunch. For investors, alleviating this network congestion could be a bigger play than the smart phones themselves.

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Growth
A recent survey by network specialist Cisco (Nasdaq:CSCO) highlights the potential problems with our mobile data traffic. The firm's "Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2011-2016" report showed that global mobile data grew by 133% during 2011. This was the fourth year that traffic more than doubled. Putting the amount in perspective, global mobile data traffic during 2011 averaged 597 petabytes per month. That was over eight times greater than the total global Internet traffic during 2000.

Despite the fact that average smartphone data usage tripled during previous year, Cisco predicts that network owners haven't seen anything yet. Looking out to 2016, the tech firm predicts that mobile data traffic will be 18 times larger than it is today. More than 100 million smartphone users worldwide will download over 1 GB of data per month. Given that telecom providers like Sprint (NYSE:S) have already had trouble with network congestion, serious dollars will need to be spent in order to upgrade this infrastructure.

How much? According to IHS iSuppli, global CAPEX spending on Long Term Evolution (LTE), technology will reach $24.3 billion by 2013 and more than $36 billion by 2015. From 2009 to 2010, AT&T (NYSE:T) spent $3.5 billion improving networks in Illinois alone. LTE networks promise greater spectral efficiency and higher data rates than predecessor technologies. Prompted by growing consumer demand, the LTE infrastructure equipment market will grow by 45% during the next five years. However, this spending doesn't even take into account Wi-Fi rollouts, 3.5G upgrades and data center equipment.

Playing the Data Crunch
As telecoms try and keep pace with growing data demands, the potential for portfolios is certainly great. Given the spending needed to achieve and accommodate this higher data traffic, investors may want to add some exposure to the trend. The iShares S&P North American Tech-Multimedia Networking ETF (ARCA:IGN) tracks 32 different networking communications firms including QUALCOMM (Nasdaq:QCOM) and Juniper Networks (NYSE:JNPR). The exchange-traded fund charges .48% in expenses and can provide a broad play on the theme. Likewise, the PowerShares Dynamic Networking (ARCA:PXQ) can be used as well.

One of the more interesting developments in the mobile data crunch has been the development of "White Spaces." At their core, white space is essentially TV broadcast channels that became available to telecoms when television made the switch from analog to digital. Using a TV Band enabled device, network firms can move more data through a white space network than traditional Wi-Fi. However, the Federal Communications Commission has only granted a few firms to dabble in the technology. Aside from tech-stalwarts like Google and Mr. Softy, which can play with the technology, mid-cap NeuStar (NYSE:NSR) could be a white space winner. The firm provides a variety of networking and telecomm capabilities, but its future white space offerings could make it a great growth stock. Shares of the firm currently trade for cheap forward P/E of 13.

No matter if it's LTE, 3.5G or white spaces, the makers of wireless infrastructure semiconductors will benefit. Chip companies like Texas Instruments (Nasdaq:TXN) and PMC-Sierra (Nasdaq:PMCS) should continue to benefit as more high data networks will need to be built.

The Bottom Line
As smartphones continue to become more prevalent in today's society, their data demands will continue to wreack havoc on our communications networks. This pending data crunch will have carriers spending big amounts on upgrading and improving network speeds and bandwidth. For investors, betting on this surge in data could be a great portfolio play. The previous picks along with, JDS Uniphase (Nasdaq:JDSU) make ideal selections to play the trend.

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At the time of writing, Aaron Levitt did not own shares in any of the companies mentioned in this article.

Tickers in this Article: FONE, PXQ, NSR, TXN

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