Strategy towards New Networks and Services

1. Strategy towards New Networks and Services ITU/MII Seminar on Telecom in Transformation: Opportunities and Challenges Masae TAMURA Senior Executive Vice President NTT Communications

2. Nippon Telegraph and Telephone Group Holding Company NTT DoCoMo NTT East NTT West NTT Communications NTT Data Computer Systems Integration • Int’l & Long Distance Services • Corporate Businesses • Internet Services Regional Telecom Services Regional Telecom Services Mobile Services *Group structure since the re-organization NTT in July 1999. Gov. of Japan will review restructuring of NTT group in 2010, based on the status of broadband deployment and progress of NTT’s medium term management strategy. www.ntt.com

3. NTT Communications’ Mission in NTT Group Corporate ICT and Internet businesses company As a “Front-running challenger” Corporate Business ICT Solution Partner • ICT business to Multi National Corporations (MNCs) • High quality data network, data center, hosting etc • 51 Offices in 21 countries; Services to 151 countries Internet Services “CreativE-Life” for everyone • No.1 ISP in Japan with 8.5 Million subscribers • Search engine and portal services • No.1 backbone provider to ISPs with 80% share www.ntt.com

4. Ubiquitous Network Society To realize a truly affluent society, we need toovercome gaps of Time Distance Information Broadband and Ubiquitous Communications Helping to solve social problems Environment Education Economy Energy www.ntt.com

5. 2004 2005 2002 2010 1.1% 1.0% 0.9% 0.7% 1.0% 1.4% 1.8% 3.9% %: Ratio to Japan’s total energy consumption Energy Saving Effect by ICT Contribution to Environmental Protection through use of ICT Total energy consumption by ICT network and equipment Total energy saving effect by using enhanced ICT www.ntt.com

6. FTTH deployment Towards 30 Million FTTH subscribes in 2010 1Gbps GE-PON, Maximum 100Mbps per household Currently, broadband services for 52 % of household 30 Million Internet subscribers FTTH for 60% of household in 2010 (Unit: Million) www.ntt.com

7. Mobile Communications in Japan Rapid 3G penetration High-Speed Downlink Packet Access (HSDPA) realizes high speed data communications at 3.6Mbps PHS 100 million Mobile users. 80%penetration Mobile IP users 3G 66 million 3G users 2G (Unit: Million) www.ntt.com

8. Internet Traffic Increase Traffic exchanged via Japan’s major IXs (JPIX, JPNAP, NSPIXP) 250 ＊ IX (Internet eXchange): 214.8Gbps (2006.11) 150.1Gbps (2006.11) 200 158.4Gbps (2005.11) 150 115.9Gbps (2005.11) 100 Monthly average of daily peaks 50 Monthly average of daily averages (Gbps) 0 1999 2000 2001 2002 2003 2004 2005 2006 1997 1998 www.ntt.com Source: MIC Japan (Mar 2007)

9. 60,000 Yearly Trend of Reported Incidents 50,000 Mytob, Netsky 40,000 Netsky and its varieties MSBlaster, Welchia 30,000 20,000 10,000 0 * 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1990 Incidents of Internet Viruses 44,840 incidents reported in 2006. The number decreased from the previous year but is still the third largest. Virus epidemic in cyber space continues. * April to Dec. 1990 Though the number of reports decreased, the situation is probably worse in 2006. www.ntt.com Source: Information-technology Promotion Agency

10. Critical Infrastructure Protection Policy • Unified policy of protecting critical infrastructure (ie. Communication, Energy, Power supply, Transportation and Finance) and Information Systems (Operation Systems) • The highest stability and reliability are required for communication infrastructure, as a “neuro-network” for the other infrastructures. ICT System (Operation System) Interdependency Among Critical Infra. Transportation Finance Communication Energy Issues for CIP • Collaboration between the public sector and other infrastructure operators • International collaboration • Collaboration with standardization organizations for standardization and sharing of effective measures and guidelines. www.ntt.com

11. Challenges of NGN Infrastructure Concept of NTT Group’s NGN • As reliable as conventional PSTN • IP based network, but with advantage of IPv4 and IPv6 dual protocol • QoS Choice of four levels of quality • Security Authorization with caller’s ID • Reliability Traffic control • Prioritize security level of communications • Open Interface • Interface for diverse applications Schedule Started trials by end 2006 Commercial services by early 2008 www.ntt.com

12. Standardization for NGN • Standardization started in 2003 at concerned organization. Today, mainly carried out at ITU-T and ETSI. • In July 2006, ITU-T completed 13 documents, which defines conceptual design of NGN (Release 1). • Protocol level details and services specific to NGN such as IPTV and video distribution are to be reviewed. Standardization Schedule 2006 2007 Service Requirements Release 2 Release 1 ITU-T Architecture Oct. 2006～　 ～July 2006 Protocol ～Jan. 2008 (Target Goal) ETSI TISPAN Service Requirements Release 1 Architecture Release 2 Protocol Dec 2007 (Target Goal) www.ntt.com

13. GOJ’s Telecom Sector Regulatory Reform Outline of Government’s “New Competition Promotion Program 2010” • MIC intends to implement the development of competition rules in response to the shift to IP networks steadily by implementing the “New Competition Promotion Program 2010,” reporting the progress and reviewing the program as necessary. • Promotion of Infrastructure Competition (Fixed and Wireless) • Review of Interconnection Policy (Dominant regulation, Interconnection policy of NGN) • Review of Universal Service System • Review of Tariff Policy (Price cap regulation) • Other Main Policies (Network Neutrality principles, etc…) Excerpt from the announcement by the Ministry of Internal Affairs and Communication www.ntt.com

14. Appendix 1:NGN-NW Management: End-to-End Quality Control • 4 Classes of Service depending of application requirements • Three classes with guaranteed quality of services and a best effort class Traffic Control Server Guarantees quality within the bandwidth requested to the network (Traffic control server controls the edge node) UNI Highest Priority High Priority Priority Access Fiber Best Effort Edge node blocks uninformed packets at the entering point. Edge Node Carrier’s Network www.ntt.com

15. Appendix 2:Optical Core Network: Wavelength Routing Electrical Process: Packet by packet process of header information  More processes High Latency Optical Process: Process entire optical transmission by wavelength  No packet by packet process  Less processes  Lower Latency Wavelength Path WDM =Traffic Lanes Electric Switch WDM Route Selection by wavelength Wavelength Routing Switch IP Packet Electrically processes routing information in a packet header - high latency - high jitter - limited capacity Routing of entire optical transmission - low latency - no jitter - greater capacity www.ntt.com

16. Appendix 3:Optical Access: “Freely Bendable” Optical Fiber Cable Handled as easily as metal cables and used to improve esthetics Cross-section diagram Example uses at Customer’s Premises hole Bundled Kinked Perpendicular Bent core clad ＰＣ Bent – Attenuation Property (dB/m) ＯＮＵ 10 Bent - radius:10 mm - 20 times Optical Connector Outlet Attenuation by Bent 1 10-1 hole assisted fiber 10-2 10-3 Tied 10-4 1200 1300 1400 1500 1600 wavelength (nm) www.ntt.com