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NTT’s Business Trends and R&D Directions

NTT’s Business Trends and R&D Directions. Jan. 2010 Hiromichi Shinohara Director and Senior Vice President, Director of Research and Development Planning Department Nippon Telegraph and Telephone Corporation. 1. Information Communication in Japan 2. NTT’s Business Strategies

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NTT’s Business Trends and R&D Directions

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  1. NTT’s Business Trends and R&D Directions Jan. 2010 Hiromichi Shinohara Director and Senior Vice President, Director of Research and Development Planning Department Nippon Telegraph and Telephone Corporation

  2. 1. Information Communication in Japan • 2. NTT’s Business Strategies • 3. R&D Directions 1

  3. Penetration rate for households 31% Penetration rate for households 59% Broadband Service Subscribers in Japan • Toward a Full-scale FTTH Era Million <as of Sep. 31, 2009> DSL 10.5 M NTT: 3.7 M (35%) 34% CATV Internet 4.3 M 13% FTTH 16.5 M NTT: 12.3 M (74%) 53% 2002 2008 2003 2004 2005 2006 2007 Total 31.3 M NTT: 16.5 M (53%) Source: Ministry of Internal Affairs and Communications 2

  4. Broadband Service and Price Trend Fiber DSL Cable, etc Charge per 1 Mbps <Million Subscribers> 15.9 M 81.2 M 17.7 M 24.0 M 18.7 M 30.9 M 10 208 100% 100 420 378 Price (U.S. Dollars per 1 Mbps) 511 4,500 1,084 1,763 No. of users (millions) 2190 4.9 351 6.3 5.2 1,396 1,589 732 3.7 3,134 0.8 0.6 5 7 0 483 0% Source: Subscribers: OECD Broadband subscribers per 100 inhabitants, by technology, June 2009 Price: ITU　World Information Society Report2007 3

  5. Mobile Phone Subscribers in Japan • Shift from 2G to 3G (Broadband) <as of Sep. 31, 2009> Million 3G 5.3 M NTT: 3.9 M (74%) 5% Population diffusion 82% 2G 104.3 M NTT: 51.3 M (49%) Population diffusion86% 95% Total 109.6 M NTT: 55.2 M (50%) 2002 2003 2004 2005 2006 2007 2008 Source: TCA 4

  6. International rankings for ICT Infrastructure Japan is the first place in 24 countries Competitive in the lowest price and the highest speed Deviation Value Average of Indicators Source: Ministry of Internal Affairs and Communications 5

  7. 1. Information Communication in Japan • 2. NTT’s Business Strategies • 3. R&D Directions 6

  8. Structure of NTT Group NTT (Holding Company) 10.4trillion 200 thousand Lab subsidiary companies : approx. 479 100% 100% 54.2% 100% 66.2% Other Subsidiaries NTT Facilities NTT Urban Development NTT Comware NTT Finance NTT Advanced Tech. etc. NTTDocomo NTT Data NTTEast NTTWest NTT Communications Long Distance and Int’l Data Mobile Regional Others \4.4trillion \4.1trillion \1.3trillion \1.1trillion \1.2trillion As of March 31, 2009. Operating revenue and operating income of each segment include intersegment transactions. 7

  9. Transformation of our Business Portfolio Transformation of Business Portfolio Consolidated revenue composition 100% ｿﾘｭｰｼｮﾝ・新分野等 Solution and new business, etc. 26% 28% 29% 32% 35% 80% 60% 75% 52% 58% 68% 60% IP business 26% 29% 32% 36% ＩＰ系 40% 40% Legacy business 48% 20% 42% 40% 32% 25% ﾚｶﾞｼｰ系 0% Apr.-Sept. of 2010/3 2011/3(E) 2013/3(E) 2009/3 2008/3 Financial Indicators 8

  10. Way to Transform our Business Portfolio Accelerate the Development of Full-IP Networks (Fixed-line and Mobile Phones) Promote Broadband and Ubiquitous Services through Full-IP Networks Business Transformation Based on IP, Solution and new business 9

  11. ◆ Expansion of Broadband Network Optical Broadband Mobile Broadband FOMA High-Speed (Max. 7.2Mbps) 100% FTTH(Max. 100Mbps) Coverage Coverage HSDPA Nationwide coverage (Dec. 2008) Approx. 90% NGN-based FTTH (Max. 100Mbps and higher) LTE (Max. 37.5Mbps and higher) 2011/3 2008/3 2009/3 2010/3 2008/3 2009/3 2010/3 2011/3 Launch LTE (planned Dec. 2010) Present point Present point HSDPA: High Speed Downlink Packet Access LTE: Long Term Evolution (3.9G mobile phone) 10

  12. Change in ARPU from FTTH • The bundled service of FTTH records a higher ARPU than Plain Old Telephone Service (POTS). • The ARPU has been increasing gradually. • It is urgent to raise ARPU further to strengthen our financial basis. (Yen) Further Acceleration 6,000 5,590 5,370 5,000 5,120 4,800 4,000 2006/3 2008/3 2009/3 2007/3 (ARPU : Average Revenue Per User) 11

  13. Plan for NGN Convergence Proceed Migration to NGN Network Future Now NGN-NW Regional IP-NW PSTN Regional IP-NW 0ABJ- VoIP NW NGN -NW 0ABJ- VoIP NW PSTN ? v6 v4&6 POTS VoIP Data POTS VoIP Data POTS: Plain Old Telephone Service 12

  14. Four Major Growth Areas New Business Upper Layer Solution New services over NGN & 3G network Customer-oriented solution businesses New market development Environment & energy Global Global expansion with high quality ICT service lineup 13

  15. Hikari TV - High Definition Video Delivery - Station/ Center Home NGN STB • High-definition video delivery • IP retransmission of digital broadcasts • Video on demand Optical Video Delivery Subscribers 0.92 M(as of September 31, 2009) 14

  16. Bee TV- Broadcasting Station for Mobile Phone - Service Concept: Personal Entertainment Collector 0.81 M Subscribers (as of Nov. 31, 2009) Contents: over 8 Genre 25 Program Established Joint Company with Avex entertainment 15

  17. Expanding the Video Communications Market Realization of high-definition, high-quality communication Expansion of opportunities for using video communications Telepresence Remote pathology Expansion of user groups High-quality Needs Tele-conferences Remote monitoring Teleworking Web conferences Simple 16

  18. N-Academy - Web-based School - Collaboration with partners Business A variety of courses with a focus on business and hobbies Sincere two-way instruction Web-based school Communication between students via the Internet Optimal learning design to match one’s lifestyle Instructed directly by top-professionals of each field Schooling and off-line meeting Reasonable price Sports Hobbies 釣り 17

  19. Applications of Digital Signage Provide a broad range of products for small- to large-scale applications Low price Small-scale applications Provide solution packages Medium-scale applications Customized Packaged Large-scale applications Form alliances with external parties High price 18

  20. NTT’s Cloud Computing “Safe and secure cloud” = cloud with high reliability and security in conjunction with NGN NTT’s Target New area(social infrastructure) Consumers Enterprises Individuals Small-medium enterprises / municipalities Large enterprises / national government High Service creation (Use NGN/LTE) Mission critical systems ・e-administration ・core business systems Wide-ranging system development support, operations and management Broadband AP ・IPTV Secure AP ・e-POBox ・Home ICT Reliability and security Specific venture-driven fields Internet AP ・EC ・Search Amazon Conventional cloud application area Google Low [Public clouds] (for the Internet) [Public clouds] [Private clouds] 19

  21. NTT Group’s Activities on Clouds Individuals Small-medium enterprises / municipalities Large enterprises / national government Mobile Integrated VPN NGN NTT East NTT West Biz clouds Biz storage Biz conference Biz mail Biz∫ Biz support Finance, accounting SaaS ・・・ Intra-mart framework Intra-mart framework Application delivery platform PaaS BizCITY for SaaS Data center Collection agent, etc. Biz hosting, etc. Green data center, etc. IaaS Integrated cloud service Common infrastructure NTT Group provides SaaS for 150 applications (NTT applications: 105; partner applications: 45) 20

  22. Home ICT Service Platform Customers Service center Service Providers (partners) Life Support Services Controlling home appliances from a remote location outside home Home gateway Network Visualizing energy consumption Home appliance manufacturers Transmission of health-care data Home-related manufacturers Utility companies Checking locks from a remote location outside home ・・・・ Sharing videos, etc., among devices Provide a variety of daily lifestyle support through collaboration with partners The technical trial project commenced in Dec. 2009 21

  23. The NTT Group’s Global Business Expansion Solution Bases Bases acquired by M&A in the past 2 years ■ Data Center HSCS Major investment targets ■ ASIA ■ ■ ■ ■ PC-1 ■ ■ ■ ■ ■ ■ ■ ■ ■ APG ■ ■ ■ ■ ■ ■ ■ ■ North America/ South America ■ ■ Europe ■ ■ ■ ・itelligence <Germany> ・Cirquent <Germany> ・PLDT <Philippine> ・Tata (TTSL/TTML) <India> ・KT <Korea> ・Verio/NTT America <U.S.> ・Pacific Crossing <U.S.> ・ICT solution bases: 19 cities・Employees: approx. 1,800 ・ICT solution bases: 41 cities ・Employees: approx. 3,800 ・ICT solution bases: 33 cities ・Employees: approx. 4,100 ※HSCS：Hokkaido-Sakhalin Cable System、PC-1：Pacific Crossing – 1 APG：Asia-Pacific Gateway（Operation scheduled to commence in 2011） 22

  24. The NTT Group’s Global Business Expansion - Asia - Korea KT (NTT Docomo) Taiwan FET (NTT Docomo) Hong Kong HTCL (NTT Docomo) Philippine PLDT (NTT Docomo, NTT Communications) India TTSL (NTT Docomo) Vietnam NTT Vietnum (NTT East) Bangladesh TMIB (NTT Docomo) NTT Com Thailand (NTT Communications) Mobile Innovation (NTT Docomo) NTT DATA Asia (NTT Data) NTT DATA Engineering System Thailand (NTT Data) Malaysia U Mobile (NTT Docomo) Singapore StarHub (NTT Communications) 23

  25. R&D’s Contribution to Global Businesses Network • Leading international standardization (ITU, 3GPP) • Supporting global development of mobile handsets • Mobile communication (3G, LTE) • First in the world to commercialize • Also sold overseas by Japanese manufacturers • Free bending fiber-optic cords • Thin low-friction indoor optical cables • International standardization (IEC) • Approx. 50% of global market • Fiber-optic connectors • International standardization (IEEE) • Adopted by Chunghwa Telecom (Taiwan), TOT(Thailand) and PCCW (Hong Kong) • High-speed optical access system (GE-PON) • International standardization (ITU-T) of Optical Transport Network (OTN) transmission • 50% of global market of optical transport devices • (OTN-LSI) • High-speed optical transmission Service • International standardization (ITU-T) of IPTV technical specification • International standardization (ITU-T, IEEE) • operatingin 16 countries • IPTV • Video encoding (H.264/MPEG) • First national encryption adopted in ISO standard. • Adopted in International standardization (IETF) • Used in over 60 products such as Linux • Symmetric-key cipher (Camellia) 24

  26. International Promotion of Technologies • Accept trainees to enhance skills of engineers in emerging countries • Host technical seminars in partnership with the government and vendors January 2009 25

  27. Role of ICT Sector in Reducing CO2 CO2 emissions by sector in Japan Energy conversion Other 7% 6% Transport 20% Home 13% Business 18% Industrial 34% ICT sector 2% As a telecommunications carrier, NTT Group will contribute to reducing CO2 emissions by proactive use of ICT. Source: Ministry of Economy, Trade and Industry 26

  28. CO2 emissions by the NTT Group The CO2 emissions by the NTT Group amount to 4.02 million tons (FY2008), representing about 0.3% of Japan’s total emissions. (M ton) 4.76 Use of heat 5 4.40 Use of company vehicles 3.78 4 3.60 3.19 Use of gas and fuel 3 2 Use of electricity 1 (Fiscal year) CO2 emissions from business activities 27

  29. NTT’s Activities towards a Low-carbon Society • Energy saving measures • at communication facilities (Data centers, power/AC equipment) • “Green NTT” • (introduction of natural energy production) • Participation in “Team minus 6%” “Green of ICT” 1 Reduction of CO2 emissions generated by NTT Group business operations “Green by ICT” 2 • Providing ICT solutions for teleworking and digital content distribution, etc Providing solutions that contribute to reduction of CO2 emissions by customers “Green with Team NTT” 3 Reduction of CO2 emissions at homes and in communities of NTT Group employees • Participation in eco-driving, forest preservation activities, regional clean-up activities and greening of building rooftops 28

  30. Green of ICT– Green Data Center - Photovoltaic Generation System High Efficiency Air Conditioning Combining cutting edge energy saving technologies Environment-friendly data centers Linked control Direct Current Power Feeding System ～ ＩCＴ Equipment ＡＣ ＤＣ ＤＣ ＣＰＵ ICT Equipment Sensor Air Conditioning G Battery Higher Voltage Linked control of ICT equipment and air conditioning Higher Voltage Direct Current Supply Virtualization Technology to reduce number of ICT equipments 29

  31. Role of ICT Sector in Reducing CO2 CO2 emissions by sector in Japan Energy conversion Other 7% 6% Transport 20% Home 13% Business 18% Industrial 34% ICT sector 2% As a telecommunications carrier, NTT Group will contribute to reducing CO2 emissions by proactive use of ICT. Source: Ministry of Economy, Trade and Industry 30

  32. CO2 emissions by the NTT Group The CO2 emissions by the NTT Group amount to 4.02 million tons (FY2008), representing about 0.3% of Japan’s total emissions. (M ton) 4.76 Use of heat 5 4.40 Use of company vehicles 3.78 4 3.60 3.19 Use of gas and fuel 3 2 Use of electricity 1 (Fiscal year) CO2 emissions from business activities 31

  33. NTT’s Activities towards a Low-carbon Society • Energy saving measures • at communication facilities (Data centers, power/AC equipment) • “Green NTT” • (introduction of natural energy production) • Participation in “Team minus 6%” “Green of ICT” 1 Reduction of CO2 emissions generated by NTT Group business operations “Green by ICT” 2 • Providing ICT solutions for teleworking and digital content distribution, etc Providing solutions that contribute to reduction of CO2 emissions by customers “Green with Team NTT” 3 Reduction of CO2 emissions at homes and in communities of NTT Group employees • Participation in eco-driving, forest preservation activities, regional clean-up activities and greening of building rooftops 32

  34. Green of ICT– Green Data Center - Photovoltaic Generation System High Efficiency Air Conditioning Combining cutting edge energy saving technologies Environment-friendly data centers Linked control Direct Current Power Feeding System ～ ＩCＴ Equipment ＡＣ ＤＣ ＤＣ ＣＰＵ ICT Equipment Sensor Air Conditioning G Battery Higher Voltage Linked control of ICT equipment and air conditioning Higher Voltage Direct Current Supply Virtualization Technology to reduce number of ICT equipments 33

  35. Green of ICT- Direct Current Power Feeding - Direct current power feeding Air conditioners ICT equipment Direct current power supply system Power loss (heat) 48V DC AC CPU AC/DC conversion DC/DC conversion Commercial power supply Battery DC power feeding can reduce total power consumption by 15% compared with AC power feeding. Alternate current power feeding Air conditioners Alternate current power supply system ICT equipment 100, 200V AC AC CPU DC AC/DC conversion DC/AC conversion AC/DC conversion DC/DC conversion Commercial power supply Battery 34

  36. Green of ICT- Conference on Ecology Guidelines in the ICT Field - • Provide evaluation criteria to assist the formulation of “procurement criteria” for ICT equipment and data center services • The Guidelines are to be formulated in February 2010. • Evaluation criteria for target equipment (evaluation indices, standard values, etc.) • Target equipment: small routers, L2 switches, transport devices, PON devices (GE-PON), • broadband base station equipment (WiMAX), external power supplies (AC adaptors), servers • Evaluation criteria for data centers (evaluation indices, standard values, etc.) • 　　“Power Usage Effectiveness” (PUE) has been selected • PUE=Power consumed by all entire facilities / power consumed by ICT equipment • Standard for displaying a voluntary assessment result (eco-ICT mark) • A standard and a symbol have been defined to indicate voluntary activities of telecom companies with the aim of reducing CO2 emissions. 35

  37. Green of ICT - Small-diameter, Low-friction Cable- Estimated reduction in CO2 emissions by small-diameter, low-friction optical fiber cable Common part Customer’s premises CO2 emissions (kg/line/year) Copper cable LAN cable VDSL equip. Optical cable PC VDSL equip. Reduction of approx. 80% Use of VDSL Small-diameter, low-friction indoor optical fiber cable LAN cable Optical cable Use of VDSL Use of optical fibers PC Splitter GE-ONU Use of optical fibers 36

  38. Green by ICT - Teleworking - Estimated reduction in CO2emissions Example of teleworking CO2 emissions (kg/line/year) By accessing the PC in the office from a PC at home, office work can be performed 2,000 Reduction of 35.5% 1,000 0 Telework 2 days a week and commute to the office 3 days a week Commute to the office 5 days a week 37

  39. Green by ICT – Videoconferencing - Estimated reduction in CO2 emissions Example of teleconferencing Allows high-reality videoconferences or shared viewing of documents by many people CO2 emissions (kg/line/year) 2,000 Reduction of 47.8% 1,000 0 Face-to-face meetings Videoconferences Two 2-hour meetings between people in Tokyo and Osaka 38

  40. Green by ICT – an Environmental Load Assessment System - The system can easily calculate how much an ICT service contributes to reducing the environmental load “Kankyo-shiro” Estimated contribution of the videoconferencing system to reducing the environmental load ICT service: videoconferencing Conventional means: travel to meeting site Input the location and frequency of meetings Evaluation result Breakdown into lifecycle stages Internet Use of conventional means Use of ICT Reduction in CO2 emissions User The contribution of the use of ICT to reducing CO2 emissions 39

  41. Green by ICT - Standardization of Environmental Load Assessment - Activities in ITU-T July 2008: “Focus Group on ICTs and Climate Change” formed in TSAG Chair: U.K.; Vice-Chairs: Japan (NTT), Korea, U.S.A, and Syria May 2009: “WP on ICTs and Climate Change” (WP3/5) formed in SG5 Chair: U.K., Vice-Chairs: Japan (NTT) and Korea Five questions defined in WP3/5 October 2009: Submitted the study framework to develop recommendations and the draft for “Methodology for environmental impact assessment of ICT” TSAG: Telecommunication Standardization Advisory Group SG: Study Group; WP: Working Party 40

  42. NTT Group Initiatives Creation of business through innovation Global activities of individuals and companies Enriched lifestyles Revitalizing the community Sustainable growth of society Globalization Financial/economic crisis Environmental burden Digital divide Aging society with fewer children Overcoming socio-economic problems 1. Service creation 2. Global business development 3. Efforts towards a low-carbon society (Green of ICT, Green by ICT and Green with Team NTT) 41

  43. 1. Information Communication in Japan • 2. NTT’s Business Trends • 3. R&D Directions 42

  44. Three Laboratory Groups of NTT R&D Cyber Communications Laboratory Group Creating broadband and ubiquitous services Information Sharing Laboratory Group Developing infrastructure technology for network innovation Science and Core Technology Laboratory Group Cutting-edge technology for social revolution 43

  45. NTT Laboratories Musashino Atsugi Yokosuka Tsukuba Keihanna 44

  46. Create broadband & ubiquitous services Expand and economize network infrastructures Create services that take the fullest advantage of broadband networks, and develop seeds for future services Establish a service provision platform and drastically reduce network costs Pursue technical development to achieve challenging goals to reduce environmental load Pursue research of cutting-edge technologies that lead the world in ICT Contribute to reducing environmental load Promote research into leading-edge technologies Driving R&D for Service Creation Video communication Content circulation Home ICT SaaS/Cloud FMC Establish a service provision platform Reduce cost and power consumption of networks Drastically reduce the lifecycle cost of networks Ubiquitous Personal concierge Usability Optical technology Nano-device technology Quantum information processing technology Technology for saving energy of ICT Environmental load assessment technology Life extension of facilities Wireless communication technology Future networks Natural language processing technology Encryption technology Video coding technology 45

  47. Application cooperation/ development support Cloud security Virtualized operation and management Distributed data management Network cooperation and active use Resource virtualization Cloud Computing Technology • Common platform technology for building safe and secure clouds Public clouds outsourced Private clouds Self-owned AP AP System integration ・・・ Service Cloud Computing technology: CBoC SaaS Applications Finance, accounting Management control technology Personnel, pay Financial account ・・・ PaaS Platform HaaS IaaS Hardware, operation management OS, middleware, servers, storage units, LAN, networks, facilities, etc. CBoC: Common IT Bases over Cloud Computing 46

  48. A C B C A B Home ICT technology • Delivery management technology using bundles (software components) based on international standard, OSGi • The platform is available to all service providers and helps reduce the development and operational cost of services “Bundle delivery and management” Use a closed network, such as the NGN or the LTE Service providers Home ICT platform Bundle Provider A Center server Network Bundle Info appliances HGW Provider B Control Info appliances OSGi bundle Delivery management system OSGi framework Provider C Info appliances Internet “Services expansion” Controlled via a variety of networks, such as the Internet OSGi: Open Services Gateway initiative 47

  49. R&D target for FTTH Initial stage Cost reduction technologies FTTH expansion Recently Easy construction technologies Full-scale FTTH era From now on Easy maintenance tech. 48

  50. Hole Cladding Core Flexible Fiber Code • Fiber can be installed neatly because it can be handled as easily as copper Example of indoor installation Bundled Folded back Right angle bend Cross-section PC 8 Conventional single-mode fiber ONU 6 Optical outlet, etc. Bending loss (dB/m) 4 No bending loss 2 0 Hole-assisted optical fiber Tied in a knot 5 10 15 20 25 30 Bending radius (mm) 49

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