November ２００８ Yasu TANIWAKI (y-taniwa@soumu.go.jp) Division Director, ICT Strategy Policy Division Global ICR Strategy Bureau Ministry of Internal Affairs & Communications (MIC), JAPAN Mobile Business Revitalization Plan

Number of Mobile Service Subscribers (Unit : 10 thousand subscribers) End of the year 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Number of subscribers 49 87 138 171 213 433 1,171 2,691 3,825 4,731 5,685 6,678 7,482 8,112 8,665 9,147 9,648 10,170 Rate of increase from previous year 101.6 77.3 58.8 24.3 24.5 103.2 170.4 129.7 42.2 23.7 20.2 17.5 12.0 8.4 6.8 5.6 5.5 5.4

Market share by main mobile phone operators （ from MIC) ＨＨＩ （ * ） share （ * ）ＨＨＩ（ Herfindahl-Hirschman Index ） one of the indicator to measure the degree of monopolizing market. Squares the number of each operator’s market share and adds up. its range is from 0 to 10,000, and means higher degree of monopoly when it close to 10,000. Docomo group au group (including Tu-ka) Softbank mobile (previous Vodafone) Others (exclude PHS/Docomo) (right)

Open Mobile Business Environment Content application layer Platform layer Telecommunications service layer Network layer Terminal layer Mobile Service Vertically integrated Business models Mobile Service Open Mobile Business Environment Mobile terminal Users Content & Applications variety of ubiquities terminals （ including home appliances ） Fixed Service A various ways to utilize telecommunications services including M2M (machine to machine) Content & Application ＦＭＣ Ubiquities Network Business Model 1.0 Business Model 2.0 Progress broadband development and IP transition

Service fee [Monthly] Terminal price Sales Incentives User Service fee [Monthly] Separation Plan (separation of terminal fees from service fees) Terminal Fee [Monthly] (equivalent to the sales incentives for terminals) Terminal price (initial cost) Excluded from rate base for access charge and/or wholesale price in the telecom business accounting rule Period Contract ■ Correction of inequality on burden of terminal costs ■ Promotion of MVNO entry through reductions in access charge and wholesale price ■ Clarification of earnings and expenses related to terminal sales (implicit pressure to decrease sales incentives) ■ Promotion of terminal diversification through SIM unlock Current Model New Model Partial introduction in 2008 Consideration of full-scale introduction by 2010, at the latest ■ The real significance of SIM locks will disappear through the introduction of service period contracts. ■ However, differences in 3G systems do exist (W-CDMA [Docomo / Softbank] and cmda2000 [au]); thus, SIM unlocks at this time could distort competition. ■ In principle, SIM unlock is desirable. Looking at the direction of future development for BWA and the terminal market, by 2010, this issue of SIM unlock will be concluded at the timing of 2010. User Status of SIM unlock Review of Sales Model for Mobile Business Compensated for sales incentives

Creation of New Markets Economic Revitalization Users (Enjoy a diversity of services) ■ MVNOs (Mobile Virtual Network Operators) provide telecommunications service without setting up their own wireless facilities. ■ MNO goes beyond simple telecommunications service provision to implement vertically integrated business including content/application layer, represented by music and game distribution, and alliance with financial services. ■ It is expected players in other areas come as MVNOs into the mobile communications market and build up new business models. ■ A “win-win” relationship can be built between MNO and MVNO. Promotion of New Entries of MVNOs MNO (incumbent mobile telecom carriers) MVNO Wholesale service and/or interconnections Added Value (Services and terminals) MNO (incumbent mobile telecom carriers) MVNO (Entry from a variety of business categories) games, e-money and more Linkage of existing services with mobile services Service Diversification New Market Creation Revitalization of the mobile business and achieving service diversification through promotion of new entries as MVNO into the mobile market Service provision

Newly Created Market through New Entries of MVNOs Terminal Market Service Revenues & Additional Revenue （ Source ） Nomura Research Institute(contained in the report of Study Group on Mobile Business (September 2007) ) ・ New entrants of MVNOs is expected to create additional 15 to 20 % of the mobile business market in 2015. Total 9

MVNO Business Guideline June 2002 The guideline was released. February 2007 The 1st revision of the guideline was released. May 2008 The 2nd revision of the guideline was released. ● Legal interpretation of Telecommunications Business Act and Radio Act, applied to the relationship between MNOs and MVNOs ● It made clear the relationship between MNOs and MVNOs can be either interconnection between MNOs and MVNOs or wholesale of MNOs’ services to MVNOs. ● More concrete interpretations were added in the guideline, reflecting the commets by MVNOs. November 2007 The resolution was released in the dispute on interconnection between NTT DoCoMo and Japan Communications Inc. ● The first case on the dispute settlement relating to MVNOs. ● The agreement was reached between them in June 2008. 10

Examples of MVNOs Wholesale Interconnection ■ NTT DoCoMo ■ au (KDDI) ■ Softbank Mobile ■ eMobile ■ Willcom ■ UQ Communications (WiMAX, starting in 2009) Acca Networks(DSL) IIJ (ISP / SIer) Japan Communications Inc (scheduled to launch in July 2008) Toyota (G-book) Disney Mobile NEC Biglobe (ISP) Nifty (ISP) IIJ(ISP / SIer) Japan Communications Inc Nifty (ISP) (Next genetation PHS, starting in 2009) ✔ 2.5GHz band was allocated in Dec. 2007. ✔ As one of the conditions , Willcom and UQ Communications are required to open their networks to MVNOs . HSDPA (DL / 7.2Mbps) (data communications) 11

Mobile telecom carriers Study Group on Platform Functions (Feb ～ December 2008) Terminal layer Telecom services layer Platform layer Content/Applications layer Vendors, etc. Fixed telecom carriers Content providers, etc. Strengthening cooperation of platform functions Sound growth of ICT market created by open platform policies NGN Market Integration Participation of new entrants (new business model) Creation of various business models