May 2015 Yuji SASAKI, Director, International Policy Affairs Division MIC Japan ICT Infrastructure Development in Japan

Broadband Service Subscribers in Japan Source: MIC Population: approx. 128 million Households: approx. 56 million (Jan. 1, 2014) (million) 1

Current Status of Broadband Spread in Japan Source: MIC Area Coverage Broadband * ％ （ 99.9% ） Inside ( ) : only fixed broadband Ultra High-Speed Broadband * ％ （ 98.7% ） （ As of end Mar ） Rate of Subscription Fixed Broadband *3 65.2% Mobile Ultra High-Speed Broadband *5 Fixed Ultra-High-Speed Broadband *4 48.5% 42.6% *1 FTTH, CATV Internet, FWA, BWA (only services whose download speeds are over 30Mbps, other than FTTH) *2 FTTH, DSL, CATV Internet, FWA, Satellite Broadband, BWA, 3.5G Mobile Broadband *3 FTTH, DSL, CATV Internet, FWA, BWA (only Local WiMAX) *4 FTTH, CATV Internet (only services whose download speeds are over 30Mbps) *5 3.9G Mobile Broadband, BWA (other than Local WiMAX) 2

Policy targets on broadband deployment 2001 ～ 2005 ～ Strategy for bridging digital divide (June 2008) Strategy for bridging digital divide (June 2008) IT New Reform Strategy (January 2006) e-Japan Strategy II (July 2003) Target: Connect 30 million households to high-speed Internet and 10 million households to Ultra high-speed Internet in 5 years Target: Elimination of areas where broadband remains unavailable by FY 2010 Target: (a)Ensure that all households have access to broadband by the end of FY 2010 ( ｂ )Ensure that 90% households have access to Ultra high-speed broadband by the end of FY2010 Basic Law on the Formation of an Advanced Information and Telecommunications Network Society （ January 2001 ） New Broadband Super Highway (Hikari no Michi) New Broadband Super Highway (Hikari no Michi) Target: All households use broadband services by around 2015 e-Japan Strategy (January 2001) Securing the world’s most advanced IT infrastructure environments Develop and secure high-speed broadband environments in unprofitable areas such as isolated islands based on area characteristics Declaration of the Creation of the Most Advanced IT Nation in the World (New IT Strategy)

Interconnection regulations (1997) ■ In 1997, MIC amended Telecommunications Business interconnection regulations Act, and established the interconnection regulations. interconnection regulations ・ MIC introduced interconnection regulations in 1997 in order to: Foster fair competition between NTT and other new carriers, from the viewpoints of not only network scales but also other factors such as quality of services, consumer prices. Foster fair competition between NTT and other new carriers, from the viewpoints of not only network scales but also other factors such as quality of services, consumer prices.  In this new regulation, NTT could not refuse other carriers’ reasonable requests for interconnection. interconnection regulations ・ MIC introduced interconnection regulations in 1997 in order to: Foster fair competition between NTT and other new carriers, from the viewpoints of not only network scales but also other factors such as quality of services, consumer prices. Foster fair competition between NTT and other new carriers, from the viewpoints of not only network scales but also other factors such as quality of services, consumer prices.  In this new regulation, NTT could not refuse other carriers’ reasonable requests for interconnection. ・ NTT had relatively strong position because of : The largest networks (deployed in the state-owned monopoly era) The largest networks (deployed in the state-owned monopoly era) ・ NTT had relatively strong position because of : The largest networks (deployed in the state-owned monopoly era) The largest networks (deployed in the state-owned monopoly era) 4

Asymmetric regulations (1997,2001) ■ MIC introduced in 1997 and enhanced in 2001 “asymmetric regulations”, which was applied to some dominant carriers. ・ Along with establishing interconnection regulations, it became necessary to promote further competition through preventing dominant carriers from anti-competitive activities such as: Abuse of information obtained through interconnection Abuse of information obtained through interconnection Unfairly advantageous/disadvantageous treatments to specific carriers etc. Unfairly advantageous/disadvantageous treatments to specific carriers etc. ・ Along with establishing interconnection regulations, it became necessary to promote further competition through preventing dominant carriers from anti-competitive activities such as: Abuse of information obtained through interconnection Abuse of information obtained through interconnection Unfairly advantageous/disadvantageous treatments to specific carriers etc. Unfairly advantageous/disadvantageous treatments to specific carriers etc. ・ For this reason, NTT East & West (fixed) and NTT DoCoMo (Mobile) submitted to such regulations as : Prohibiting anti-competitive activities stipulated and enumerated in the provisions Prohibiting anti-competitive activities stipulated and enumerated in the provisions Regulations regarding carriers with special relations Regulations regarding carriers with special relations ・ For this reason, NTT East & West (fixed) and NTT DoCoMo (Mobile) submitted to such regulations as : Prohibiting anti-competitive activities stipulated and enumerated in the provisions Prohibiting anti-competitive activities stipulated and enumerated in the provisions Regulations regarding carriers with special relations Regulations regarding carriers with special relations 5

Policy targets on broadband deployment 2001 ～ 2005 ～ Strategy for bridging digital divide (June 2008) Strategy for bridging digital divide (June 2008) IT New Reform Strategy (January 2006) e-Japan Strategy II (July 2003) Target: Connect 30 million households to high-speed Internet and 10 million households to Ultra high-speed Internet in 5 years Target: Elimination of areas where broadband remains unavailable by FY 2010 Target: (a)Ensure that all households have access to broadband by the end of FY 2010 ( ｂ )Ensure that 90% households have access to Ultra high-speed broadband by the end of FY2010 Basic Law on the Formation of an Advanced Information and Telecommunications Network Society （ January 2001 ） New Broadband Super Highway (Hikari no Michi) New Broadband Super Highway (Hikari no Michi) Target: All households use broadband services by around 2015 e-Japan Strategy (January 2001) Securing the world’s most advanced IT infrastructure environments Develop and secure high-speed broadband environments in unprofitable areas such as isolated islands based on area characteristics Declaration of the Creation of the Most Advanced IT Nation in the World (New IT Strategy)

Broadband service area in Kansai region(2006) FTTH 提供市町村 FTTH ・ケーブルインターネット 提供市町村 DSL CableInternet DSL and CableInternet Osaka Pref. Hyougo Pref. Kyoto Pref. Shiga Pref. Wakayam a Pref. Mie Pref. 7

Past Government Supports for broadband deployment Measures for Telecommunications operators 2. Reduction of Tax Bases for Fixed Asset Taxes (Local Tax) ・ Partial reduction of the tax base for fixed asset taxes is allowed for telecommunications operators building broadband facilities, such as optical fiber and DSL. ・ 1992 ～ Tax Breaks １.Accelerated Tax Depreciation (National Tax) ・ Accelerated tax depreciation is allowed fo ｒ telecommunications operators building broadband facilities, such as optical fiber and DSL. ・ 1991 ～ Measures for Local Governments 1. Local Information and communications Infrastructure Development Grants (ICT Grant) Grants equivalent to one third of total project cost is provided to local governments that builds broadband facilities to address the digital divide ～ Grants/Subsidies 2. Local Intranet Infrastructure Facility Development Promotion Grants Grants equivalent to one third of total project cost is provided to local governments that builds ultra-high-speed local public networks connecting public facilities such as schools, libraries, and municipal offices ～

Broadband deployment method by supporting local government IRU （ Indefeasible Right of User ）： Longtime stability rights established by the contract(including other types of agreements) to prevent termination of said contract without agreement by both parties. IRU contractor who allowed others to use optical fiber networks is recognized as governing/managing said optical fiber networks in a legal capacity. Example of public-build and private operation method by “Subsidy of info-communication utilization environment improvement and construction”. MIC Usage charge Public Applications Support for cost of network laying. Internet Access service Fee Internet Telecom Carrier Public Facilities Citizens IRU contract Installing network line Local Government Network leasing 9

National budgets in constructing optical fiber networks to date Project for the improvement and construction of intranet basic facilities. (FY 1998 ~ FY 2009) ・・・・・・ About 91bil yen （ Adopted 934 regions ） 465 bil clp Project for the improvement and construction of subscriber optical line. (FY 2002 ~ FY 2005) ・・・・・・ About 3 bil yen （ Adopted 18 regions ） 15 bil clp Subsidy of regional info-communication base improvement and construction. (FY 2006 ~ FY 2009) ・・・・・・ About 98 bil yen （ Adopted 664 regions ） 500 bil clp For Local government Total about 200 Billion Yen 1000 Billion CLP Total about 200 Billion Yen 1000 Billion CLP Subsidy of info-communication utilization environment improvement and construction.(FY 2011 ~ FY 2014) ・・・・・・ About 4 bil yen （ Adopted 24 regions ） 20 bil clp 10

Policy targets on broadband deployment 2001 ～ 2005 ～ Strategy for bridging digital divide (June 2008) Strategy for bridging digital divide (June 2008) IT New Reform Strategy (January 2006) e-Japan Strategy II (July 2003) Target: Connect 30 million households to high-speed Internet and 10 million households to Ultra high-speed Internet in 5 years Target: Elimination of areas where broadband remains unavailable by FY 2010 Target: (a)Ensure that all households have access to broadband by the end of FY 2010 ( ｂ )Ensure that 90% households have access to Ultra high-speed broadband by the end of FY2010 Basic Law on the Formation of an Advanced Information and Telecommunications Network Society （ January 2001 ） New Broadband Super Highway (Hikari no Michi) New Broadband Super Highway (Hikari no Michi) Target: All households use broadband services by around 2015 e-Japan Strategy (January 2001) Securing the world’s most advanced IT infrastructure environments Develop and secure high-speed broadband environments in unprofitable areas such as isolated islands based on area characteristics Declaration of the Creation of the Most Advanced IT Nation in the World (New IT Strategy)

■ ■ Project of info-communication utilization environment improvement and construction Budget in 2013: 0.8 bil yen (4 bil clp) Budget in 2014: 0.5 bil yen (3 bil clp) Promotion of Ultra high speed Broadband infrastructure dedicate to install public applications such as medical/health and welfare/education. The central government also gives subsidies toward project costs to local governments remote island or sparsely-populated areas. 【 Image 】  Subsidizing 1/3 of the installation cost of optical fiber lines and accessories in areas under disadvantageous conditions, such as sparsely populated areas and remote islands, (2/3 of the installation cost in the case of remote islands) if such optical fiber lines are installed by local governments.  The local governments usually loan the installed optical fiber lines and accessories to telecommunications carriers that will use the optical fiber lines and accessories and provide local residents with Internet services.  The local governments utilize the loaned optical fiber lines and accessories and provide local residents with public application services (e.g., the provision of disaster information and elderly watching over and care). 【 Summar y 】 Public facilities （ Educational/Medical facilities ） Houses Switching station of telecom carriers Ultra high speed Broadband （ Utilize optical fiber and Radio system ） Services provided by public applications Ultra high speed broadband infrastructure development project 12

Thank you. Ministry of Internal Affairs and Communications (“MIC”), Japan