Status Report of Internet in Japan February 22, 2009 Ryoichi Hosoya INTERNET MULTIFEED CO.

22 (c) INTERNET MULTIFEED CO., All rights reserved. Trends in Japan’s Telecom Market  Data: White Paper on Information and Communications in Japan, Ministry of Internal Affairs and Communications, Telecommunications Carriers Association, etc ▲Present (millions) Fixed-line phones Cellular and PHS phones All Internet services Broadband Internet services  Mobile subscriptions: 109,420,000  Mobile phones: 104,830,000  PHS phones: 4,590,000 (Sept. 30, 2008)  Internet subscriptions:  Fixed: Approx. 40 million Mobile: Approx. 89 million (June 30, 2008)  Fixed-line subscriptions: 50,260,000 (June 30, 2008)  Broadband subscription: 29,340,000 (June 30, 2008)  DSL 12,290,000 FTTH 13,080,000 Cable 3,960,000

33 (c) INTERNET MULTIFEED CO., All rights reserved. Growth of Broadband Subscribers Source: Press release of the Ministry Internal Affairs and Communications (MIC) on 17 December Japanese) Number of subscribers : 10 thousand 【 2004 】 【 2005 】 【 2003 】 【 2006 】 【 2007 】 FTTH DSL CATV as of the end of September 2008 Nearly 30 millions! Nearly 30 millions! 【 2008 】

44 (c) INTERNET MULTIFEED CO., All rights reserved. NTT-E/NTT-W 79% 10.2 millions NTT-E/NTT-W 79% 10.2 millions Others 21% 2.8millions Others 21% 2.8millions Others 61% 7.5 millions Others 61% 7.5 millions NTT-E/NTT-W 39% 4.7 millions NTT-E/NTT-W 39% 4.7 millions FTTH DSL  NTT-East/NTT-West dominate broadband access line market 13 millions 12.2 millions FYI: Market share of broadband access line Source: Information and Communications Statistics Database of the Ministry Internal Affairs and Communications (Only Japanese)

55 (c) INTERNET MULTIFEED CO., All rights reserved. Is the Internet traffic growing in Japan?  Yes!  The total traffic in 2008 reaches 1.2times the number in Source: Press release of the Ministry Internal Affairs and Communications (MIC) on 29 August (only Japanese)

6 (c) INTERNET MULTIFEED CO., All rights reserved. Traffic in major IXPs in Japan Data: Ministry of Internal Affairs and Communications tripled Gbps (Nov 2006) 158.4Gbps (Nov 2005) 132.0Gbps (May 2005) 238.7Gbps (May 2007) 2007 doubled x 1.4 x 1.5 x Gbps (May 2006) Gbps (Nov 2007) 303.3Gbps (May 2008) x 1.3 Combined traffic at major domestic Internet exchange points traffic

7 (c) INTERNET MULTIFEED CO., All rights reserved. Major IXPs in Japan Major players (commercial)  JPNAP  JPIX  BBIX  Equinix Major players (academic)  Dix-ie (by WIDE Project)  MEX

8 (c) INTERNET MULTIFEED CO., All rights reserved. Structure of Japan’s Internet Closed NW for broadband access line (FLETS) ISP 1 Provided by NTT-East/NTT-West … The Internet ◎ Provided by ISPs Representative ISP’s DSL FTTH ISP 2 ISP 3 ISP X Prohibited to enter the ISP market Unbundled access line NW

9 (c) INTERNET MULTIFEED CO., All rights reserved. Internet Service Provider in Japan % Source: Nikkei Sangyo Shinbun, July 24, 2008 (Total number of broadband Internet users in 2007: 28.3 million)

10 (c) INTERNET MULTIFEED CO., All rights reserved. Application for Consumer in Japan Data based on Consumer Media Survey (April 2, 2008), Web Advertising Bureau (million users) CGM users: Approx. 40 mil  Low growthHigh growth 

11 (c) INTERNET MULTIFEED CO., All rights reserved. Next-generation Networks ◆◆  NGN service areas  March 2008  NGN commercial services launched  Current service areas  NGN will cover all existing FLET’S Hikari service areas  End of FY2008  End of FY2010 ◆◆ ◆◆   23 wards of Tokyo, Osaka (06 area code), and parts of the following areas:   Tokyo (outside the 23 wards), Kanagawa, Chiba, Saitama, Miyagi and Niigata   23 wards of Tokyo, Osaka (06 area code), and parts of the following areas:   Tokyo (outside the 23 wards), Kanagawa, Chiba, Saitama, Miyagi and Niigata  NGN will be available to approx. 60% of households/businesses in existing FLET’S Hikari service areas NGN will be available in all optical-fiber areas by the end of March 2011

12 (c) INTERNET MULTIFEED CO., All rights reserved. Thank you for your attention!