1. January 10, 2011 Harry Takeichi Executive Vice President Communications and Information network Association of Japan

2. 2 Vertical Integration Model ： Operator AOperator BOperator C R&D With Vendors R&D With Vendors R&D With Vendors Network with Exclusive Apps Network with Exclusive Apps Network with Exclusive Apps SIM Lock IP Network Operators lead feature provisioning

3. Multi-functional Mobile Phone (“Galapagos” phone) Cam coder Stereo speaker Wide-VGA LCD 5M pix DSC E-money (Felica) Dual mode (GSM/WCDAM) Video phone Bluetooth HSDPA Media player File viewer QR code reader Email & web access Digital TV GPS navigation Java applications Magazines, Books TV / Radio GPS navigation Wallet, Credit card, keys, Tags, etc. Music Player, Camera Office Documents All in one Exclusive for a specific operator 3

4. FEATURES (examples) : - Video Viewing - Books - Music - GPS - Restaurant Search, etc….. Network ( no matter which operator) Terminals: Not bound with an operator -Carrier-driven vertical integration faces a barrier -Smartphone grows with much functions -Functions sit on the other side of network -Terminals drive telecom business 4

5.  Feature phone - Galapagos - Tied to Operator - Saturated Market - Go into Global Market  Smart phone - Open Market - Terminal-Cloud Linkage - Overseas Market First - Intrusion into Japan 5

6. Infra-first to Service-First 6 -Carrier-based services comes up against a wall. -Infrastructure does not drive services; what happens is reverse - Terminals drive business, furnishing with lots of functions

7. 7 -Japanese vendors want to go more international, while overseas vendors try to expand current business opportunities in Japan’s domestic market -Equal-footing seems essential to assure fair trades

8. 8 1. A Mobile phone has lots of functions these days. 2. It can function not only as a ‘phone’ but also as TV, radio, GPS, music player, e-money, and etc... 3. Mobile phones should be duty free in WTO member countries/areas due to the Information Technology Agreement (ITA). 4. Some customs, however, tried to impose tax on mobile phones because they can function as GPS navigator or TV, being exempted from ITA. 5. After long and intensive arguments, the tax committee in that region decided not to impose tax on mobile phones. 6. It can happen again. A new ITA may be necessary to realize tax-free on every electronics products.

9. Country Products Japan Country (Area) A Country B Country C Mobile Phones 0000 TV 0143.930 Video Recorder 013.9020 Copier 06020 Camera 03.2020 9

10. 1. Systems Security is very important, especially in Telecommunications Infrastructure. 2. So, there are Common Criteria, International Security Assessment Standards, to deal with the security threats. 3. Some countries, however, are trying to establish their own security regulations which demand the escrow of security codes or design information of the products. 4. Intellectual Property Rights are protected under WTO Agreement and should never be endangered. 5. Common Criteria Recognition Arrangement (CCRA) should be considered first to implement effective and internationally acceptable security regulations. 10

11. Common Criteria Recognition Arrangement - IT products evaluated or certified by CAP countries based on ISO/IEC Common Criteria shall be recognized by CAP + CCP countries. CAP : Certificate Authorizing Participants CCP : Certificate Consuming Participants 11

12. CAP CCP JapanUSCanadaUKFranceGermany KoreaItalyNorwaySpain NetherlandSweden AustraliaNew ZealandTurkey GreeceFinlandDenmarkSingaporeMalaysia Pakistan IsraelHungaryAustriaCzech India 12

13. 13 Future Network with Secured Cloud ∑ Service Apps ∑ Common / Personal / DBs ∑ Computing Power Secured Cloud Note PCSmart PhoneMobile Phone Big-Screen TV Free from duty/tax everywhere in the world IP well protected