1. Private and Public Sectors’ Roles in Establishing Effective and Sustainable Measures Towards Solving the Digital Divide Satoshi Fujita NTT Communications January 12, 2003

2. Lessons Learned in Sri Lanka and the Philippines (1) NTT in Sri Lanka and the Philippines ■ Sri Lanka ● Sri Lanka Telecom - No.1 carrier in Sri Lanka - NTT’s investment share: 35.2% - Services: Regional, long distance and international, Internet, cellular - CEO from NTT Com - IPO in 2002 ■ The Philippines ● ODA (National Telephone Program: NTP) - From 1991 to 1995 - 60,000 lines in 71 town and cities that previously had no telephones ● PLDT - No.1 carrier in the Philippines - NTT’s investment share: 15% - Services: Cellular, regional, long distance and international, Internet

3. Sri Lanka ■ Importance of efficient operations: Private sector and privatized organizations ● Significant improvement in operation performance ● Realization of IPO in 2002 ● Contribution to country’s industrial development ● Cooperation with government programs ■ Role of public sector: Support and compliment private sector (privatized telecos, etc.) ● National Communications Policy ● Universal Access Policy towards raising living standards - Communications in remote areas and user groups inadequately served - Establishment of indicators to evaluate ICT access ● Telecommunications Development Fund (TDF) - Contribution by licensed operators - Focus on rural areas, but at same time following market principles - Telephone access to rural post offices and sub post offices - Multi-purpose Community Telecenters (planned) Lessons Learned in Sri Lanka and the Philippines (2)

4. Operation Revenue 1997 2001 13,725Rs.Mil. 22,060Rs.Mil.Double Improvement in Service and Financial Performance Productivity (Revenue / Employees) 1997 2001 ■ ■ 1.6Rs.Mil. 2.5Rs.Mil. 0.9Rs.Mil.UP No. of Subscribers 315,000 708,000 1997 2001 Triple Fault Rate* 1998 2001 ■ ■ 16% 7.3% Half *Fault rate per 100 subscribers Sri Lanka Telecom

5. Lessons Learned in Sri Lanka and the Philippines (3) The Philippines - 1 ■ Expansion of telecommunications network in rural areas: Only 1/3 of 30,000 “Barangay”s (smallest unit of local communities) enjoy fixed-line telephone service ● Competition - Long history of laissez-faire - Concentration of investments in main cities ● Public sector - “Telepono sa Barangay!” : “Telephone in every village!” * Burden to operators, program stopped: commission and cost 10 to 20 times higher than normal) ● ODA - ODA is efficient. NTP was a success to some extent. - Organization problems: European programs failed.

6. Lessons Learned in Sri Lanka and the Philippines (4) The Philippines - 2 ■ Success of “private” and “mobile phones” ● Smart (PLDT) and Globe ● 80% service coverage ● No. of subscribers: 11M with a penetration rate of 14.5% (Fixed-line: 3.1M subscribers with a penetration rate of 4%) ● Cost effective - Cost reduction: from $500 to $50 (Fixed-line cost $1k in cities, $2k in rural areas) - Mobile phone set - open tender - Pre-paid method popular

7. ‘Disruptive’ Technologies Impact of Disruptive Technologies in Telecommunications Time Analog Tel. ISDN DSL WLL Mobile LAN i-mode 3G Internet Mobile Fixed-line Telephone Optical Performance Disruptive Innovation

8. 0 1,000 2,000 3,000 4,000 50,000 100,000 150,000 June 2001 （ Month ） （ yen ） January 2000 JuneJanuary 2001 JuneDecember Internet Access Charges in Japan ： Flat Rate/1M ＩＳＤＮ（ 64k ） Optical （ 10M ） ＡＤＳＬ（ 1.5M ） 125,000yen 70,312yen 56,250yen 51,562yen 45,312yen 43,750yen 3,400yen 3,066yen 2,533yen 1,933yen 1,300yen 500yen 387yen 1/320 in two years (ISDN→ Ａ DSL8M) 1 yen = $0.008 ＡＤＳＬ （ 8M ）

9. Best Mix of Private Options & Public Initiatives ■ Adoption of the most efficient technologies ● ‘Disruptive’ technologies: “low-cost, high-service” ● Combination of fixed-line and wireless, including cellular phones, such as in Sri Lanka and the Philippines ■ Role of public sector ● Human resource development - Education, IT literature: For example, the Multi-media University in MSC (Multi-media Super Corridor), Malaysia ● Regulations - Competition guidance and monitoring ● Finance: Secure universal access ● Information and knowledge sharing ■ Cooperation between private and public sectors, including NPOs and international Institutes, is important.

10. As of 2001 %

11. ＜ Top 20: Number of Mobile Subscribers and Mobile Penetration Rate ＞ As of 2001 Million