Launching an NGN commercial service - NTT’s approach - December 16, 2008 Tatsuro Murakami NTT Information Sharing laboratory Group (C)2008 NTT Contents z Issues facing telecom carriers z The status of Japan’s telecommunications market z NTT’s Activities z NTT’s Medium-term Strategy z NTT’s Challenges in Field Trials z NGN Commercialization and Service Deployment z NTT’s history and plan for introducing the NGN z Questions for launching the NGN z Summary 2 (C)2007NTT Issues facing telecom carriers 3 (C)2007NTT Issues facing telecom carriers Issues facing all telecom carriers are migration to IP, promotion of broadband services, and creation of new telecom businesses. Carriers are investing in the NGN as a solution to these issues. z Promote broadband & ubiquitous services like FMC and triple play Revenue shift from telephony Revenue from telephony Revenue from broadband and ubiquitous services Cost z Collaborate with various service players in creating new businesses Expand telecoms market z Migrate telephone network to IP Reduce CapEx and OpEx 4 (C)2007NTT The status of Japan’s telecommunications market 5 (C)2007NTT The lifetime of NTT’s PSTN facilities NTT’s PSTN consists of about thousands switches. Although a then-state-of-art switching system was developed around 10 years ago, the rapid progress in technology since then has resulted in the discontinuation of production of some components used in the system. Currently, we are trying to prolong the lifetime of the switches by re-establishing sources for such components. Migration to more highly integrated LSI that operates with lower voltage power supply 1.8, 2.5V PS 0.25µm POI Transit switch Transit switch Other carriers POI NW between prefectures ~hundreds Transit switch NTT West NW inside a prefecture ~thousands Local switch Local switch NTT East Transit switch 0.35µm 0.5µm 3.3V PS 5V PS 0.6µm 0.8µm 1.0µm 1.2µm 90 nt in ue d Other carriers Di sc o ~dozens Degree of integration NTT Communications 95 00 Year 05 NW inside a prefecture Local switch Local switch NS8000 (developed around 10 years ago) 6 (C)2007NTT The revenue structure of the NTT Group Revenue from traditional networks, such as the PSTN, is falling. This fall has not yet been made up for by revenue from broadband businesses. It is necessary to change the revenue structure by expanding revenue from Broadband services provided on the NGN. Consolidated revenue of NTT Group (Billion US$) Mobile Internet and data communication Fixed-line analog telephone (POTS) 100 90 80 70 60 50 30 9 7 34 34 32 31 30 12 13 16 18 20 22 40 41 38 36 34 31 32 33 12 40 11 8 8 40 30 49 46 20 45 Revenue from broadband market 10 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 7 2006 (C)2007NTT Increase in ARPU of broadband services (ARPU : Average Revenue Per User) • The bundled service of FTTH records a higher ARPU than POTS service. • Since FTTH services can incorporate video delivery & other supplementary services, the ARPU is increasing gradually. ・ It is urgent to raise ARPU further to strengthen our financial basis. (Yen) 6,000 5,000 5,370 5,607 estimate FY 2007 FY 2008 5,120 4,800 4,000 FY 2005 FY 2006 8 (C)2007NTT Promotion of optical access by the u-Japan Strategy The Japanese government’s “u-Japan” plan proposes the full development of broadband infrastructure by installing optical fiber networks nationwide. Proposed status of broadband networks in 2010 Proposed on Aug. 11, 2006 1. 100% broadband network The projected status of a 100% broadband network, through which broadband services are made available to all communities, is as follows: (1) Overall, a variety of wireline and wireless technologies will be seamlessly linked, and broadband service based on one or more of these technologies will be available nationwide. (2) In areas where cost-effective investment is difficult, broadband infrastructure will be built taking both investment efficiency and the needs of communities into account. Specifically, the following will be used in addition to ADSL and cable modems: (a) Wireless broadband using wireless LAN and other technologies; (b) Integrated broadband, in which “wireless and ADSL/VDSL”, “optical fiber and infrared transmission”, or “optical fiber and ADSL (in so-called Fiber To The RT (FTTR))” are integrated. (3) Of these varieties of broadband service, super-high-speed broadband access, mostly based on FTTH, will cover 90% of households nationwide. 9 (C)2007NTT Dramatic increase in the number of FTTH subscribers Number of users (Million) 16.0 Optical access is being promoted so aggressively that the number of FTTH subscribers is growing rapidly and the number of DSL subscribers has now gradually begun to fall. 14.0 12.0 CATV DSL FTTH 10.0 8.0 ADSL (NTT) FTTH (NTT) 6.0 4.0 0.0 02 Q2 02 Q4 03 Q2 03 Q4 04 Q2 04 Q4 05 Q2 05 Q4 06 Q2 06 Q4 07 Q2 07 Q4 2.0 Source: Ministry of Internal Affairs and Communications 10 (C)2007NTT Intense competition in broadband access •Competition in the telecommunication market is intensifying in Japan. •NTT faces strong competition in gaining share in broadband access. Shares in ADSL market Others USEN7.4% Others ACCA 3.4% 4.9% KDDI 7.6% eAccess 14.3% SoftBank BB Shares in FTTH market NTT 37.1% 6.1% Power Company 10.2% NTT 71.4% 37.6% As of December 2007 11 (C)2007NTT 80 60 12 o aid kk Ho ori m Ao a it Ak te a Iw gi ya ta Mi aga a m im Ya ush k Fu aki ar i Ib ig ch To ma n Gu ama it Sa a ib Ch o a ky To gaw i na sh Ka ana m Ya ta ga Ni a ma y To awa ik Ish fu Gi ano g a Na uok iz Sh i ch Ai i ku Fu e Mi ra Na o ot Ky ka a Os a ig ma Sh aya ak W o og a Hy am a ay Ok shim ro Hi ri t to e To an i h im Sh guc a m a Ya aw g Ka e a im Eh shim ku To hi c a Ko ok ku Fu a g i Sa sak ga Na ta i Oi zak to ya Mi amo a m im Ku osh g a Ka aw in Ok 0 NTT average: 57.4% 70 50 40 30 NTT’s share (%) Share of FTTH, prefecture by prefecture NTT has over 50% share in optical access nationwide. However, in urban areas, where fibers can be installed efficiently, NTT faces tough competition and is falling behind in many prefectures. Share of FTTH market in individual prefectures (As of March 2005) 100 90 20 10 (C)2007NTT Rapid reduction in the charge for broadband access •Strong competition has led to a price war, bringing down the charges for ADSL and even FTTH dramatically. •Strong competition has made it hopeless to seek to gain significant revenue from telecommunication traffic. Monthly charge (US$) 100 80 60 For detached house $34 40 $22 1.5M-type 20 0 2001 2002 $21 For MDU 2003 2004 2005 13 (C)2007NTT NTT’s Activities 14 (C)2007NTT NTT Medium-term Strategy - November ’04 Objective Contribute to National Plans of e-Japan and u-Japan to solve social problems such as population aging and environmental issues Milestone Migrate 30 20 million customers to optical fiber access and next-generation network services by 2010 Specific actions (1) Develop and implement a ubiquitous broadband service by integrating fixed and mobile communications, etc.an Build Build an NGN NGN that that is is of of high high quality, quality, flexible flexible and and secure secure (2) Build a high-quality next-generation network that is flexible and secure Develop broadband Buildand an open (3) Migrate seamlessly from existing fixedand linespread telephony to IPand telephony fromnetwork copperthat ubiquitous services that allow fixedallows collaboration with wire systems to optical fiber mobile convergence (FMC) other carriers and ISPs (4) Expand business opportunities using a ubiquitous broadband service (5) Strengthen our competitiveness and financial base 1 Implement smooth migration from existing fixed-line to IP-based telephony, and from copper to optical access 2 Expand business opportunities by exploiting broadband ubiquitous services 3 Provide new business opportunities to various service players (XSP) Strengthen competitive edge and financial base, and contribute to achievement of u-Japan 15 (C)2007NTT Issues facing telecom carriers Issues facing all telecom carriers are migration to IP, promotion of broadband services, and creation of new telecom businesses. Carriers are investing in the NGN as a solution to these issues. z Promote broadband & ubiquitous services like FMC and triple play Revenue shift from telephony Revenue from telephony Revenue from broadband and ubiquitous services Cost z Collaborate with various service players in creating new businesses Expand telecoms market z Migrate telephone network to IP Reduce CapEx and OpEx 2 3 1 16 (C)2007NTT 17 (C)2007NTT Overview of Field Trials of NTT’s NGN Objectives : - Verification of the NGN implementation - Creation of new business opportunity with ASPs - Building consensus to use NGN as a communication infrastructure of the future Various services through tie-ups with IThome appliance manufacturers and ASPs Osaka area Open connectivity functions NGN IP multicast function Security functions End-to-end quality control Tokyo area Base station IP telephony FMC Video distribution Internet access 18 (C)2007NTT Examples of services tested in the trial ■ NGN for Business - High definition visual communication - Multipoint Web Conferencing System - Wideband IP conference phone - Enterprise-oriented network service - Push to talk with multimedia over NGN, etc. ■ NGN for Life - Broadcast retransmission over IP - High-definition IPTV service - IP high-definition videophone - Wideband IP phone - One phone, etc. ■ NGN for Society - Home security and control - Telepathology system - Healthcare - Ubiquitous network service for kid’s safety - Gentle touch supervision by robot, etc. 19 (C)2007NTT Covered area in NGN commercialization - During FY 2007, launch NGN service in certain areas of Tokyo & Osaka - During FY 2008, expand NGN service area in major cities - By the end of 2010, cover the entire current FTTH service area 07 FY 2008 FY 2009 FY 2010 Launch in certain areas of Tokyo, Osaka and some more Ethernet Service Video Distribution IP broadcast retransmission VOD etc. Launch of Commercial Services B-FLET’S & Hikari Denwa services Rollout in the 23 wards in Tokyo, the 06 area in Osaka, Yokohama, Kawasaki, Chiba, and Saitama Expansion in other ordinance- designated cities Expansion in entire current fiber access area by the end of FY 2010 Rollout in major cities including those with prefectural government offices Launch in certain areas of Tokyo and Osaka Expansion in major cities nationwide including ordinance-designated cities and those with prefectural government offices Tokyo and Osaka Service rollout according to user needs Development in conjunction with NGN development & user needs *2 Service offering in balance with NGN development 20 (C)2007NTT NGN Commercialization and Development -QoS services including Hikari Denwa*1, video telephony, and services for content distribution such as multicast -Charges for best effort service and standard-QoS Hikari-Denwa and video telephony approximately the same as current levels -Customer-friendly rate levels structure for QoS services other than those above (TBD) category Network services on NGN Existing IP network services Fiber Access Service -The same as the existings -Single-dwelling for family (~100Mbps) -Multi-dwelling for mantion(~100Mbps) -Office use(~1Gbps) IP telephony (0AB-J)*2 -HIkari Denwa incl. both the existing quality and high qualityNew -Business type is upcoming -Video telephony incl. the existing New quality and two high quality grades -Hikari Denwa incl. office type /Video telephony -Video telephony VPN service -Center-end type, CUG type -QoS guaranteed one is upcoming -Office & Group access Service for content distribution -The same as the existings - unicast/ multicast with securing bandwidth New -FLET’S .Net EX/ v6 cast (unicast, multicast) Ethernet service - The same as the existings and inter-prefectural New -Business Ethernet (intra-prefectural) *1: Hikari Denwa is the service name of VOIP provided by NTT EAST/WEST *2: Geographic number for PSTN and IP telephony with equivalent quality to PSTN (C)2007NTT 21 New Service Creation on NGN Creation of new services in cooperation with various industries Broad casting Financial Medical Education Advertise Business Internet industries services Cooperation or Tie-up with other industries and different business Applications/ Contents Platform Video distribution Creating new services and values with open and collaborative works The Internet NNI SNI ISP NGN ISP Carriers UNI Many kinds of Information appliances Customers 22 (C)2007NTT Next-Generation Services Joint-Development Forum -‘Joint-Development of Services’; Joint-Development with business from various industries, creating new business models that take advantage of NGN features -“Next-Generation Services Joint-Development Forum”( tentative name) to be launched next spring ISP/ Contents Provider/ ASP etc. Collaborate Incubation Support -Marketing -Technology consulting -Leverage R&D result Collaborate Next-Generation Services Joint-Development Forum Information & Environment -Seminars etc. -Utilize Test Beds -Exhibition Space ‘NOTE’ -Enhance SNI&UNI Contribute Capital as necessary Service Creation & Commercialization such as Telemedicine, Remote education, Telecommuting etc. 23 (C)2007NTT For What on NGN? For Society - Remote medical treatment, a base forcare economic growth Health - Antidisaster information system Solution for social problems ( -Less children/more elderly people, E-government, nurse/medical/education, E-local governing body heavy natural disaster etc.) - Remote education etc. For Business Social infrastructure with high reliability - Corporate VPN Business chance creation - SaaS Productivity improvement - Tele-work Quick response to market change - Tele-presence - Groupware etc. For Customers -Secure Telephone/TV phone & safe - IPTV More enjoyable - Home security More convenient - Networked game - Video sharing etc. 24 (C)2007NTT NTT’s history and plan for introducing the NGN 25 (C)2007NTT Rapid growth of Internet IP network Broadband demand Pre-NGN 1999: Started IP network (pre-NGN) 80 million 60 million PSTN Telephone Mobile phone IP (2000.3) 40 million 1999: Start IP network (pre-NGN) for Internet access Internet (fixed networks + mobile internet) 20 million Broadband (fiber optic + DSL, etc.) ISDN 3/94 3/95 3/96 3/97 3/98 3/99 3/00 3/01 3/02 3/03 26 (C)2007NTT Rapid growth of Internet IP network Broadband demand Pre-NGN 1999: Started IP network (pre-NGN) Promotion of broadband 9M fiber-optic subscriber base 2001 Started fiber-optic access (pre-NGN) ADSL (NTT) PSTN DSLAM IP FTTH (NTT) Number of users (Million) 10.0 8.0 Expanding fiber-optic subscriber base 6.0 4.0 2.0 4 05 Q2 05 Q4 06 Q2 06 Q4 07 Q2 07 Q4 04 Q 2 04 Q 4 03 Q 2 03 Q 4 02 Q 2 0.0 02 Q 2001: Start fiber-optic access service (pre-NGN) 27 (C)2007NTT Triple play Development service of IP services Rapid growth of Internet IP network Broadband demand Pre-NGN 1999: Started IP network (pre-NGN) 2001 Started fiber-optic access (pre-NGN) Promotion of broadband 9M fiber-optic subscriber base 2004 Started triple play service PSTN DSLAM IP Expanding fiber-optic subscriber base 2001: Start fiber-optic access service (pre-NGN) PSTN DSLAM IP Developing triple play service 2004: Started triple play (pre-NGN) 28 (C)2007NTT Triple play Development service of IP services Rapid growth of Internet IP network Broadband demand Pre-NGN 1999: Started IP network (pre-NGN) 2001 Started fiber-optic access (pre-NGN) FLET’s Promotion of broadband 9M fiber-optic subscriber base 2004 Started triple play service Service features started 1999 – Users can access their contracted ISP – Best-effort network service for internet access – Fixed monthly charge B-FLET’s Variants (Peak rate: 100Mbps) started 2001 – Business type (for large businesses) – Basic type (for SOHO & heavy users) – Condominium type (for mass market users) – Hyper-Family/Premium type (for mass market users) Services on B-FLET’s (Triple Play) started 2004 – High Speed Internet access – IPTV up to 32,000 VODs, 100 multicast channels, including HDTV – RF video up to 300 channels, including HDTV – POTS quality VoIP 29 (C)2007NTT Triple play Development service of IP services Rapid growth of Internet IP network Broadband demand Pre-NGN 1999: Started IP network (pre-NGN) 2001 Started fiber-optic access (pre-NGN) (Yen) Promotion of broadband 9M fiber-optic subscriber base 2004 Started triple play service ARPU of broadband services 6,000 5,000 5,370 5,607 estimate FY 2007 FY 2008 5,120 4,800 4,000 FY 2005 FY 2006 30 (C)2007NTT Triple play Development service of IP services Rapid growth of Internet Timing IP network Pre-NGN 1999: Started IP network (pre-NGN) Broadband demand 2001 Started fiber-optic access (pre-NGN) Promotion of broadband 9M fiber-optic subscriber base 2004 Started triple play service Timing of NGN launch…. z Establishment of nationwide customer base (9M subscriber) Solutions brought by NGN Requirements z Low cost structure Converged network z Reliability and traffic control Carrier-grade IP network z Start of triple play services Solutions brought by NGN Requirements z New telephone service menu for IP era Simulation base PSTN evolution z Attractive network for content providers QoS and Capacity z Market expansion to new business areas Open Interface 31 (C)2007NTT Triple play Development service of IP services Rapid growth of Internet Timing IP network Pre-NGN 1999: Started IP network (pre-NGN) Promotion of broadband Broadband demand 2001 Started fiber-optic access (pre-NGN) 9M fiber-optic subscriber base 2004 Started triple play service Developing triple play service Field trial PSTN DSLAM IP 2004: Started triple play (pre-NGN) Timing Significance of the field trials •The starting point for collaboration with service providers. •Verification of the NGN implementation 32 (C)2007NTT Alternative ways of migration to the NGN PSTN PSTN PSTN Shift (at customer’s will)) NGN Overlay with the PSTN NGN Provide new service structure Shift (at the provider’s will) IP network PSTN Maintain existing services Replacement of the PSTN NGN Add new services 33 (C)2007NTT Alternative approaches to migrating telephony Use of the IMS to build an IP network and introduce broadband services APL APL Total NGN IMS One-step approach PSTN APL APL FTTx IMS Switch FTTx AGCF Two-step approach Soft Switch AGW DSL APL APL Soft Switch AGW Use of softswitch to build an IP network + use of the IMS to introduce broadband services IMS MSAN 34 (C)2007NTT Triple play Development Service service of IP services creation Rapid growth of Internet Timing IPnetwork Pre-NGN 1999: Started IP network (pre-NGN) Broadband demand 2001 Started fiber-optic access (pre-NGN) PSTN NGN Promotion of broadband 2004 Started triple play service 9M Expansion of fiber-optic area coverage subscriber base 2008 Started commercial NGN Start from triple play with QoS and security Maturity of NGN 2010 To have 20M Fiber-optic subscribers PSTN NGN DSLAM DSLAM IP 2008: NGN commercialization IP Small start and rapid expansion of service area coverage 2010: 20M fiber-optic service subscribers z Small start z Covering a wide area in short time frame z Version up from pre-NGN z Same categories of services = upward compatibility + QoS and security z New services aimed towards new business areas 35 (C)2007NTT Triple play Development Service service of IP services creation Rapid growth of Internet Timing IPnetwork Pre-NGN 1999: Started IP network (pre-NGN) Broadband demand Promotion of broadband 2001 Started fiber-optic access (pre-NGN) 2004 Started triple play service Systematic Maturity Completion migration of NGN of NGN 9M Expansion of fiber-optic area coverage subscriber base 2008 Started commercial NGN to NGN 2010 To have 20M Fiber-optic subscribers 2012 Completion of the migration to NGN Systematic migration from existing IP network PSTN NGN NGN PSTN DSLAM IP 2010: 20M fiber-optic service subscribers DSLAM IP 2012: Completion of the migration from existing IP network to NGN 36 (C)2007NTT Triple play Development Service service of IP services creation Rapid growth of Internet Timing IPnetwork Pre-NGN 1999: Started IP network (pre-NGN) Broadband demand Promotion of broadband 2001 Started fiber-optic access (pre-NGN) PSTN NGN 2004 Started triple play service Systematic Maturity Completion migration of NGN of NGN 9M Expansion of fiber-optic area coverage subscriber base 2008 Started commercial NGN to NGN 2010 To have 20M Fiber-optic subscribers Systematic migration from existing IP network 2012 Completion of the migration to NGN NGN PSTN DSLAM IP 2010: 20M fiber-optic service subscribers DSLAM IP 2012: Completion of the migration from existing IP network to NGN 37 (C)2007NTT Triple play Development Service service of IP services creation Rapid growth of Internet Systematic Maturity Completion migration of NGN of NGN Timing 1999: Started IP network (pre-NGN) Broadband demand 2001 Started fiber-optic access (pre-NGN) Promotion of broadband 2004 Started triple play service 9M Expansion of fiber-optic area coverage subscriber base 2008 Started commercial NGN E-mail Web TV (1seg) Multi-media TV phone Camera Games terminal 45M Promotion of voice and IP infrastructure En dbro to-en adb d IP and IP network Pre-NGN to NGN 2012 Completion of the migration to NGN Start LTE 2001 Start of 3G z Deployment of both fixed and mobile full-IP network infrastructure will be in 2010 z This will be based on 3G infrastructure subscriber base started in 2001 z Mobile handsets have already become multi-media terminals using i-mode, video phone, 1seg TV, etc. z LTE will drive end-to-end IP broadband communications. 38 (C)2007NTT Questions for launching the NGN 39 (C)2007NTT Questions for launching the NGN There are two questions regarding the launch of the NGN • Chicken or egg? Which comes first? (or, Highway or sports car?) NTT may appear to be looking at infrastructure alone. However, NTT’s approach is based on synchronizing development of services and infrastructure • From where do subscribers migrate ? What is the subscriber base ? BT: Migrate from PSTN Europe: Migrate from GSM world NTT: Migrate from IP broadband 40 (C)2007NTT NTT’s approach is based on synchronizing development of services and infrastructure Triple play Development Service service of IP services creation IPnetwork Pre-NGN 1999: Started IP network (pre-NGN) Broadband demand 2001 Started fiber-optic access (pre-NGN) Promotion of broadband 2004 Started triple play service 9M Expansion of fiber-optic area coverage subscriber base 2008 Started commercial NGN E-mail Web TV (1seg) Multi-media TV phone Camera Games terminal 45M Promotion of voice and IP infrastructure 2001 Start of 3G Systematic Maturity Completion migration of NGN of NGN En dbro to-en adb d IP and Rapid growth of Internet to NGN 2012 Completion of the migration to NGN Start LTE 41 (C)2007NTT NTT subscriber base and revenue source will be migrated to NGN from IP broadband Triple play Development Service service Revenue source of IP services creation pre-NGN pre-NGN IPnetwork Promotion of Pre-NGN 1999: Started IP network (pre-NGN) Broadband demand 2001 Started fiber-optic access (pre-NGN) 9M Expansion of fiber-optic Customer-base area coverage broadband subscriber base 2004 Started triple play service NGN 2008 Started commercial NGN Systematic Maturity Completion migration of NGN of NGN En d-t bro o-en adb d IP and Rapid growth of Internet NGN to NGN 2012 Completion of the migration to NGN E-mail Web TV (1seg) Multi-media Revenue source TV phone Camera Game Start terminal IP broadband LTE 45M byof3G Promotion voice and IP infrastructure Customer-base 2001 Start of 3G 42 (C)2007NTT Summary 43 (C)2007NTT Summary NTT’s history and plan for the NGN z Since NTT first provided an IP network service for Internet access, NTT has promoted optical access and triple play services. z To meet its timetable to get a 9M optical access subscriber base and establish revenue source from triple play, NTT has just started NGN commercial service. z The NGN started in limited areas such as Tokyo and Osaka as an upgrade of the existing IP network service. z The NGN will cover a wide area in short time frame and create new services aimed at new business areas. NTT’s approach to launching the NGN z NTT’s approach is based on synchronizing the development of services and infrastructure. z NTT’s subscriber base and revenue source will be migrated from IP broadband to the NGN 44 (C)2007NTT Thank you 45 (C)2007NTT