Information

NTT Group’s Medium-term Management Strategy

In November 2002, the NTT Group announced aplan entitled “Vision for a new optical generation—
Broadband leading to the world of resonant communication”. As a step toward this vision, the NTT
Group has formulated a medium-term management
plan consisting of management objectives, specificactions, and proposals for solutions.
1. Japan’s information and communications
market: current conditions and issues
This market already has approximately 17 million
fixed-line broadband users (including 12 million
ADSL users and 1.6 million optical fiber users), andprices are some of the lowest in the world. IP telephone use is also spreading rapidly among individuals and companies alike. There are more than 84 million mobile phone users, and 90% of such users use imode or other Internet connectivity services. The
transition from 2G to 3G mobile phones is moving
forward, with the number of FOMA [1] customers
expected to grow from the current level of approximately 6 million to more than 10 million by the endof March 2005. The introduction of informationhome appliances (Internet appliances) is also creating
an emerging market for Internet access through home
appliances, in addition to mobile phones and computers.
The accelerated growth of the information andcommunications market has spurred greater diversity
and complexity in customer demands. On the other
hand, a number of problems are becoming evident,
including quality and connectivity between IP networks, security against cyberterrorism at Internet
weak spots, and policing of illegal transactions overthe Internet. Solutions to these problems must be
found before a ubiquitous broadband society candevelop. In addition, the question of how to maintain
universal services, which are provided through existing fixed telephone networks, as the transition to IP
telephone service progresses remains a significant
issue.
As these developments suggest, the information38

and communications market is experiencing a periodof significant transition and change. It will be necessary to achieve reliable connectivity and security,
ensure a smooth migration from fixed-line telephonyand metal wire systems to IP telephony and opticalfiber, and solve many other problems through an
overall plan created and implemented not only by the
information and communications companies, but also
by a wide coalition of government and industry groups.
2. Developing safe, secure, and convenient
ubiquitous broadband services
2.1 Management objectives
NTT has three management objectives for meetingcustomer needs:(1) Use the combined strengths of NTT to actively
build the ubiquitous broadband market and help
achieve the e-Japan Strategy [2] and the uJapan Initiative [3](2) Build a safe, secure, and convenient communications network environment and broadband
access infrastructure, while achieving seamlessmigration from fixed-line to IP telephone service and from metal wire to optical fiber systems(3) Strive to increase corporate value and achievesustained growth
NTT will endeavor to achieve these management
objectives by leveraging its experience in providing
reliable services in the field, and its technology andR&D prowess in optical fiber implementation andnetwork reliability. Specifically, NTT has:
• Proven capability in advanced service operations
for communications and information systems;
protecting and managing customer information toensure customer privacy; large-system design,operation and maintenance; and fast recovery in
the event of natural disasters or other emergencies• Proven research and development capability in
key technologies: technologies that ensure thesecurity of information and infrastructure integrity, technologies for building large-scale operaNTT Technical Review

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tions and information systems, and optical fiber
technologies for increasing communication
capacity.
2.2 Specific actions
To achieve the above management objectives, NTT
will take the following five actions (Fig. 1).
(1) NTT will develop and implement a ubiquitous
broadband service by integrating fixed andmobile communications, etc.
Customer needs are becoming more complex anddiverse. Customers want faster, interactive visualcommunications and other types of broadband services, “anywhere, anytime, anything” ubiquitous services, “safe, simple, and convenient” broadband portal services, and global one-stop services for personal and business use. NTT will use the group’s combined strengths to meet these needs (Fig. 2).
i) Super-high-speed interactive video communications over optical fiber will be combined withmobile communications services (known as
fixed-mobile convergence) to provide ubiquitous services that can be accessed from PCs,
TV sets, mobile telephones or information
appliances. Some service examples are:• Connecting the work site with the office for crisis
management, disaster recovery management orworkflow management• Providing home security and remote control ofhome systems

Build a safe, secure, and convenient
communications network
environment and broadband accessinfrastructureii) Multi-site video conferencing and other services via real-time interactive video communications will give users in different locations thesense of being in a single location. Some service examples are:
• Remote medicine combining health monitoringand medical examinations by video• Remote education using video textbooks andvideo communications between teachers and students• Remote face-to-face consultation, such as financial and life planning, through simulation software and video communicationsiii) Comprehensive, wireless-enabled portal services will provide customers with the information they need accurately and quickly. Some
service examples are:• Comprehensive search and retrieval of word-ofmouth information about local stores and events,
with maps and other related information, creating
a one-stop search service that can be accessedfrom mobile devices• Broadband search services, such as graphics andvideo searching using metadata (title, performer,
production date and similar related data points
used to search for information), voice commandsearching and similar services• Personalized searches that provide endorsed content and advertisements tailored to the user’s
tastesAchieve the e-Japan strategy
and the u-Japan Initiative
Customers(1) Develop and implement a ubiquitous broadband service by integrating fixed
and mobile communications, etc(2) Build a high-quality, flexible, and securenext-generation network(3) Seamlessly migrate from fixed to IP
telephones and from metal wire to
optical fiber systems(4) Expand business
opportunities using
ubiquitous broadband
service(5) Strengthen its competitiveness and financial baseFig. 1. Specific actions.

Vol. 3 No. 2 Feb. 2005

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Seamless services available by broadband and mobile access
Portal, contents, applications
Common services for information search, music, movies, games
Linked services using quick response codes
Platform
Common services such as standardized ID, authentication, and electronic money
Communication service
Connection service to exchange video, voice, and data between fixed-line telephones and mobile phones
Conference service to which multiple fixed-line telephones and mobile phones can be connected
Convenient service to transfer calls to mobile phones during absence

3G mobile phone(FOMA)

Wireless LAN

Broadband(optical fiber)Portable seamless terminal
Dual terminal, inter-terminal wireless communication, etc.

Fig. 2. NTT will develop and implement a ubiquitous broadband service by integrating fixed andmobile communications, etc.

• Total solutions as a group to support new businesses and more efficient business processes forour customers.
• Solutions using large-scale system integration andcross-industry network system services, such as
supply chain management systems that use optical fiber access or an IP network in combination
with radio frequency identification (RFID) tags
• Hosting services and other solutions that meet the
IT needs of medium-size business customers• Ubiquitous broadband services utilizing a flatrate structure that is not based on call distances.
Customers will be given service options that meettheir requirements for quality, speed (data volume), reliability and security levels, with various
rates depending on service content.
(2) NTT will build a high-quality, flexible, andsecure next-generation network
NTT will promote IP telephone services as an alternative to fixed-line service and provide various ubiquitous broadband services emphasizing high-speed
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and interactive features in order to shift 30 million
customers from the existing metal wire and fixed telephone network to optical fiber access and next-generation network services by 2010. It will study the following issues, which are obstacles to network providing services in a broadband society, and find solutions.
• Traffic control and management: How should weprioritize traffic as the traffic volume rapidly
increases, and how should we restrict illegal traffic?
• Network safety and cyberterrorism countermeasures• Defense against abuses on the Internet, such astheft and impersonation, violations of privacy,
and the spreading of rumors• Measures for dealing with physical threats to thesystem from earthquakes and other natural disasters.
The next-generation network combined with optical fiber access will provide total IP connectivity
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Informationfrom the user’s device to the network, combine thebenefits of both fixed and IP networks, and help toovercome the barriers to the development of a broadband society. We will contribute to a more economical network and lower service prices by utilizing IP
technology to lower device costs and wavelength
division multiplexing to lower transmission costs. In
addition, we will develop and implement flexible andconvenient services by allowing flexible servicedependent bandwidth settings and provide a simple
and flexible structure for the development and introduction of various services by allowing services to bemade available through the installation of applications on the system platform. Network-wide control
and management will enable more effective maintenance of quality and security by restricting illegal
traffic. System-wide management of congestion will
also allow important communication lines to be kept
open during a natural disaster. The next-generation
network will be built with a common service foundation that merges mobile and fixed communications.
Each NTT group company will play a role that capitalizes on its strengths. NTT will aim for early implementation of carrier-grade technology as a core technology for the next-generation network, including
optical multiplexing and node architecture technology. It will also seek to achieve efficiencies in equipment investment in connection with the constructionof optical fiber access infrastructure and the nextgeneration network. NTT will strive to eliminate
regional differences in the development and availability of broadband services. These objectives will
be achieved through the final two actions discussed
below.
(3) NTT will seamlessly migrate from fixed to IP
telephones and from metal wire to optical fiber
systems
Maintaining both metal wire and optical fiber
access methods and fixed telephone networks as well
as IP networks is a burden on business operations andincreases the cost to society. The first step is to promote the spread and expansion of optical fiber accessand the next-generation network so that the majorityof customers are using them by the year 2010. The
next step is to convert completely from metal wireaccess and the existing fixed telephone network. NTT
will formulate and announce an outline for this transition by 2010, taking into account the interests ofcustomers and operators of related businesses.
During the conversion to IP telephony, the existing
fixed-line network will still serve as the network oflast resort for emergency notification, safety informaVol. 3 No. 2 Feb. 2005

tion, telephone number portability, and interconnectivity between operator networks, so the fixed-line
network must still be maintained for some time. NTT
will ask all interested parties to consider an appropriate scheme for retaining the fixed telephone network
system, including retention from the perspective of
maintaining universal service.
The existing fixed-telephone rates (basic rate, callrates, equipment installation rates) must be reevaluated in preparation for migration to a rate structure forservices using optical fiber access and the next-generation network. NTT has already announced a revision to its basic rates and other fees as a first step inthis direction.
(4) NTT will expand business opportunities using
ubiquitous broadband service
We will build on the know-how of the NTT groupcompanies that provide ubiquitous broadband services and system integration services to expand nontraffic-sensitive businesses that utilize authenticationand settlement, single-sign-on, and other platformfunctions. In doing this, NTT will actively pursue
alliances with companies outside the NTT group andseek to expand its presence in the market (Fig. 3).
This expansion will cover:• Visual content-related distribution over the nextgeneration network• Business related to authentication and settlement
services using the next-generation network and ecommerce businesses that combine mobile telephones and portal services• Business related to training and education businesses and promotion and advertising businesses
that use constant-connection and interactive IP
technologies• Business related to home security, distribution
management, and facility management businesses that use RFID (radio-frequency identification)
tags• Business opportunities using group management
resources• Procurement of more outsourcing contracts formaintenance and management services that will
enable NTT to make best use of its experienceand know-how in communications equipment
maintenance and building management• Procurement of more outsourcing contracts for
efficient and high-quality accounting and payroll
services using internal shared service centers
within NTT• Expansion of NTT real-estate businesses and promotion of energy-related businesses to mitigate
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Information

Databasebusiness

Marketingbusiness
Face-to-facesales

Financial portal
business

Onlinepublishingbusiness

Net gamebusiness

Image creatorsupport businessTravel EC

new
ating

Asset management
support businessCommunity
business

Image culturebusiness

Remotenursing-carebusiness

Solutionbusiness

e-learningbusiness
Movie
distribution
business

Monitoringbusiness

Preventive medicalcare business

Recyclingbusiness

Collaboration
business

ess

busin

(Service aggregate) Cre(Data mining)

Crea

ting

Service provider

Consulting
business(Matching)Service provider(Agent)Service provider

Service provider

new

busin

ess

•••

Synergy through resonance with resonant communications environment
Resonant communications environment

Corporation
Individuals

Goods

Corporation

Individuals

Individuals
Corporation

Individuals

Platform service(charging, authentication, etc)

Mobile communications
Corporationand other network services
Corporation
IndividualsGroup
Individuals

End-to-end network service(connectivity, quality and reliability, security, etc)

Individuals

Goods
Corporation

EC: electronic commerce

Fig. 3. Expansion of business opportunities through reinforcement of platform business.

the increased energy burden associated with thetransition to broadband.
(5) NTT will strengthen its competitiveness andfinancial baseNTT will enhance the quality of customer services,
strengthen its competitiveness and profitability, anddevelop an improved financial infrastructure by promoting ubiquitous broadband services, pursuing new
business opportunities, and reducing costs in operations and equipment investments. To achieve theseobjectives, it will be necessary to lay the groundwork
to resolve the issues described below.
• Increase revenues from next-generation network
solutions and non-traffic-sensitive businesses to
500 billion yen by the year 2010.
• Maintain the same equipment investment level as
before: a cumulative total of 5 trillion yen for
fixed communications operations through the42year 2010. To do this, NTT will aim to substantially reduce costs for equipment investment
associated with optical fiber access and the nextgeneration network by introducing technicalinnovations, reducing the cost of equipment, andimproving production methods. Through thesecost-cutting initiatives, NTT will endeavor to
make its new optical fiber access and the nextgeneration network businesses profitable in thenear future.
• By 2010, NTT aims to reduce costs by 800 billion
yen by improving the efficiency of fixed communications operations and by reducing costs
through the streamlining of operating systems
and through business process re-engineering as
the transition to optical fiber access and full IP
connectivity unfolds.
To maintain and reinforce its reputation as a secure,
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safe, and reliable brand, NTT intends to take the steps
needed to respond to customer demands. NTT will
enhance its end-to-end delivery system (by shortening delivery times, etc.), strengthen its one-stop service capabilities, and improve service quality andsecurity by establishing an operations management
system that leverages the group’s comprehensive
strengths. Specifically, it will:• Improve operating efficiency by reorganizing
group companies, including outsourcing companies• Strengthen the tie between system integration andsoftware businesses within the NTT group• Increase efficiency in group finance functions.
In addition to strengthening its competitiveness andfinancial base, NTT will take the following steps toincrease company value:• Improve returns to shareholders (including repurchasing its own stock based on market demandand supply conditions for it)• Further increase management transparency bypromoting information disclosure• Maintain management practices that emphasize
compliance, including policies and procedures
for maintaining the privacy of customer information• Establish advisory boards comprising outside
experts• Establish committees for management appointment and compensation
2.3 Proposals for solutions: optimizing thedevelopment of a broadband society
For the healthy development of a broadband society, customers must have access to safe and secure
information and communications services providing“end-to-end, any-to-any” connectivity. This requires
standardization of connectivity and security from thecustomer’s device to the network and between networks, as well as a network environment that gives
customers a selection of providers and services.
Acceleration of the migration to optical fiber accessrequires a system in which infrastructure providers
can secure a fair return on the development and introduction of new technologies and other cost-reduction
measures and a fair return on equipment investment
risk. The digital divide between people with andwithout access has also become a social issue. Theseissues must be addressed by a broad, unified coalition
including industry participants and the government.
NTT intends to lend its full support to this effort.

Vol. 3 No. 2 Feb. 2005

2.3.1 Ensuring the connectivity and security
required in the ubiquitous broadband era
A committee composed of information and communications device manufacturers, network operators, and the government should be established toform a consensus on network quality and interface
standardization. This group of private and public
interests should create an overall plan, taking into
account international standardization and other factors. The NTT group will put forth specific proposals
and will play an active part in this effort.
Plans are already in motion to address information
security from the standpoints of national security andanti-terrorism measures. Information security is an
issue that affects the security of many critical infrastructure elements such as energy, transportation, andfinance. The development and implementation of aprogram consistent with government policy, including emergency and national disaster response measures, will therefore require even closer cooperation
between the private and public sectors. This will
involve: i) cooperation between the national government and operators involved in infrastructure construction and maintenance, in addition to cooperation
with international interests and ii) joint development
and standardization of policy guidelines in cooperation with standards organizations.
2.3.2 Solving the digital divide
In order to create a vibrant aging society, it will benecessary to create a user-friendly environment thateven unskilled users can access. NTT intends to callupon the public and private sectors to combine theirefforts to this end. It will work to simplify device andnetwork service interfaces and promote public awareness of illegal transactions and other abuses on theInternet and methods of preventing them.
To stimulate local communities and promote
remote-medicine and education, it will be necessary
to avoid regional differences in the development andavailability of broadband services. This is an issue
with significant social implications. The NTT groupwill play a part in overcoming these problems by lowering facility construction costs and expanding the
supplementary use of wireless access technology,
such as fixed wireless access (FWA). It will promotejoint efforts by the public and private sectors (including cooperation with projects for constructing government networks by local governments and initiatives for servicing areas with poor reception throughterrestrial digital broadcasts provided by cable broadcasters) and will secure national and local government funding for these projects.
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Metallic/fixed telephone network• Mandatory regulations on
telecommunication equipment
Regulations on unbundlingand connection fees
• Regulations against business activity
NTT East, NTT West and NTT
Docomo are not allowed toprovide one-stop services
within the NTT Group.

Optical fiber/IP telephone network• Mandatory regulations
on telecommunicationequipment are also
applied to the opticalfiber network offeredby NTT East and
NTT West.
• Regulations against
business activity arealso applied.

• When building an optical accessnetwork, it is necessary to createa system in which infrastructure
providers can secure a fair return.
• In principle, regulation of services
should be limited to post-facto
regulation to facilitate the provisionof integrated fixed/mobile services
and provide customers with theconvenience of one-stop shopping.

Need to reevaluate the scheme for maintaining the
fixed telephone network, including certain aspectsof the maintenance of universal services.

Fig. 4. Competition in the ubiquitous broadband era.

2.3.3 Competition in the ubiquitous broadband era
As society converts to IP and optical fiber, there
will be a dramatic change in the nature of competition
compared with the situation for conventional fixed
telephones (Fig. 4). This trend must be reexamined at
an early stage to ensure the sound development of abroadband society. We must create a mechanism topromote competition in facility construction to support the accelerated growth of optical fiber access,which will form the foundation of ubiquitous broadband services. A connectivity scheme for interactive
video services must be considered from the viewpointof maintaining the quality and security expected byproviders and providing the customer with choices inproviders and services. In principle, services should
be subject to post-facto regulation, so as to ensurethat customers have convenient, free, and fast accessto one-stop services.

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References
[1]
[2]
[3]

http://www.nttdocomo.co.jp/english/p_s/service/foma/index.html
http://www.kantei.go.jp/foreign/policy/it/enkaku_e.html
http://www.soumu.go.jp/joho_tsusin/eng/Releases/NewsLetter/
Vol15/Vol15_12/Vol15_12.html* This article is based on NTT NEWS RELEASE at: http://www.ntt.co.jp/
news/news04e/0411/041110d.html (Editorial Office)For further information, please contact
Corporate Strategy, Department I, NTT
Chiyoda-ku, 100-8116 Japan
Telephone +81 3 5205 5131

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