KDDI’s Views on Future 3GPP2 Activities

1. KDDI’s Views on Future 3GPP2 Activities 16 May 2008

2. Decline (or even Saturation) of Revenue Growth Penetration went beyond 80%: Little room for the new addition of normal handset subscribers Potential data intensive market, but not as big as normal handset market and faced with competition against, e.g. WiFi, WiMAX, etc. Potential M2M market, but much lower ARPU expectable Flat rate tariff commonly considered for data A “must” pricing for data market growth, cf. fixed broadband access Revenue cap per subscriber, ARPU no longer proportional with traffic Flat rate tariff beginning to penetrate for voice Revenue cap per subscriber, ARPU no longer proportional with traffic Continued Demand for Capacity Increase Faster data traffic growth than expected driven by flat rate tariff and popularity of rich contents The Internet experience, 10-20% users generate 80% or more traffic, also applies to cellular data How can Operators survive? Majority of customers will be satisfied with 1x/1xEV-DO capabilities and will yield healthy profit and cash-flow for next 10 years. Enhanced 3G and 4G targeted for heavily data intensive users Significant reduction of CAPEX and OPEX for Enhanced 3G and 4G inevitable, requiring large Eco-system for these systems Operator’s Business Environment in the Developed Market Japan Market as an Example

3. The challenges which 3GPP2 has been recently faced with are as follows; Decline in the membership from 74 (04/2007) to 59 (04/2008) as well as in the number of meeting participants to around 120 recently (used to be around 200) These declines lead to budget constraint, including the cancellation of Bangkok meeting in September 2008 Growth area of 3GPP2 market has shifted from matured market to emerging market, leading to higher demand for enhancement of 1x/HRPD over enhanced 3G or 4G A few big operators of 3GPP2 camp announced their choice of non-3GPP2 technology, e.g. LTE and WiMAX, for the 3G enhancement Recent 3GPP2 Challenges

4. To maintain the competitiveness among 3G technologies such as UMTS and GSM evolution To meet the future market needs, including the support of new band classes which may require a new set of minimum performance specifications To support interworking with non-3GPP2 technologies To win the market’s confidence of 1x/HRPD specifications 3GPP2 Objectives as The Owner of 1x/HRPD Specifications KDDI thinks it extremely important for 3GPP2 to continue to enhance and maintain the specifications of 1x/HRPD to meet market requirements that will emerge as the CDMA market develops. The objectives of these activities include, but are not limited to, the following;

5. Enhancement and maintenance of 1x/HRPD specifications to enable increased system capacity and improved performance. This includes, for example; Voice capacity enhancement of 1xRTT Voice quality improvement of 1xRTT HRPD enhancement which can be implemented by Software Update Completion of remaining set of specifications for UMB, e.g. minimum performance specification and also the enhancement and maintenance of UMB specifications within the constraints of the 3G classification and deployment in the existing spectrum Development of 1x/HRPD interwoking capabilities with non-3GPP2 technologies Development for Simultaneous 1x and HRPD KDDI Views on the Scope of Future 3GPP2 Activities KDDI recommends 3GPP2 to focus its future work on the following areas: KDDI strongly prefers that the RTT for IMT-Advanced be a single global standard in order to secure acceptable economies of scale and an ecosystem that is large enough for its business viability. As such, KDDI does not believe that a separate 3GPP2 air interface proposal for IMT-Advanced is in the best interest of the industry and that an industry harmonized proposal would be preferred.