It is estimated that from the year 2020, the mobile broadband network will cover more than 90% of the world’s population, and the demand for telecommunications will continue to swell.In addition, practical use of the IoT (Internet of Things), including MTC (Machine Type Communication) and wearable devices, is expected to rapidly expand throughout the world.Because of this, telecom carriers are facing the issue of a “traffic explosion.”Because up until now the Internet has largely been used for watching video and listening to music, restricting excessive traffic on network performance had prevented large problems, but this will become principal in the age of IoT, especially from the perspective of social infrastructure, as various services supporting our safety and well-being come into use.Furthermore, in order to continue providing a high-quality user experience both stably and economically, telecomcarriers face the large business challenge of developing a business model that will create brand new benefits.To contribute to the resolution of these issues, NEC has committed to the research and development of the cutting-edge technologies, such as SDN (Software-Defined Networking), NFV (Network Functions Virtualization), and 5G.This report discusses the coming network society in relation to the age of a “traffic explosion,” as well as NEC’s ideas regarding an information and communications infrastructure.

Social Value Creation Report

A “traffic explosion” draws near.

What is the information and communications infrastructure?

Communication

2

Source: Modified QOL from “Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2015–2020”

Changes to performance demands and duties of networks

Mobile data traffic changes Network value changes from "connectivity" to

"content transfers" and "safety and security”Exabyte / month

0

5

20

15

25

30

2015 20202019201820172016

10

Mobile phones excluding smartphones CAGR 25% Smartphones CAGR 54% PCs CAGR 23% Tablets CAGR 50% M2M CAGR 83% Other portable devices CAGR -11%

Changing circumstances Changing role of networks

Home, Wearables

Physical systems

Smartphones

PCs

System logs

Connecting all things in the world

Connecting to the net & cloud without user

awareness

Communications responding to requests

Safety & security

Comfort

Connectivity

In recent years, when international large-scale sports competitions and global-scale events are held, the amount of network traffic notably skyrockets. The primary source is world-wide audiences using social networks to share their personal experiences by chatting, texting, and posting images and videos. From the soccer tournament held in Brazil in 2014, for example, 26.7 terabytes of traffic occurred, and data proportionate to 48.5 million digital images and 4.5 million voice calls was generated. This sort of data increase is expected to spread to all areas of the real world through the IoT, centered around not only today's smartphones, but also MTC, wearable devices, and other things that, up until now, have not been connected to the network. The compound annual growth rate of world-wide mobile data traffic is estimated at 53% expansion for 2015 to 2020. In preparation for 2020, Japan also aims to implement "5G" service, the next generation in mobile communications systems, which can facilitate transmissions at ultra high speed + high capacity from a large number of devices. Furthermore, the European Commission aims to implement 5G in all urban areas and along major roads and railroads by 2025. As a first

step, they have proposed that each country in the EU commence service for business purposes in at least one city by 2020. From here on, it seems that a variety of services which rely on networks will deeply permeate people's everyday lives, and that images and social media contents will account for a majority of the traffic explosion. Within that, telecom carriers must increasingly pursue a means to construct and optimize an information and communications infrastructure that can guarantee the transmission of the traffic caused by "large amounts of small data" necessary to the safety and security of our society, such as emergency responses and the surveillance and management of public infrastructure, while seamlessly offering users a high-quality experience. Because networks will gain a more powerful role as public infrastructure, network infrastructure must become more secure and resilient.

Duties of a revolutionized network in the age of IoT

Communication

Total CAGR (compound annual growth rate) of 53%

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As was mentioned in the last section, just as electric power, water services, and gas are important to the infrastructure of society, the importance of networks is already rapidly increasing as the years go on. In the future, as society is permeated with practical uses for the IoT and 5G mobile broadband, the realms in which networks are used will expand for things like autonomous car and optimized logistics, infrastructure surveillance, optimized energy allotment , and remote medicine, so smart cities can hopefully be achieved. Because networks are taking on the important task of acting as public infrastructure in this manner, security for durability and reliability against negative impact in times of disaster is becoming more important. When the Great East Japan earthquake hit in 2011, while it's true that it did enormous damage to both base stations and relay base stations, mobile traffic experienced a surge that made it difficult for end users to connect for a long time, among other issues. Telecom carriers were called upon to pursue a variety of plans for coping with disaster scenarios. Smartphones are spreading more rapidly now than they were at the time of the disaster, and social media can be used specifically for safety confirmation and

victim support, so if another large disaster strikes, we can be quite certain that traffic will jump even higher than before. Of course, these sorts of traffic explosions do not only occur in times of misfortune; they also result when international large-scale sports competitions and global-scale events are held. For example, the traffic that occurred during the large-scale sports competition that took place in London in 2012 was 4 to 7 times greater than it was in Beijing 4 years prior. The amount of traffic quadrupled again 2 years later for the event in Sochi, and it will continue to increase with each competition. It has been estimated that the amount of mobile traffic for the 2020 competition in Tokyo will be upwards of 30 times greater than it was for Sochi. Because the pervasiveness of networks is expanding into wider areas throughout society, the information and communications infrastructure must be resilient and intelligent enough to handle more than the everyday status quo.

The importance of a pervasive network as public infrastructure

Increasing trends for peak traffic during disasters and large-scale sports competitions

Communication

Traffic explosion caused by the Great East Japan earthquake

Traffic explosion caused by international large-scale sports competitions

* Source: “The State of Maintaining Communications in the Case of Large-Scale Disasters and Other States of Emergency” (Ministry of Internal Affairs and Communications, Investigative Commission into the State of Maintaining Communications in the Case of Large-Scale Disasters and Other States of Emergency) (http:// www.soumu.go.jp/main_sosiki/kenkyu/saigai/), “Metropolitan Sphere, Globalization, and Land Development Basis (Reference Data)” (Ministry of Land, Infrastructure, Transport and Tourism, National Land Development Council planning subcommittee) (http://www.mlit.go.jp/common/001060124.pdf)

70 to 95% of calls restricted for all carriers

Peak communication traffic at time of disaster 50 to

60 times more than normal

29,000 base stations in the mobile network interrupted

Beijing2008

London2012

4 to 7 times more than Beijing

Sochi2014

4 times more than London

Tokyo

2020

Estimated 30+ times

more than Sochi

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From 2020 onward, the mobile broadband network is expected to cover more than 90% or so of the world's population, and through the use of smartphones and tablets, the transfer of images, videos, and other high-capacity data is likely to increase. We also anticipate that various uses for the IoT—such as traffic and logistics, energy, and disaster prevention—will spread rapidly, especially in developed countries. Users have a growing tendency to expect continuous improvements to their service, in addition to a high-quality user experience. The key to future growth for telecom carriers lies in how they handle the unavoidable traffic explosions to come, how they monetize their services, and how they optimize features that meet the full diversity of customers' needs using the limited amount of communications resources available, such as radio frequencies. One point that cannot be overlooked is that when a traffic explosion puts pressure on the network, no matter what the situation, simply providing a high-quality user experience cannot produce higher revenue for the telecom carriers. The age of 5G networks is expected to include a wide variety of demanded services, but a current business model that accounts for a new range of services has not been assumed, because the majority of traffic on current networks is focused around smartphones.

This is a problem faced by world-wide telecom carriers offering mobile broadband services. It makes sense that with the existence of high-quality services, such as AR/VR games* and video transmissions in 4K/8K that use large amounts of data, a balance between user experience and price is desired. It is also important to consider a different price setting for so-called resilient services like security cameras and the observation of power plants, banks (embankment), bridges, and other such important infrastructure. Telecom carriers must continuously update their policies with a combination of various schemes, such as reigning in complex network operation costs and increasing the network speed by, for example, increasing the communication capacity. At the same time, it is important to stretch revenue by constructing an information and communications infrastructure that encourages practical applications for ICT benefits according to industry, like a model for the IoT. However, whatever type of policy is put into action, to lack security for the reliability and resiliency is unthinkable.

Unavoidable traffic explosions and changing business theories

Source: Created from Light Reading data

Gap between traffic and revenues

The gap between traffic and revenue widens according to the changing circumstances surrounding networks: increases in traffic, and reaching the limit of usage fees per user.

Communication

Time

Broadband dominant

Revenues

The revenue / Traffic gap

Traffic

Voice dominant

Large size and complicatedness of the network

(Varied devices, classifications, network organization)

Diversification of services

Gap

Intensification of competitive environment

(competition to acquire affiliates, trouble stretching revenue)

* AR: Augmented Reality, VR: Virtual Reality

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In order to provide a quality of service that guarantees a great user experience and can be efficiently implemented in situations where a large variety of needs are shifting from moment to moment, a structure that can maintain "useful quality" and "stability" by consolidating applications with an information and communications infrastructure will be necessary. Until now, it has been necessary to prepare a particular network that is tailored to the quality of a service, but thanks to the ability to construct faster networks through virtualization technologies, it has become theoretically possible to flexibly change a network depending on the service. Specifically speaking, virtualization technologies will lead to network plans that are dynamically changeable for the sake of flexibly allocating resources to meet the variety of requirements that applications demand: processing with low delay, high traffic density, high connection density, peak traffic convergence, decentralized processing, and so on. Therefore, network slices will be dynamically configured in order to flexibly implement a variety of services on the same physical network. Something like the following example is being considered as a virtual network slice configuration. In the case of a public emergency, network resources would be allocated to give priority to emergency voice calls/screen phone connections.

When it comes to ultra low delay/high reliability, self-driving vehicle assistance would be given priority access to edge computing resources, which ensure reachability and ultra low delay. For high speed/broadband use on the other hand, assigning preferential use of broadband Uplink resources to surveillance cameras for public security services would optimize the network configuration for high definition image and video transmissions. Also, the network would be dynamically configured to remain strongly stable, even through changing circumstances, by taking into account the actual network status and predicting status changes that result from weather changes, open events, and other external changes. A high quality user experience will be maintained as problems like network congestion and the declining quality of application use are preemptively addressed and the utilization of resources for the telecommunications basis is constantly optimized. In the age of IoT, end-to-end orchestrators that dynamically optimize the deployment of functions for an information and communications infrastructure that covers everything from devices and wireless access to applications, and then OSS/BSS* that can consolidate those orchestrators and applications, will become necessary. NEC is working together with its clients to develop this flexible type of information and communications infrastructure.

A flexible information and communications infrastructure that should be implemented in the age of IoT

NEC's approach to a flexible information and communications infrastructure

* BSS: Business Support Systems OSS: Operation Support Systems

Communication

FTTxWLAN

3G4G

5G

Edge Transport Core Data center

Variety of virtualization layers to meet service requirements

Public emergency network

Ultra low delay/highly reliable network

High speed/broadband network

Large-scale connection network

Complete understanding of the network status

A n a l y s i s of n e ce s s a r y i nfo r m a t i o n /features, and feature deployment

Automatic creation of configuration change sequence

Important networks and servicesOSS/BSS

End-to-end orchestrator

(1) Collect data from networks

and services

(3) Act according to analysis

results

(2) Analyze collected data

6

NEC/Netcracker’s framework for optimal SDN / NFV solutions

As you have seen thus far, telecom carriers must deal with the coming traffic explosion while applying optimized costs. By combining components according to each telecom carrier's needs and challenges, NEC/ Netcracker* proposes the most suitable solutions and develops potential for an information and communications infrastructure that pushes ahead in terms of optimization, flexibility, and high-speed service. As a simple introduction to NEC/Netcracker’s components, Virtual Infrastructure virtualizes the functions of all networks as software and implements them on an all-purpose server (NFV), and Management & Control efficiently manage that Virtual Infrastructure and Physical Infrastructure through software. An end-to-end orchestrator practically integrates use/management of the Infrastructure that enables such software management and dynamically configures the optimal network. Also, beyond providing a flexible information and communications infrastructure that has been made into software, NEC/Netcracker offers plans to generate new revenue (Business Enablement Apps), and BSS/OSS carry the responsibility of managing all of these operations and business and monetizing functions for telecom carriers. At the same time, there are many hurdles between introducing new architecture and technologies and

actually putting them into use, such as being able to correspond with the systems currently in use, finding a clear ratio of investment to effectiveness, and a lack of understanding/experience in new technological fields. To help telecom carrier resolve the issues that come with reforming networks, operations, and business, NEC/Netcracker is offering AVP* solutions that incorporate original tools, platforms, and services designed for the improved speed and simplification that SDN and NFV businesses bring. By constructing a flexible information and communications infrastructure with AVP, network configuration changes and other operations can be automated and efficiently applied. In addition, by combining high ranking applications with network functions as software, it becomes possible to expedite the creation of new services. We at NEC/Netcracker are totally revolutionizing our clients’ businesses, business processes, and organization through AVP, and we are supporting the transformation to digital service providers (DSP), which can quickly provide new opportunities for revenue through an optimized cost structure.

NEC meets a variety of needs through SDN/NFV

* Netcracker Technology, a wholly owned subsidiary of NEC Corporation, is a forward-looking software company, offering mission-critical solutions to service providers around the globe.* AVP: Agile Virtualization Platform and Practice

Communication

Comprehensive Professional Services

Network & IT Infrastructure

Virtual InfrastructurePhysical Infrastructure

Management & Control

End-to-End Orchestration

BSS / OSS

Edge (Residential , Business)Access

Mobile Core , Data CenterAggregation & Core

Business Enablement Apps

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With the latest technologies like SDN and NFV, it seems likely that flexible virtual networks will be implemented by 2020. NEC is planning to fuse networks with the ICT platforms of other industries by applying these technologies. By doing this, we can continue to support increasingly diversified services and businesses in the real world. Then, with the dawning of the "5G” era, the fusion of virtual network technology and 5G wireless technology will surely increase the speed and diversification of even more services. For example, if an enormously growing number of sensors are received by virtual networks through 5G wireless technology made for the IoT, we can expect more secure traffic management services and more efficient goods distribution management services to be made available. NEC is focusing its attention on wireless technology innovations for the age of 5G as well. Special attention is being given to Cloud-RAN (Radio Access Network) technology, which allows the virtualization of network features through a wireless access area; MEC (Mobile Edge Computing) technology, which decentralizes the computing resources across multiple wireless base stations and other access points, so transportation management and other usage cases

that require low delay and high reliability are sustained; and Massive MIMO technology, which implements Beamforming that emits each set of radio waves in multiple, specifically oriented directions. If this Massive MIMO were deployed at a location like a large-scale stadium, separate wireless beams could transmit to each person, so even if the space is crowded with many people, the crowd would not hinder anyone's ability to enjoy transmitted videos. Moving forward, NEC is driving the research and development of networks that are suitable for a variety of usage scenarios in the age of 5G. We are working with our clients to achieve prosperous society that is safe and secure, through a new information and communications infrastructure that is resilient and intelligent in the time of a "traffic explosion.” While respecting the essential values pursued by society and by their customers, NEC wishes to work together with everyone and use the ICT to design new social values for the sake of a brighter world. If you have any questions concerning the contents of this report or NEC initiatives, please do not hesitate to contact us.

Enhanced transmissions with the future 5G mobile platform

Communication

Use cases for IoT with a foundation in 5G

Uses for network functions in a large variety of applications

Traffic management

Notification of approaching

emergency vehicles

Automatic tracking of favorite athletes

Viewing images that match your tastes

Cargo traceability (quality)

International distribution

Visualization of transport movement

Optimization of dispatch / delivery plan

Traffic mitigation

Safe driving support / cooperative driving

Collision evasion

Logistics managementEntertainment

Accident / disaster alert Cost reduction and quality /

speed improvement

Communication

Please direct any inquiries to the following contact or an NEC marketing representative.

NEC Corporate Marketing Groupnec-vision@crp.jp.nec.com

TEL: +81 (0)3 3454-1111 (main) http://www.nec.com/en/global/about/vision/index.html

©NEC Corporation 2016 Catalog No.16120049E

NEC Group is focusing its efforts on providing “Solutions for Society” by upgrading the social infrastructure with ICT. NEC defined six megatrends based on a structural observation of the global economy and social trends. Based on the six megatrends, NEC formulated seven themes for social value creation as its mission.

This Social Value Creation Report is issued for each of the seven themes listed above and summarizes NEC's concepts, efforts, and proposals, in addition to social issues and global trends. NEC hopes that this report can be the first step in establishing cooperative creative partnerships with customers.

Sustainable EarthEstablish a sustainable lifestyle base by utilizing limited resources effectively and taking measures to prevent damage to the global environment in order to live in harmony with the Earth.

Safer Cities & Public Services

Help emerging countries build safe and secure cities, and help developed countries mature their societies. Establish a "global" administrative service platform through joint initiatives between the public and private sectors.

Lifeline Infrastructure

Establish ICT systems that resolve disparities of area and delivery time, and build safe and efficient lines for travel, utilities, etc. that can support around-the-clock activities in society.

CommunicationBuild a platform for information and communications to support the distribution of information and knowledge, which becomes more important as society advances.

Industry Eco-System

Innovate a new industrial ecosystem including connection of industrial machinery with the Internet, 3D printers, crowdsourcing and reverse innovation.

Work StyleCreate new work style and relationship with society in which people work together with communities and robots regardless of gender and generation.

Quality of LifeBuild a diversified and equal society to support people's enriched and active lives through contributions to education, healthcare and medicine.

The names of products and companies appearing in this document are the trademarks or registered trademarks of their respective companies.