During the six months ended September 30, 2007, the Japanese economy continued to recover, with improved corporate earnings and a recovery in consumer spending despite the slowdown in capital spending and the severe employment situation.
The environment surrounding the information and telecommunications market saw drastic changes. These included an expansion of triple play services that combine Internet access services with IP telephony and video distribution capabilities, an advancement of fused services such as IP-based fixed-mobile convergence, and the merging of telecommunications and broadcasting introduced with a shift to IP. In addition, efforts have been accelerated to construct a next generation network that will lay foundation for a ubiquitous broadband network society as envisioned in the "u-Japan Policy," the "New IT Reform Strategy," and the "Next Generation Broadband Strategy 2010."
In the dramatically growing broadband market in particular, while the number of DSL service subscribers continued to show a net decrease, optical access services, the frontrunner in the broadband services market, has entered its full-scale expansion stage, and service providers including electric power companies have aggressively expanded their businesses, with intensified competition for securing new customers.
Meanwhile, the fixed-line telephone business environment has become even more severe with a contraction of the market. Traffic volumes continued to decrease due to the increased use of mobile phones, rapid migration to IP phones and expansion of direct subscriber phone services using dry copper lines.
In the face of this severe business climate, NTT Telegraph and Telephone West Corporation (NTT West) has strived to provide high-quality, stable universal services. At the same time, in line with the "NTT Group's Medium-term Management Strategy" and the "NTT West Group Medium-term Vision", NTT West has aimed to achieve "prompt reform of its earning structure changing its revenue base from fixed-line telephones to optical and IP-based services." Such efforts include enriching its optical access services and optical IP phone services line-up, offering broadband application services with higher levels of performance and quality, and developing solution businesses aimed at contributing to the revitalization and development of local communities. To this end, NTT West has implemented the following measures. |
<1> Development of Broadband Business |
(1) Expansion of Broadband Access Services |
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Since the full-scale launch of "B-FLET'S" in August 2001, NTT West has been working to upgrade the functions of IPv6-enabled high quality video telephony and standard security protection settings and to enhance its service lineup to meet the diversifying needs of customers. Specifically, NTT West launched "FLET'S HIKARI PREMIUM Family Type" services for customers in detached houses in March 2005, "FLET'S HIKARI PREMIUM Condominium Type" services for customers in multi-dwelling houses in April 2005, and "FLET'S HIKARI PREMIUM Enterprise Type" services for corporate customers in August 2006.
In the first six-month period of the fiscal year ending March 31, 2008, NTT West developed a smaller-sized multi-unit VDSL system to address the needs of customers in multi-dwelling houses who could not use NTT West's optical access services because the designs of and facilities available in such multi-dwelling units are not compatible with those services. NTT West launched the "FLET'S HIKARI PREMIUM Condominium Type Mini" service for small-scale multi-dwelling units in September 2007.
In addition, to improve customer satisfaction, NTT West has worked to reduce lead-time (time between submission of application and line connection) by using the Administrative Quick Response for Optical Service (AQROS) system, and, in order to boost the level of customer convenience further, introduced the "WEB Quick Response" system in July 2007, in which customers can designate a desired date for line engineering work on the FLET'S official website (http://flets-w.com) 24 hours a day.
As a result of these efforts, the number of "FLET'S HIKARI" (a generic term for "FLET'S HIKARI PREMIUM" and "B-FLET'S") subscriber lines installed in western Japan since the service was launched exceeded three million in July 2007. NTT West took four years and one month to top the one million mark after the launch of the service, reached two million nearly a year later, and achieved the three million milestone 11 months thereafter. |
(2) Expansion of Broadband Application Services |
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In order to respond to the increasing demand for lower telephone charges and higher quality IP phone services, NTT West enriched its service lineups by launching "HIKARI
DENWA (optical IP telephony service) Business Type" for large-scale business enterprises in October 2003, "HIKARI
DENWA" for customers in detached/multi-dwelling houses in September 2004, and "HIKARI
DENWA Office Type" for small and medium-sized businesses in June 2006. It also introduced a new discount charge structure, "HIKARI
DENWA A (Ace)", in October 2006, that combines the "HIKARI DENWA" service with six additional services and includes a maximum three hours of free calls in the package.
In the first six-month period of the fiscal year ending March 31, 2007, in order to meet growing demand for lower priced optical IP phone services, NTT West introduced its new "FLET'S HIKARI PREMIUM Enterprise Type", which was launched in April 2007 as a new access line for the "HIKARI
DENWA Business Type" service, in addition to the "Business Ether" and "B-FLET'S Basic Type" access lines already available.
In April 2007, NTT West also introduced the "HIKARI PREMIUM Compatible Plan" for the "FLET'S Group" service designed for corporate intranet communication. This newly introduced plan makes the service available to customers at a more affordable price, allowing for the use of the "FLET'S HIKARI PREMIUM" service as an additional access line complementing the conventional "B-FLET'S" and "FLET'S ADSL" lines.
Furthermore, in response to the rising interest in home security, in July 2007 NTT West launched its "FLET'S HOME SECURITY" offering, a service that ensures the safety and convenience of customers using broadband lines such as the "FLET'S HIKARI PREMIUM" line. Included in its lineup are the "HIKARI HC-1000 HOME CAMERA", which enables easy remote home monitoring via a FLET'S phone or mobile phone, and the "FLET'S HS-1000 HOME SECURITY" system, which detects abnormalities at home through sensors, alerts customers via personal computer or mobile phone, and allows customers to remotely turn on or off their home appliances by mobile phone. |
(3) Efforts to Improve Optical Fiber Broadband Service Quality |
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In order to adequately respond to customer needs amidst continuing advances in technological innovation and changes in the market environment, NTT West established "HIKARI Professional College" in April 2007 in order to train expert engineers in optical access technology who are capable of managing an entire work process from planning to development and maintenance, tapping into not only their technical skills but also their intuitive practical capabilities.
NTT West has opened a number of "Techno Colleges" in rapid succession in six districts of western Japan region starting in July 2007. These colleges are designed to meet the pressing need to train IP engineers capable of engaging in high-level work including service operations, in preparation for the full introduction of the next generation network (NGN) that will be the foundation for future services. These colleges are also a response to the need to improve practical skills relevant to the maintenance of conventional telephone services.
Through these efforts, NTT West seeks to proactively develop high-level IP engineers to support NTT West Group operations. |
<2> Development of Solution Businesses |
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While continuing to construct Information Highways and local intranet systems using its accumulated know-how and proven capabilities and continuing to improve telecommunication infrastructure centering on the FTTH development model, NTT West has also been expanding its public sector solution businesses through the promotion of e-government projects.
NTT West has also been actively expanding its business services to meet private sector demand, focusing on solution businesses such as internal control systems, Business Continuity Plan (BCP) and security protection in line with recent market trends. In addition, in response to rising business concern over CSR in recent years, NTT West began to market its "CSR Solution" in May 2007, which supports mainly small and medium-sized businesses in resolving CSR-related issues, and to develop and operate IT systems and networks that promote CSR activities best suited to the activities of such businesses. At the same time, NTT West has set up a new "CSR Solution Business Promotion System" at its head and branch offices in order to offer higher quality solutions.
Furthermore, NTT West launched its "Information Security Incident Response Service" in August 2007, which analyzes the causes of and provides solutions to security incidents involving a corporation's or local government's public servers, such as website defacing or personal information leakage that occurs following unauthorized access to their web servers.
Moreover, NTT West is aware that demand for optical fiber access services is low in many parts of its region, such as on remote islands and in highland areas, and has been providing support in the development of community information systems, and working with local governments in accordance with IRU (*1) in a bid to help mitigate the digital divide in the relevant districts.
| *1: |
Indefeasible Right of User: A long-term right of line usage which cannot be nullified or terminated without the agreement of the parties involved. |
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<3> Review of Business Structure |
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In preparation for the expansion of optical broadband services on a larger scale, NTT West has reviewed the organizational structure of its headquarters to enhance its marketing efforts directed at, and customer services for, small and medium-sized enterprises, SOHO businesses, and sales agents. Such enhancements are becoming increasingly important.
Specifically, NTT West has reorganized its former marketing department into three departments: the "Business Marketing Department", which promotes sales to small and medium-sized enterprises and SOHO businesses, the "Business Partner Sales Department", which handles business with sales agents, and the "Marketing Department", which promotes sales to consumers. Simultaneously, a "Marketing Headquarters", which is responsible for controlling these three departments and formulating overall policies, was established.
In addition, the former Solution Business Headquarters was also renamed as "Corporate Marketing Headquarters" to underline its mission to promote sales to large and medium-sized corporations.
Furthermore, in order to establish the optimum corporate system for the entire organization through its company-wide business process reengineering (BPR) plan, NTT West has recently set up a "Technology Innovation Department" by integrating major system development functions in various parts of its head office with all the Technology Department functions, which include the systems development policy formulation and planning functions.
In addition, NTT West established a number of new temporary staff services including "NTT WEST-TOKAI IT-MATE (*2)" in March 2006, "NTT WEST-CHUGOKU IT-MATE," "NTT WEST-SHIKOKU IT-MATE" and "NTT WEST- KYUSHU IT-MATE" services in March 2007, and "NTT WEST-KANSAI IT-MATE" services in September 2007, which mainly focus on system engineering work and repair services for IP-based systems in NTT West's solution businesses area.
| (*2): |
IT-MATE TOKAI CORPORATION was renamed NTT WEST-TOKAI IT-MATE effective July 1, 2007. |
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<4> Major CSR Efforts |
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The NTT West Group sees corporate social responsibility (CSR) as a principal pillar of its management ethos. It has continuously been working on "value creation" activities in which each employee works to enhance NTT West Group's corporate value through its primary business operations. Such values are a "social value" benefiting customers, the global environment and local communities, an "economic value" benefiting shareholders, and a "human value" benefiting employees.
More specifically, the NTT West Group has been working to promote the understanding of CSR by issuing booklets to employees that explain the CSR concept and its initiatives in a comprehensive manner. It has also worked on improving CSR promotion systems, holding seminars and training sessions, and providing a variety of information. At the same time, the NTT West Group has formulated a unified action plan to signal NTT West Group's overall objectives and numerical targets designed to achieve four missions ("growth in social value," "growth in economic value," "growth in human value," and "compliance") and to let the concept of CSR spread across the organization. In line with these action plans, NTT West Group has thoroughly implemented a process of "acting/developing," "evaluating results" and "modifying action plans," based on a plan-do-check-act (PDCA) cycle.
In addition, in order to ensure compliance with laws and appropriate business risk management, which CSR efforts are based upon, the NTT West Group has been making every effort to cultivate high ethical standards and create a solid corporate culture that prevents employee fraud and misconduct. Such efforts include a campaign against drunk driving and the designation of one month each year as Corporate Ethics Enhancement Month.
Meanwhile, NTT West Group is making ongoing efforts to boost information security in line with the Law Concerning the Protection of Personal Information. These efforts include the hosting of training sessions for NTT West Group companies to thoroughly implement information management controls, running an inspection on system logs and access authorization status, conducting a sweeping inspection of employees' home-use personal computers and other terminal equipment to establish whether they are used to store data related to the company's business activities, and the implementation of a web-based employee self-evaluation program designed to evaluate the degree of understanding about the protection of customer information.
During the first six months of the fiscal year, the NTT West Group has stepped up its group-wide effort to protect customer information by holding training sessions for all levels of employees to further raise awareness and by producing new videos that help increase employee awareness about the threat of file transfer software and the risk of information leakage due to computer virus contamination. |
In addition to the measures outlined above, NTT West, as a member of the local community, has aimed to contribute to the establishment of a "safer" and "more secure" society in the event of disasters such as torrential rains, typhoons or earthquakes. Since September 2007, NTT West has been taking steps to enhance its community-based "disaster relief initiatives" in its 33 western Japan region branches by gradually expanding its customer support function that helps disaster-affected customers and businesses to "rebuild their lives" and "resume their business operations".
In the meantime, while making constant efforts to assure and improve quality and safety in the installation of telecommunications facilities and to provide stable telecommunication services, NTT West has also been striving to give customers greater confidence in their facility installation work by conducting an extensive "KICCHIRI
KOJI (KK) Campaign (campaign for proper installation work)" jointly with its contractors. The aim of this campaign has been to further promote "installation work from the viewpoint of customers" with an "emphasis on the importance of compliance", and to collect customer feedback and requests on installation work to help facilitate a prompt response to such requests.
Furthermore, in order to make next generation network services commercially available on a large scale, as envisioned in the "NTT Group Medium-term Management Strategy,", in April 2007 NTT West expanded the scope of its field trials originally started in December 2006 to general customers in order to ascertain customer needs more precisely. Based on the results of these field trials and working closely with a wide range of business partners, NTT West has been promoting the creation of an enriched communication environment and finding new business opportunities by offering a diverse range of services, including video communication services such as high-quality image distribution and other services using information home appliances.
NTT West Group has sought to establish credibility among customers by boosting group-wide "customer-first activities" that demonstrate its commitment to reliable customer service.
As a result of the above efforts, operating revenue and ordinary income for the first six months of the current fiscal year amounted to 939.7 billion yen (down 2.1% over the same period last year) and 22.6 billion yen (up 17.1% over the same period last year), respectively. |
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