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Social Value Creation Report "Communication"

The Next-Generation Information and Communications Infrastructure that Will Support New Industrial and Social Transformation

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February 22, 2018

As digital technology including AI and IoT evolves and its range of applications expands, the world has recently seen an acceleration of digital transformation that makes maximal use of digitalization to create new processes and business models. In many countries, joint initiatives of public and private sectors for innovation have begun under national strategies that aim for industrial and social transformation through digital technology. Amid these developments, national governments have been preparing for the 5G (5th generation mobile communication systems) as a digital strategy. The ability to connect many devices simultaneously, low latency and high reliability as well as ultra-high speed and high capacity are crucial to the nextgeneration information and communications infrastructure that will support digital transformation. 5G holds great potential to support the evolution of digital transformation, and to introduce improved products or services and new business models that bring added values, such as self driving cars, remote medicine, VR, and AR. This report discusses the ”5G. A Future Beyond Imagination.” concept put forward by NEC and the three transformations aimed at realization of the concept, along with initiatives for the creation of new social values in the 5G era through co-creation with customers, and NEC's next-generation information and communications infrastructure that will support those initiatives.

The structural redesign in society and industry that digital technology will drive

The accelerating wave of digital transformation in industry

Initiatives for digital transformation that will transform social, economic, and industrial structures are accelerating under the rapid progress of AI, IoT, and other digital technologies. Digital companies are taking the lead in breaking down old business models. They are promoting transformation to new models and rapidly expanding the scope of businesses along with their revenues, a result of attracting a large number of users.

An example of this is Uber, a leader that epitomizes the "sharing economy" of shared goods and services. Uber has expanded a car dispatch service around the world in just a few years, and is promoting the transformation of the mobility business. Uber is also pushing the practical realization of self driving cars, and aims to resolve social issues such as reducing fatal accidents and mitigating traffic congestion. At the same time, U.S.-based General Electric (GE) is promoting a switch to a digital manufacturing industry that provides new values to industry overall by using IoT to collect and analyze data from industrial equipment provided to customers. The company is also working to realize "Digital Twin" that reproduces the real world digitally in real time to inspect products and processes in cyberspace and reflect improvement measures back into actual manufacturing.

In this way, digital transformation has begun to rework the rules of business and society, accelerating initiatives in varied industries around the world. The gap between companies that fail to be engaged in digitalization at an early stage and expand their business under new rules and companies that have done otherwise is only increasing.

National governments look toward social and industrial transformation in the digital age

Throughout the world, government-led movements to advance digital strategies are heating up, with the goal of maintaining or increasing national power. These include Germany's Industry 4.0 initiative for digitalization in the manufacturing industry, and Singapore's Smart Nation initiative to achieve a smart nation driven by ICT. The Japanese government is also making use of digital technology to realize Society 5.0, a Super-Smart Society that will balance economic development with the resolution of social issues such as a declining birthrate, and local depopulation. The government has formulated the Basic Act on the Advancement of Utilizing Public and Private Sector Data to strengthen collaboration among industry, academia, and government, and is moving forward with initiatives in areas including the construction of a cross-boundary data distribution platform.

Digital transformation will extend beyond the borders of industries and nations to create new values that connect people, things, and contexts. Viewing this technology-driven paradigm shift as an opportunity and undertaking digitalization at an early stage will lead to the expansion of business opportunities and the early resolution of social issues.

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5G supporting the achievement of digital transformation

5G is indispensable to the advancement of services in the digital age

New processes and the transformation of business models through digital transformation require the advancement of mobile networks. Preparations are steadily moving forward around the world to realize the 5G (5th generation mobile communication systems) that will support the transformation of society and industry in the digital age.

The domains in which 5G will see utilization will go beyond smartphones, expanding to encompass all manner of things and contexts, from home appliances to automobiles or sensor in factories and facilities. Through this, digitized information will increase to a degree never seen before, and its shared use will accelerate collaboration that crosses the boundaries of society and industry.

The characteristic features of 5G can be broadly stated as (1) Ultra-high speed and high capacity that meet the need for delivery of high-definition, high-capacity video, including virtual reality (VR) and augmented reality (AR); (2) Massive machine type communications that link multiple devices and sensors with high precision; and (3) Ultra-reliable and low latency communications that meet requirements for self driving cars, remote medicine. These characteristics are critical for achieving transformation that makes maximum use of digital technology and transcends the borders of society and industry.

Service creation in view of 5G: the driving force for companies' growth

R&D and utilization trials involving 5G are being strategically advanced through cooperation among industry, government and academia, to create the information and communications infrastructure that will support the digital strategies of nations around the world. The 5G-PPP*1, launched by the EC (European Commission) in 2013 to make 5G a reality, has identified five fields of industry that will make use of 5G, and is working to strengthen collaboration with industries and create new markets for the technology. In Japan, 5GMF*2, a public and private sector 5G promotion organization established in 2014, is backing up such efforts, and comprehensive 5G demonstration trials by the Ministry of Internal Affairs and Communications have begun. Not only telecommunications carriers but also industry partners, research institutes, and universities are cooperating on demonstration trials in a variety of fields in order to accelerate initiatives to commercialize 5G services for the largest international sporting event to be held in Tokyo in 2020.

A new world created through 5G is unfolding before us. The creation of values by making maximum use of 5G and digital technology will provide the momentum behind companies' growth.

*1 5G-PPP: 5G Public-Private Partnership, a public and private sector partnership for the construction of 5G infrastructure

*2 5GMF: The Fifth Generation Mobile Communications Promotion Forum

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The New Markets and Major Economic Impacts Arising om 5G

Joint initiatives of public and private sectors for 5G : the key to international competitiveness

The creation of new markets that utilize 5G will have a major impact on the international competitiveness of industries. The 5G-PPP project by the EC has begun a variety of initiatives under five priority areas: (1) automotive; (2) factories and manufacturing; (3) energy; (4) medicine and health; and (5) media and entertainment.

In Japan, the Ministry of Internal Affairs and Communications' Round-table Conference on Radio Policies 2020 has identified nine key fields, based on the industrial characteristics and industrial structure of Japan. These include the five areas identified by the EC and other areas that are key to Japan. As an example, the construction industry, including in the areas of "Agriculture, forestry, and fisheries " and "Smart cities/smart areas", faces a major issue in securing human resources amid a significantly declining working population. For this industry, the use of 5G will enable transformation to a more efficient industrial structure.

"Smart houses/life (daily necessities, communications, etc.)," "Retail (finance, settlement)," and "Sports," in view of international sporting events to be held in Tokyo in 2020, are also key areas of Japan not included in the EC's five areas.

5G-enabled output will exceed US$12 trillion worldwide

IHS Markit has estimated that the potential global sales activity enabled by 5G will reach US$12.3 trillion across the globe in 2035, as the result of greater efficiency, engagement with customers, and launching new business models. This estimate represents 4.6% of global real output in 2035. Broken down by the industrial sector, it is calculated as US$3.4 trillion in the manufacturing sector and $1.4 trillion in the information and telecommunications sector, both of which will receive direct economic benefits from the manufacture of 5G-related equipment and the provision of telecommunication services, as well as $1.3 trillion in the wholesaling and distribution sector, $1.1 trillion in the public services (government) sector, and $0.7 trillion in the construction sector. The extent of these economic effects is expected to spread throughout society and industries as a whole. The same report also predicts that this incredible flexibility different from the generations that came before, which includes the shared spectrum and operating on private networks, will promote adoption by industry. In terms of technology, applications making use of Enhanced Mobile Broadband (Ultra-high speed and high capacity) will proceed, and for the medium-and long-term point of view, applications exploiting Massive Internet of Things and Mission Critical Services (Ultra-reliable and low latency communications) will proliferate.

Offering new characteristics in addition to higher speeds and larger capacities in communications, 5G will become a key part of the infrastructure of a new society, and the transformation of the whole society and industry will progress rapidly. As markets change at amazing speed, companies will find it difficult to compete if they do not create new business models and services in view of the evolution and development of technologies with 5G placed at the top.

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NEC's aim for value creation: "5G. A Future Beyond Imagination."

Three transformations for achieving the creation of social values

The concept that NEC is putting forth for the 5G era is "5G. A Future Beyond Imagination." This concept aims to create social values under new business models and services by combining NEC’s 5G and cutting edge technologies such as NEC the WISE*4, and other advanced technologies. It will be carried out through co-creation with telecommunications carriers, industry partners and organizations in diverse industries, and other partners.

NEC is undertaking three transformations aimed at making this concept a reality: (1) "Social transformation" that promotes the digitalization of society and industry and transforms the lifestyles and work styles of users; (2) "Operation transformation" that transforms management and business processes by making the management of telecommunications carriers and the operation of IT, networks, and services autonomous through advanced ICT technology; and (3) "Network transformation" that enables the provision of optimal, secure networks that can flexibly meet the diverse requirements of 5G.

Through the three transformations . social, operation, and network . and together with telecommunications carriers, industry partners, organizations, and other customers, NEC will work toward the accelerating digital transformation of society and industry.

New co-creation through the fusion of services and networks

In the 5G era, new services will arise on the next-generation information and communications infrastructure characterized by Ultra-reliable and low latency communications, Massive machine type communications, Ultra-reliable and low latency. The transformation of processes and business models will also progress. This will require greater linking and harmonization of services and networks than ever before.

By providing IT solutions to diverse users and service providers, and by providing network solutions to telecommunications carriers, NEC has offered values that connect people, things, and society throughout the world, thereby receiving high reputation. NEC aims to build a next-generation information and communications infrastructure that fuses the company's technology and know-how in IT services and networks. The infrastructure realizes the cooperation and coordination of both network services, which can quickly and flexibly provide networks corresponding to service requirements demanded by users and service providers, and IT services, which generate new values by properly linking customer data and services over users or industries. NEC, while backing up telecommunications carriers as a partner in information and communications infrastructure, aims to create new social value through co-creation with telecommunications carriers and industrial partners.

*4 NEC the WISE is NEC's group of leading-edge AI technologies to maximize the intellectual creative activities of people.

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Initiatives for Social Transformation through Co-creation

Industry-led new initiatives that leverage the characteristics of 5G

NEC aims to create services that leverage 5G through co-creation with telecommunications carriers and a wide range of industry partners, contributing to the profitability of partners and to the realization of a prosperous society. By connecting necessary people, things, and contexts, and taking values as its starting point, NEC is promoting social transformation that will change work styles and business processes in society and industry. The following is an introduction to several 5G demonstration trials that are being conducted through co-creation by NEC and leading partners with a view to the creation of new values.

Characterized by ultra-high-speed, high-capacity, ultra-reliable and low latency communications, 5G will enable large-capacity, low-latency transmission of high-definition video, an achievement that is difficult under existing mobile communications. Partnering with construction firms and telecommunications carriers, NEC is leveraging these characteristics in demonstration trials of remote construction work. The initiative is working to achieve advanced construction technologies such as automating construction machinery and real-time remote construction work, allowing workers to assess on-site conditions in real time and operate machinery remotely as if they were present at the site. Aims of the initiative include the utilization of the technology at disaster reconstruction sites that entail risks, and the alleviation of shortages of skilled technicians. NEC also holds hope for the further development of remote medicine and other technologies.

In addition, in response to the growing importance of detection and prevention of crimes in environments where large numbers of people gather, such as urban spaces and large event venues, NEC is working with security firms and telecommunications carriers to conduct demonstration trials of advanced security services that leverage 5G. In the trials, NEC is using 5G to transmit video from high-definition cameras at event venues to a monitoring center, and AI detects signs of potential crimes using such as face recognition, crowd behavior analysis, and other technologies. By sharing detection data and security instructions with security guards over 5G, we are demonstrating the prevention of crime with the aim of realizing a safer and more secure society.

Leveraging knowledge of both IT and networks to meet the diverse needs of industry

Cooperation and coordination of both networks and services with the full use of advanced IT will now be indispensable to creation of business models that enhance companies’ competitiveness and transformation in work and life styles in the 5G era. NEC has provided such IT and networks to a wide range of industries across the globe. Drawing on that base of knowledge, and acting together with industry partners and telecommunications carriers, NEC will continue working to achieve new social value and the creation of businesses through intelligent networks that leverage 5G and cutting-edge IT.

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The Transformation to New Network Services triggered by 5G

Aiming for network services that address diverse services

The era of 5G calls for a transformation toward networks that can adapt to diverse service requirements, such as the application of 5G mobile and other optimal access technology, and the utilization of edge computing. The key to achieving this is the realization of networks in software, i.e., virtualization. NEC is moving forward with the network virtualization through the development of technologies including advanced C-RAN*5 and MEC*6, with the aim of a transformation toward flexible networks able to meet diverse service requirements.

Moreover, while the operation of next-generation information and communications infrastructure that will support network services must flexibly respond to diversified service requirements, the protection of important social and industrial services and information and data from ever more advanced cyber attacks is also necessary, and will become increasingly complex. Through the utilization of its accumulated knowledge of management systems, IT, networks, and security, along with its proprietary AI, biometric authentication, and other advanced ICT technology, NEC is achieving secure and autonomous operation infrastructure, and is also undertaking transformation in operations to achieve simplification, quality improvement, and cost reductions in operational processes.

AI-driven autonomous operation with significant improvement of quality and efficiency

Where NEC is making particular efforts toward autonomous operation is in end-to-end service orchestration. This enables dynamic optimization and integrated management of all elements, from legacy networks to services and applications.

AI forms the core of autonomous operation infrastructure. AI can analyze the performance and functions necessary for each service requirement and divide (i.e., "slice") networks virtually, in order to dynamically configure optimal virtual networks. In addition, AI can collect information on network conditions in real time, detect warning signs of occurrences such as traffic increases, and progress through repeated cycles of dynamically modifying network resources. Autonomization through AI enables the provision of optimal networks even as operations become increasingly complex under diversifying services in the age of 5G, and can lead to quality improvements and the elimination of shortages of human resources and skills.

NEC, as a partner supporting next-generation information and communications infrastructure in the age of 5G, will leverage its knowledge of both IT services and networks to achieve network services that create new value in response to the diverse needs of society and industry.

NEC hopes to design new social value that leverages ICT together with customers and to work toward a "Brighter World," while placing importance on the pursuit of intrinsic value for society and for customers.

We welcome your comments and questions concerning the content of this report and initiatives by NEC.

*5 C-RAN: Cloud Radio Access Network

*6 MEC: Multi-access Edge Computing

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