Business Overview

Q1 Why do you call yourself the "Total Network Solution Provider"?

We call ourselves the "Total Network Solution Provider" because we provide Internet connectivity services, WAN services, outsourcing services and systems integration as a one-stop solution to our customers.

Q2 Who are IIJ's competitors?

For Internet connectivity services, WAN services and outsourcing services, we often compete with telecommunication carriers such as NTT Communications Corporation and KDDI Corporation. For systems integration, we often compete and also work together as a team with systems integrators such as NEC Corporation, Fujitsu Limited and NTT DATA Corporation. IIJ will further enhance its internet technological skills and develop services that meet customer needs to diffentiate ourselves from other competitors to strengthen our position as a total network solution provider.

Q3 I'd like to know more about IIJ's customers.

We believe our expertise lies in the ability to provide highly valued total network solution services underlined by internet related technology. Our customer targets are those which use their network for mission critical systems. Currently we have about 6,500 client base mostly large corporate and governmental organizations. Among our customers using Internet connectivity services, there are those who provide consumer use services such as ISPs, CATVs and providers of online game services. In addition, we offer Internet connectivity service for home use under "hi-ho" brand and IIJ brand.

Q4 Is IIJ dependent on certain customer or certain industry for its revenue?

IIJ is one of the first ISP that begun providing its Internet connectivity service in Japan. Over the years, we have accumulated over 6,500 client base covering almost every industry in Japan. For penetration rate in each industry, please refer to IIJ's Strengths.

Q5 Is IIJ's business affected by economic conditions?

As of March 2011, over 80% of our revenues are recurring revenues which comes from Internet connectivity services, WAN services, outsourcing services and systems operation and maintenance. These revenues are relatively stable and are expected to continue to steadily increase. For systems integration and equipment sales which are one-time sales revenues are volatile to economical conditions.

Q6 Are prices for Internet connectivity services still dropping?

Internet connectivity service prices in Japan were continuously dropping strongly from year 2000 to 2004 due to heavy price competition. As a result, the Japanese Internet connectivity is one of the low price services in the world. As of today, although there are still price competitions, we recognize that mergers of several major ISPs had eased the strong pressure on prices as the number of competitor in the market has decreased.

Q7 What exactly do you mean by high technological skills?

IIJ was established in 1992 by a group of highly motivated and skilled TOP level IP engineers in Japan. Even today, Japan's TOP level internet engineers are working for us, developing internet related proto type services and serving as leaders of the Japanese internet market and operating one the largest in-house developed backbone in Japan. Our engineers are also participating in several scientific and technological researches such as IPv6 researches to further contribute to the development of the internet related technologies.

Q8 What kind of patents does IIJ have?

We have patents for "SMF (Patent No. 3774433)", "SMF-LAN (Patent No.3996922)" and US patent for "SMF-LAN(Patent No.7555007)", "SMFv2 (Patent No. 7660266)".

"SMF (SEIL Management Framework)" is a centralized network management system that was originally developed and introduced by IIJ in February 2003. "SMF-LAN", developed using SMF's patent, is a system to centrally administer communications equipment and other devices--from initialization to monitoring and maintenance--on WAN and other closed networks. With this SMF technology, users can simply connect communication devices to a network and turn on the power. All settings are then made automatically. Users can thus easily take advantage of secure high-level in-house or household network services without regard to communication devices.

Q9 I'd like to know more about IIJ's Internet connectivity service.

Internet connectivity service allows customers to connect their network to the internet. Services line-ups ranges from dedicated line connectivity services of over 1Gbps with less limitations on IP addresses, low price broadband type services such as NTT Flets, IIJ Mobile service provided under MVNO scheme and consumer ISP such as IIJ4U, IIJmio and hi-ho. Typically, customers would choose high value dedicated connectivity service for headquarters and broadband connectivity for branch offices. For details, please refer to Internet Access.

Q10 I'd like to know more about IIJ's WAN service.

IIJ provides closed network services as WAN services, using network connectivity such as Ethernet, dedicated line and others. Our WAN services is mainly offered by IIJ Global Solutions Inc. which became IIJ's 100% owned consolidated subsidiary on September 1, 2010.

Q11 I'd like to know more about IIJ's outsourcing service.

IIJ has been providing outsourcing services that would add value to the Internet connectivity services such as web hosting, DNS service, Internet-VPN Service, email service, anti-spam mail service, mail archives, DDoS prevention service, router management service, firewall service, etc. Also, IIJ provides IIJ's cloud computing service as "IIJ GIO / Hosting Package," IIJ's own cloud platform.

Q12 I'd like to know more about IIJ's Systems Integration.

The systems integration that we provide are mainly related to network integration. We are very strong in constructing corporate network system construction over the internet. We provide consultation, network design, network configuration, server setups, network related application setups, security system setups, network operation and maintenances. We are also very strong in web related systems construction such as on-line shopping. Also, we are also one of the earliest companies to construct a on-line securities system over the internet. In addition, we provide IIJ's cloud computing service as "IIJ GIO / Component."

Q13 What is equipment sales?

IIJ provides sales of IIJ in-house developed router the "SEIL Series", third-party vendor network equipments, iPad and others. We provide equipment sales to meet the one-stop needs of our customers.

Q14 I'd like to know more about IIJ's cloud computing service "IIJ GIO".

IIJ GIO is the brand name for IIJ's cloud computing service. IIJ GIO provides services ranging from "IaaS" (Infrastructure as a service) to "SaaS" (Software as a service). Over the past decade IIJ has been actively developing technology and has been providing services in cloud-computing related fields. IIJ GIO draw on this accumulated expertise to provide services that enable companies to enjoy the full benefits of cloud computing. For details, please refer to IIJ GIO Service.

Q15 I'd like to know more about "IIJ Mobile".

IIJ launched IIJ Mobile Service, a corporate customer oriented data mobile service under the MVNO scheme by NTT DoCoMo's 3G FOMA (from January 2008) and EMOBILE's 3G/HSDPA (from February 2008). From July 2008, IIJ SMFsx Service became accessible via IIJ Mobile access lines using the Mobile Auto-Configuration feature enabling users to automatically connect to the corporate network via mobile broadband. With Mobile Auto-Configuration, locations that do not have ADSL or optical fiber access can be connected automatically and immediately to a high-speed network by simply installing a SEIL router with an IIJ mobile terminal attached.

The mobile data communication service for home use which was introduced under hi-ho and IIJmio brands in Dec. 2008 is also doing well. In FY2008, the mobile data communication services had reached its break even point contributing to revenue growth.
In FY2010, IIJ has partnered with Apple enables provision of one-stop service, from iPad to mobile communications environment, device security management, and business application gateway. In addition, IIJ bolsters its mobile virtual network enabler business, a MVNE which provides mobile communications facility to MVNOs. IIJ provides a three-tier pricing plan.

Q16 I'd like to know more about the contents distribution business that IIJ provides, such as acTVila and NHK On-Demand.

IIJ has strong experties in content delivery platform "CDN" and P2P type download services. From September 2007, with these back ground, IIJ has provided its network platform system to acTVila*. From December 2008, NHK On-Demand* service was launched, A new IPTV service provided by Japan Broadcasting Corporation and IIJ is also operating its systems. With the increasing participating content holders for IPTV and the digital terrestrial TV broadcasts in FY2011 is expected to boost IPTV services in Japan.

acTVila*

Established by Panasonic, Sony and three major home electronic companies in Japan. Provides portal site and pay-per-view streaming/downloading video service. The only IPTV to provide high-definition video streaming. Simply offers IPTV by just plugging in the Ethernet Cable to your home TV with no additional cost.

NHK On-Demand*

Launched in December, 2008. A new IPTV service provided by Japan Broadcasting Corporation. Users may choose to watch the program over 1)acTVila, 2)PC, 3)CATV or 4)Hikari TV. Users may watch TV programs which you missed or special contents such as NHK Special by pay-per-view or monthly charges.

Q17 I'd like to know about business of IIJ Global Solutions Inc. that IIJ acquired from AT&T Japan LLC on September 1, 2010.

IIJ Global Solutions became our 100% owned consolidated subsidiary on September 1, 2010 by acquiring mainly the domestic network outsourcing business including WAN service from AT&T Japan LLC. at the price of 9.2 billion yen. IIJ Global Solutions Inc. has about 240 employees and about 1,600 corporate customers in Japan. IIJ and IIJ Global Solutions Inc. plans to realize group synergy by providing IIJ's network solution to the customers of IIJ Global Solutions Inc.

The effects from IIJ Global Solutions on FY2010 consolidated financial results (contribution for 7 months) is as follows.

(B/S)
Current Assets : JPY11,021 million
Noncurrent Assets : JPY8,922 million (Intangible Assets : JPY5,763 million)
Current Liabilities : JPY8,198 million
Noncurrent Liabilities : JPY1,937 million
(P/L)
Revenues : JPY15,094 million
Costs : JPY12,137 million
SG&A/R&D : JPY1,767 million
Operating Income : JPY1,190 million

Q18 I'd like to know more about Trust Networks Inc.

Trust Networks Inc. operates ATMs and its network systems to provide ATMs service. It receives commission for each bank withdrawal transaction when customers use their ATMs. As of November 8, 2011, Trust Networks operates 349 ATMs.

Q19 I'd like to know more about IIJ Innovation Institute Inc.

Since the establishment of our company, IIJ has been the pioneer for Japan's Internet and has established Japan's Internet infrastructure by building up its backbone network and developing a wide variety of services. In the last 15 years, the Internet has progressed at an incredible rate, today growing into the communications infrastructure on which society and all business activities depend, and providing a never-before-seen communications media. The Internet will continue to develop and bring dramatic changes to manufacturing and social system structures, creating new value, and introducing innovative new technologies and business models. However, at the present, the role of Internet innovator has been dominated by the United States, as the world's most advanced Internet country, while Japan has admittedly lagged behind.

This IIJ Innovation Institute (IIJ-II) will provide budding technologists with the network equipment, software testing environment, and other support necessary for technological development and assist with the commercialization of the development results.

IIJ transferred control of its Internet technology research division to IIJ-II on July 1, 2009. This move will strengthen IIJ's R&D organization for next-generation Internet technology by focusing these activities in IIJ-II, which will allow IIJ to ramp up IIJ's R&D efforts for the future and create businesses based on the products of this R&D. The current research themes are mainly in these 5 groups.

1. Cloud Computing Technologies
2. Network Measurement and Analysis
3. Inernet Routing Control
4. Real-Space Type Based Application Model
5. Software Development and Publication