PART I HiNet Internet Service  Internet Value-added Services  Data Communication Services and Internet Data Center Services  We have maintained our leading market position despite a highly competitive market with over 181 internet  service providers in Taiwan. We expect the competitive conditions currently prevailing in the internet service  provider market to continue to intensify.  Our HiNet portal at  www.hinet.net  provides value-added services to our customers, such as network  security, Blog, travel, games, e-learning, financial information, music, video, anti-virus and links to other portals.  We charge fees for some of these services. We also receive commissions for transactions completed on some  of these other portals. Our internet video portal at  www.hichannel.hinet.net  offers online entertainment services  through the internet. In particular, our HiNet broadband (ADSL and FTTx) subscribers can access music,  television programs, movies and other multi-media content on demand. We charge access fees for some of this  content. We expect the revenues generated from these value-added services to grow as a percentage of our total  internet services revenues.  We provide a wide range of managed data services, including frame relay services, asynchronous transfer  mode services, and VPN services. Frame relay services provide high-speed data communications linking remote  sites. Asynchronous transfer mode services are used to handle high-bandwidth, integrated voice, video, data and  internet traffic between sites.  Internet data centers are facilities providing the physical environment necessary to keep computer network  servers running at all times. These facilities are custom-designed with high-volume air conditioning temperature  control systems, secure access, reliable electricity supply and connections to high-bandwidth internet networks.  Data centers house, protect and maintain network server computers that store and deliver internet and other  network content, such as web pages, applications and data. We currently have the greatest number of internet  data centers in Taiwan compared to our competitors in Taiwan. We offer co-location, web hosting and application  service provider services. To expand our internet data center services and strengthen our cooperation with  international telecommunications operators, we acquired a 70% equity interest of Chief Telecom in September  2006, which increased our internet data center market share to over 45% as of the end of 2010. We offered  customers hicloud CaaS (Compute as a Service) and StaaS (Storage as a Service) in 2010 to enhance working  efficiency and optimize the utilization of resources. We also continue to construct our cloud computing center.  34 We are the largest internet service provider, or ISP, in Taiwan, with a market share of 69.6% as of  December 31, 2010. As of December 31, 2009 and 2010, HiNet had approximately 4.1 million subscribers. The  increase of our HiNet broadband subscribers was offset by the decrease of HiNet dial-up subscribers. Our HiNet  internet service generated revenues of NT$17.7 billion, NT$17.3 billion and NT$18.2 billion (US$0.6 billion) in  2008, 2009 and 2010, respectively.  The following table sets forth HiNet’s subscribers as of each of the dates indicated.  As of December 31, 2008 2009 2010 (in thousands, except percentages) Total internet subscribers in Taiwan 6,027  5,668  5,888  HiNet subscribers: HiNet dial-up subscribers 580  534  507  HiNet ADSL subscribers 2,498  2,043  1,768  HiNet FTTx subscribers 1,016  1,486  1,818  Other access technology subscribers 9  4  3  Total HiNet subscribers 4,103  4,067  4,096  Market share (1) 68.1% 71.8% 69.6% (1) Based on data provided by the National Communications Commission. 