Extension of franchise for telecommunications

Franchise grant; covered telecommunications services

Section 1 grants International Communications Corporation, including its successors or assigns, the right, privilege, and authority to construct, maintain and operate telecommunications systems for international and domestic public communications.
The franchise covers stations and systems for radio, telegraph, telephone, facsimile, data, voice, audio and video services, and associated lines, circuits, satellites and/or stations, whether wire and/or wireless (Section 1).
The franchise authorizes the grantee to receive and transmit information, messages, impressions, pictures, music, entertainment and advertising signals throughout the Philippines and foreign countries, including communications for ships at sea, airplanes and other conveyances (Section 1).
The franchise covers transmission “by means of electricity, electromagnetic waves, optics or any other kind of energy, force, variations or impulses,” whether radiated or transmitted through any medium (Section 1).
The grant is subject to constitutional limits and laws/orders/issuances not inconsistent with the franchise (Section 1).

Term extension; franchise duration rule

Section 2 extends the grantee’s franchise by twenty-five (25) years from the expiration on August 9, 1996 (Section 4 as amended).
The franchise extension runs from the expiration thereof on August 9, 1996 (Section 2, amending Section 4 of Republic Act No. 3259).

Pre-construction approvals and regulatory hearings

The grantee must not begin any construction nor exercise any right or privilege under the franchise without first obtaining a certificate of public convenience and necessity from the National Telecommunications Commission or its legal successor (Section 3).
The certificate must be of the form and character provided for under existing laws (Section 3).
The National Telecommunications Commission (or its legal successor) may issue the certificate when, after due hearing, it determines that the construction or exercise of rights is necessary and proper for the public convenience (Section 3).
The Commission may impose conditions in approving construction or exercise, including conditions affecting construction, equipment, maintenance service, or operation, as reasonably required by the public convenience and interest (Section 3).

Service rates approval; public offering requirement

The rates for telecommunications services offered to the public are subject to approval by the National Telecommunications Commission or its legal successor (Section 4).
In compliance with the constitutional mandate to democratize ownership, the grantee must make public utilities offerings to the stock exchanges of at least thirty percent (30%) of its common stock within a period of three (3) years from the date of effectivity of this Act (Section 5).
No single person or entity may be allowed to own more than five percent (5%) of the stock (Section 5).

Frequency use, permits, interference standards

The grantee must secure from the National Telecommunications Commission the appropriate permits and licenses for its stations (Section 6).
The grantee must not use any frequency in the radio spectrum without authorization by the Commission (Section 6).
Stations must be constructed and operated to result in only the minimum interference on wavelengths or frequencies of existing stations or other stations established in accordance with law of other telecommunications services grantees (Section 6).
Operations must not diminish the grantee’s own right to use selected wavelengths or frequencies and must maximize the quality of transmission or reception and/or the availability of the grantee’s services (Section 6).

System operation duties; government take-over

The grantee must operate and maintain all telecommunications lines and systems in a satisfactory manner at all times (Section 7).
Whenever required by the National Telecommunications Commission or its legal successors, the grantee must modify, improve and change its telecommunications system in a reasonable and proper manner and extent as telecommunications progress makes reasonable and proper (Section 7).
The grantee must hold national, provincial, city, and municipal governments harmless from claims, accounts, demands, or actions arising out of accidents or injuries to property or persons caused by the construction or operation of the grantee’s stations (Section 8).
In times of war, rebellion, public peril, calamity, emergency, disaster, or disturbance of peace and order, the President may take over and operate transmitting/receiving/switching stations or authorize temporary use by any government department upon due compensation to the grantee for the use during the takeover period (Section 9).

Financial accounts; tax and reporting obligations

The grantee must keep an account of its gross receipts and must furnish a copy of such accounts to the Commissioner on Audit and the Treasurer of the Philippines not later than the thirty-first day of January of each year for the preceding year (Section 10).
The books and accounts relating to the grantee’s business are subject to official inspection by the Commission on Audit or its authorized representatives, and the audit and approval of these accounts are final and conclusive evidence of the amount of gross receipts (Section 10).
The grantee retains a right to appeal to the courts under the terms and conditions provided in Philippine laws (Section 10).
The grantee must pay the same taxes on real estate, buildings, and personal property exclusive of the franchise as other persons or corporations pay under law (Section 11).
The grantee must also pay a franchise tax equivalent to three percent (3%) of all gross receipts of the telephone or other telecommunications businesses transacted under the franchise, and this percentage is in lieu of all taxes on this franchise or thereof (Section 11).
The grantee remains liable for income taxes payable under Title II of the National Internal Revenue Code pursuant to Section 2 of Executive Order No. 72, unless that enactment is amended or repealed; any amendment or repeal applies to that income tax liability (Section 11).
The grantee must file the return and pay the tax due to the Commissioner of Internal Revenue (or authorized representative) in accordance with the National Internal Revenue Code, and the return is subject to audit by the Bureau of Internal Revenue (Section 11).
The grantee must submit a detailed annual report to the Congress of the Philippines on its program, operations, accounts, payment of taxes, and compliance with franchise terms and conditions (Section 11).

Regulatory control: temporary operation and interconnection

The National Telecommunications Commission may, after due notice and hearing, direct, authorize, or order another holder of a certificate of public convenience and necessity or any qualified person or entity to temporarily operate and maintain the grantee’s telecommunications services when the grantee’s certificate is revoked or suspended or when the authorized temporary operator willfully discontinues or abandons operations causing irreparable damage and serious inconvenience to the public (Section 12).
The Commission must issue a formal order prescribing the terms and conditions of temporary operation, the reasons for designation of the temporary operator, and restoration of the services to the grantee (Section 12).
A temporary-operator order must not be construed as a grant of a certificate of public convenience and necessity (Section 12).
The National Telecommunications Commission is authorized, after due notice and hearing, to order the grantee to allow interconnection of its facilities with other duly authorized telecommunications operators on terms and conditions the Commission deems proper and reasonable in the interest of public good (Section 13).

Continuous service and technology upgrades

The grantee must operate and maintain all stations, lines, cables, systems, and equipment for transmission and reception of messages, signals, and pulses in a satisfactory manner at all times (Section 14).
Whenever required by the National Telecommunications Commission in the interest of the public good and as far as practicable, the grantee must modify, improve, or change stations, lines, cables, systems, and equipment to keep abreast with advancement in science and technology (Section 14).

Corporate law compliance; limits on transfer

The grantee (and successors or assigns) must be subject to the corporation laws of the Philippines now existing or hereafter enacted (Section 15).
The grantee must not lease, transfer, grant the usufruct of, sell or assign the franchise or the rights and privileges acquired thereunder, nor merge with another entity organized for the same purpose, without prior approval of the Congress of the Philippines (Section 16).
The only exception occurs when the grantee is the surviving corporation (Section 16).
Any corporation to which the franchise is sold, transferred, or assigned must be subject to Philippine corporation laws now existing or later enacted (Section 16).
Any person, firm, company, partnership, corporation, or entity to which the franchise is sold, transferred, or assigned must be bound by all conditions, terms, restrictions, and limitations of the franchise as if it had been originally granted to that entity (Section 16).

Non-exclusivity; franchise amendment condition

The franchise is granted without interpreting it as an exclusive grant of the privileges provided (Section 17).
The franchise is granted subject to the condition that it may be amended, altered, or repealed by the Congress of the Philippines when the common good requires (Section 21).

Acceptance requirement; filing deadline and nullity

Within sixty (60) days after effectivity, the grantee must file with the National Telecommunications Commission its written acceptance of the Act and all its terms and conditions (Section 18).
If the grantee fails to accept within the sixty-day period, the Act becomes null and void (Section 18).

Amendments, repeals, and effectivity

The grantee must comply with and be subject to provisions of a general telecommunications policy law that may be enacted in the future (Section 19).
All other provisions, terms, and conditions in Republic Act No. 3259 inconsistent with Republic Act No. 7633 are repealed (Section 20).
The Act takes effect fifteen (15) days after publication in at least two (2) newspapers of general circulation in the Philippines (Section 22).