LTFRB Rules on Public Transport Regs, CPC Issuance

Legal basis and policy framework

The circular is promulgated to implement DOTC Department Order 92-587 dated 30 March 1992, defining the policy framework for the regulation of transportation services.
The certificate issuance requirement is grounded in Section 16(a), Chapter II of the Public Service Act (C.A. No. 146, as amended).
The circular ties rate control to the Public Service Act’s policy framework on regulation of land transportation services.
The circular recognizes Section 17(a) of the Public Service Act as the basis for the Commission’s power to require safe, adequate, and efficient service and to enforce compliance with standards and orders.
The circular coordinates terminal-sharing guidance with Section 17 of Republic Act No. 7160 (Local Government Code), as to development of common/public terminals adopted by local government units (LGUs).

Scope and covered operators

The policy guidelines apply to persons, corporations, firms, or associations owning and/or operating public land transportation services.
The covered services are those used to carry passengers and goods.
The issuance of Certificate of Public Convenience (CPC) under these guidelines is aimed at authorizing land transportation service operations for public use.

Defined key terms

A Certificate of Public Convenience (CPC) is an authorization issued by the LTFRB for the operation of land transportation services for public use as required by law.
Filipino Citizenship exists when the applicant is a Philippine citizen, or a corporation/partnership/association/joint-stock company organized under Philippine laws where at least sixty (60) percent of capital stock or paid-up capital belongs entirely to Philippine citizens.
Financial Capability means the capability to establish/initiate/maintain/sustain proposed/existing operations and to meet claims arising from accidents.
Public Interest is the benefit for all the people and the promotion of general welfare through increased range of service levels and fares for passengers and the enhancement of healthy competition.
An Authorized Route is the approved pair of origin and destination points linked by roads or streets open to public use over which the service is authorized to operate.
Monopoly refers to the existence/operation of one (1) franchised operator or a group of franchised operators on a particular route whose actions or practices result in lack of effective competition.
A Development Route is a route serving light density traffic that is developmental due to specified conditions, including unserved feeder portions of at least 20 kms. linking to presently served truckline routes, or the presence of residential/tourist/commercial/industrial potentials, or a need for development.
A Franchise Operator is the holder/grantee of a valid and subsisting CPC issued by the LTFRB.
A Prior Operator is the priority of an existing authorized operator in a route and in each route segment by virtue of a CPC.
A Prior Applicant is the first applicant among applicants for a CPC accorded priority.
Protection of Investment means protection and conservation of investments made by operators.
Withdrawal from Service is the suspension of a service in its authorized route or portions.
Abandonment of Service is the authorized suspension of a service by the operator/owner in its authorized route or portions.
Replacement/Substitution is substitution of lost and unrecovered, obsolete, overaged, inefficient, or dilapidated vehicles.
First Class Service is a non-aircon bus with non-reclining upholstery seats that can pick up passengers along the route.
Premier Service is a non-aircon bus with reclining seats that does not stop along the route and operates as a direct service from origin to destination.
Addition/Expansion is introduction of an additional unit in a given route.
Route Measured Capacity (RMC) is the theoretical basis for determining demand for vehicles on a route.
Quality of Service is the conditions and standards for provision of services to provide safe, adequate, efficient, comfortable, and sustained service.

CPC issuance requirements and public-need policy

CPC issuance is determined by public need.
There is a presumption of public need in favor of the applicant for a proposed service.
The oppositor bears the burden of proving that there is no need for the proposed service.
The issuance guidelines govern transport operators and are subject to the principle that the interest of public service is paramount.
Section 16(a), Chapter II of the Public Service Act requires CPC grant when: (1) the applicant is a Filipino citizen or a Philippine-organized entity with at least sixty (60) percent owned/held by Philippine citizens; (2) the applicant is financially capable to undertake the service and meet operating responsibilities; and (3) the applicant proves the operation will promote the public interest in a proper and suitable manner.
The LTFRB determines CPC issuance rules under liberalized entry/exit and competition objectives while enforcing compliance with service standards.

Entry, exit, capacity, and operational rules

Entry and exit control is liberalized to introduce and/or enhance competition in rates charged and the quality of service rendered.
The circular requires a minimum competition rule: there must be at least two (2) operators in any route.
Routes presently serviced by only one (1) operator must be opened for entry to at least one (1) additional operator of the same or better mode/type of service.
Operators authorized to develop a Development Route must be authorized to provide the required services when there are no existing authorized operators serving an unserved feeder portion of at least 20 kms., or when developmental conditions exist.
Operators on a Development Route receive protection of investment for a maximum period of two (2) years, after which the link/route must be opened for entry to at least one (1) additional operator.
Entry of an additional operator in an already established route served by franchised operators is allowed in cases including: (1) a more efficient and cost-effective competitive service; (2) quality improvements and/or innovative/technologically advanced services superior to existing operators; (3) additional capacity needs and prior operators not responding to increased demand, including where capacity increases are offered only after another operator increases capacity; (4) lack of effective competition caused by existing operators’ actions or practices; (5) abandonment of operation by existing authorized operator(s) as proven by LTFRB records or other sources; and (6) contumacious violations of the Public Service Law and/or CPC terms and LTFRB rules and regulations by existing authorized operator(s).
On abandonment/withdrawal/suspension: an operator may be declared by the Board to have forfeited its right to its certificate if it abandons/withdraws/suspends service in its authorized routes or portions for a period of one (1) month or more.
An operator is allowed to withdraw/suspend services on its route only if it files a notice with the LTFRB at least fifteen (15) days prior to the withdrawal/suspension.
Vehicle replacement/substitution and adding/expanding units: existing authorized operators may increase units through replacement with bigger-capacity vehicles and through introduction of additional units after filing an application with and receiving LTFRB approval.
Flexibility to operate on more than one route is allowed for change/amendment of provincial bus authorized routing patterns subject to conditions set under LTFRB Memorandum Circular No. 91-007.
Terminal sharing: operators must be guided by development of common/public terminals that may be adopted by LGUs under Section 17 of Republic Act No. 7160.
Quality of service must be continuously upgraded, including: (1) upgrading vehicle insurance cover values for death and injury costs to reflect compensation set by judicial rulings; (2) requiring all public transport vehicles to undergo annual inspection by the LTO under the Motor Vehicles Inspection Station (MVIS) System; and (3) establishing separate examination systems for drivers of passenger and freight public utility vehicles in 1995.

Rate and fare setting rules

Pricing control is liberalized to introduce price competition complementary with quality of service, subject to prior notice and public hearing.
Fares must not be provisionally authorized without a public hearing.
The existing authorized fare range system for provincial buses and jeepneys using a plus or minus 15% limit is widened to a +20% and -25% limit in 1994.
In 1994, the authorized fare is to be replaced by an indicated or reference rate as the basis for the expanded fare range.
Fare systems for aircon buses are liberalized to cover first class and premier services.

Financial capability and technical evaluation

For CPC applicants applying for more than five (5) units, financial capability is assessed through concurrent satisfaction of two (2) basic financial requirements.
First financial requirement: availability of funds sufficient to establish/initiate and sustain operations.
An applicant is deemed financially capable if its actual working capital is equal to or greater than the required working capital, where:
- Actual working = Current Assets minus Current Liabilities;
- Required Working Capital = Two months Operating, Administrative and Interest Expenses, Minus two months Revenue (qualified by the Average Aging Receivables); and
- Equity Investment = Equity equivalent to 30% of rolling stock/units to be franchised.
Second financial requirement: availability of sufficient financial reserves to meet claims arising from accidents if it secures satisfactory insurance acceptable to the LTFRB.
If an applicant is deemed not financially capable, the LTFRB requires an increase in working capital equivalent to the computed deficiency.
Proof of the working capital increase and corresponding documents, under oath by the applicant, must be submitted to the LTFRB for recomputation/re-evaluation of financial capability.
For technical evaluation, the LTFRB ensures that vehicles used for public convenience are roadworthy and properly maintained so operators can provide safe, reliable, comfortable, and efficient service.
The public utility operator is responsible for providing and maintaining safe, reliable, and efficient service, while the government allows only vehicles meeting established physical, technical, and service standards to operate.
The Commission/LTFRB’s authority under Section 17(a) of the Public Service Act includes requiring safe, adequate, and efficient service and enforcing compliance with standard rules, regulations, orders, or other requirements.
The Route Measured Capacity (RMC) system is used only as a guide/indicator in weighing franchise application merits and is not a limit on the service offered upon satisfactory proof of public need exceeding the determined RMC.

Franchise validity, penalties, and legal effects

A CPC’s period of validity is five (5) years from issuance.
Any violation of, or failure to comply with, the guidelines constitutes a ground for the disapproval of a CPC application.
Disapproval is in addition to the penalties provided under the Public Service Act, as amended, and other relevant LTFRB rules and regulations after due notice and hearing.
The circular supersedes and repeals or modifies inconsistent provisions of existing LTFRB rules and regulations.