Philippine Telecommunications Development Act

Coverage, application, and key definitions

The Act applies to all public telecommunications entities in the Philippines under Section 2.
“Telecommunications” is any process enabling a telecommunications entity to relay and receive voice, data, electronic messages, written or printed matter, fixed or moving pictures, words, music, visible or audible signals, or any control signals by wire, radio, or other electromagnetic, spectral, optical, or technological means under Section 3.
“Public telecommunications entity” means any person, firm, partnership or corporation, government or private entity engaged in providing telecommunications services to the public for compensation under Section 3.
“Broadcasting” is an undertaking transmitting over-the-air commercial radio or television messages for reception by a broad audience in a geographic area under Section 3.
“Franchise” is a privilege conferred upon a telecommunications entity by Congress authorizing it to engage in a certain type of telecommunications service under Section 3.
“Local exchange operator,” “inter-exchange carrier,” “international carrier,” “value-added service provider (VAS),” “public toll calling station,” “mobile radio telephone system,” and “interconnection” are defined under Section 3 and govern how operators’ categories and inter-carrier linkages are treated in the Act.

National policy and objectives

Telecommunications is declared essential to the economic development, integrity and security of the Philippines and must be developed and administered to safeguard, enrich, and strengthen the Philippines’ economic, cultural, social, and political fabric under Section 4.
Government must develop and maintain a viable, efficient, reliable and universal telecommunication infrastructure using the best available and affordable technologies under Section 4.
The expansion of the telecommunications network must prioritize improving and extending basic services to areas not yet served and government must promote a fair, efficient and responsive market emphasizing accessibility by persons to basic services in unserved and underserved areas at affordable rates under Section 4.
The radio frequency spectrum is declared a scarce public resource administered in the public interest consistent with international agreements, and allocated to service providers that will use it efficiently and effectively and may avail of new and cost-effective technologies under Section 4.
Rates and tariff charges must be fair, just and reasonable; the regulatory body must develop tariff structures based on socioeconomic factors and financial, technical, and commercial criteria to ensure a fair rate of return and promote economic and social development under Section 4.
Telecommunications services must be provided by private enterprises, with the private sector as the engine of rapid and efficient industry growth under Section 4.
A healthy competitive environment must be fostered so carriers can make business decisions and interact to encourage financial viability while maintaining affordable rates under Section 4.
Government must foster fair and reasonable interconnection to achieve viable, efficient, reliable, and universal telecommunications services under Section 4.
No single franchise may authorize an entity to engage in both telecommunications and broadcasting, whether through airwaves or by cable under Section 4.
Regulation must rely principally on an administrative process that is stable, transparent and fair, with due emphasis on technical, legal, economic and financial considerations while observing due process under Section 4.
The Act encourages broad public ownership of telecommunications entities and promotes development of a domestic telecommunications manufacturing industry and the harnessing of human resources skills and capabilities under Section 4.

Administration and regulator responsibilities

The National Telecommunications Commission (Commission) is the principal administrator of the Act and must take measures to implement the Act’s policies and objectives under Section 5.
The Commission must adopt an administrative process to facilitate entry of qualified service providers and adopt a pricing policy generating sufficient returns to encourage basic telecommunications service in unserved and underserved areas under Section 5.
The Commission must ensure quality, safety, reliability, security, compatibility, and inter-operability of telecommunications facilities and services consistent with standards and specifications set by international radio and telecommunications organizations to which the Philippines is a signatory under Section 5.
The Commission must mandate fair and reasonable interconnection through appropriate modalities and at a reasonable and fair level of charges, including cross subsidy to unprofitable local exchange service areas, to promote telephone density and expand access to basic services at affordable rates under Section 5.
The Commission must foster fair and efficient market conduct including protection from unfair trade practices of other carriers and must promote consumer welfare by facilitating access to telecommunications services geared toward individual and business users under Section 5.
The Commission must protect consumers against misuse of monopoly or quasi-monopolistic powers by investigating complaints and exacting compliance with service standards under Section 5.
The Commission must continue to impose fees and charges necessary to cover reasonable costs and expenses for regulation and supervision under Section 5.
The Department of Transportation and Communications must not exercise any power that tends to influence or effect a review or modification of the Commission’s quasi-judicial functions under Section 6.
In coordination with the Commission, the Department must develop and maintain a long-term strategic national telecommunications development plan; coordinate government research and development; represent and promote Philippine interests in international bodies and negotiate rights and obligations in international telecommunications matters; and operate a national consultative forum to facilitate interaction among industry, user groups, and academic/research institutions under Section 6.

Telecommunications entities and operating conditions

A telecommunications entity must be authorized to operate in one or more categories under the Act, and each category must be covered by its franchise under Section 7.
A local exchange operator must provide universal basic telephone service to all subscribers who apply within a reasonable period, at standards prescribed by the Commission, and at a tariff that provides a fair return on investments under Section 8.
A local exchange operator must be protected from uncompensated bypass or overlapping operations by other entities needing physical links or connections to its customers, except when it is unable to provide, within a reasonable period of time and at desired standard, the interconnection arrangements required under Section 8.
A local exchange operator has the first option to provide pay telephone services or public calling stations in its network-covered area under Section 8.
A local exchange operator is entitled to a fair and equitable revenue sharing arrangement with the inter-exchange carrier or other carriers connected to its basic network under Section 8.
The number of entities authorized to provide inter-exchange national long distance services may be limited, but where economically viable, at least two (2) carriers must be authorized under Section 9.
An inter-exchange carrier must interconnect with other networks in the same category and with local exchange carriers or other telecommunications entities upon application within a reasonable time, under fair and reasonable levels of charges, to make domestic and international long distance services possible under Section 9.
An inter-exchange carrier has the right to establish and operate its own tandem switching facilities to which international calls or overseas carriers must course messages or signals under Section 9.
Only entities that provide local exchange services and can demonstrably show technical and financial capability to install and operate an international gateway facility are allowed to operate as international carriers under Section 10.
An international carrier must produce a firm correspondent or interconnection relationship with major overseas telecommunications authorities or carriers within one (1) year from the grant of authority under Section 10.
An international carrier must comply with providing local exchange service in unserved or underserved areas within three (3) years from the grant of authority as required by existing regulations under Section 10.
An international carrier is deemed compliant with the three (3) years unserved/underserved local exchange obligation if it allows an affiliate to assume and comply with the obligation under Section 10.
Failure of an international carrier to comply with the required obligations is a cause to cancel its authority or permit to operate as an international carrier under Section 10.
A VAS provider need not secure a franchise provided it does not up up its own network, and a VAS provider may competitively offer services and/or expertise and lease or rent telecommunications equipment and facilities necessary for specialized services in the domestic and/or international market in accordance with network compatibility under Section 11.
Telecommunications entities may provide VAS only if they secure prior approval of the Commission to ensure VAS offerings are not cross-subsidized from proceeds of utility operations, do not discriminate against other VAS providers in rates, do not deny equitable access to their facilities, and maintain separate books of accounts for the VAS under Section 11.
In a local telephone exchange area, more than one duly enfranchised provider of mobile radio services distinct from the local exchange carrier may operate only with prior authority from the Commission and subject to VAS conditions and radio frequency spectrum utilization norms under Section 12.
The operator of a mobile radio telephone system must comply with obligations to provide local exchange service in unserved and underserved areas in accordance with existing regulations under Section 12.
Failure to comply with the mobile operator unserved/underserved local exchange obligation within three (3) years from the grant of authority is a cause to cancel authority or permit to operate under Section 12.
Duly enfranchised radio paging services involving voice or data messages must be allowed to compete freely in rates, number of operators, or variety of operating modalities, subject only to radio frequency spectrum utilization norms under Section 13.

User rights and consumer protections

End-users have the right to non-discriminatory, reliable telecommunications utility service conforming to minimum standards set by the Commission under Section 20.
End-users have the right to be given the first single-line telephone connection or the first party-line connection within two (2) months of application for service, against deposit, or within three (3) months after targeted commencement of service in the barangay concerned per the original schedule of service expansion approved by the Commission, whichever deadline comes later under Section 20.
End-users have the right to regular, timely, and accurate billing, courteous and efficient service at utility business offices and by utility company personnel under Section 20.
End-users have the right to thorough and prompt investigation of and action upon complaints; utilities must endeavor to allow complaints to be received over the telephone and must keep a record of all written or phoned-in complaints under Section 20.

Franchise, rates, accounts, and interconnection

No person may commence or conduct the business of being a public telecommunications entity without first obtaining a franchise under Section 16.
In granting a Certificate of Public Convenience and Necessity (CPCN), the Commission may impose conditions on duration and termination of the privilege, concession, or standard or technical aspects of equipment, rates, or service not contrary to franchise terms under Section 16.
A CPCN may not be shorter than five (5) years nor longer than the life of the franchise under Section 16.
If a CPCN expires at the same time as the franchise, it is deemed renewed for the same term if the franchise is also renewed or extended under Section 16.
Expansion and financing of network and services using equipment compatible or homologous to existing or previously approved plant and facilities to meet additional demand in the same installed areas does not require Commission approval under Section 16.
Upgrading existing plant and network facilities, including financing to retire or replace obsolete or outmoded equipment with state-of-the-art equipment and technology to improve quality or grade of service in the same areas covered by previously approved plant and facilities also does not require Commission approval under Section 16.
The Commission may not grant a subsequent CPCN for another segment of service or extend an entity’s area service coverage if the entity failed to satisfactorily comply with its commitments to provide a particular service in the original area coverage under an earlier authorization under Section 16.
The Commission must establish rates and tariffs that are fair and reasonable and provide economic viability and a fair return on investments considering prevailing cost of capital in domestic and international markets under Section 17.
The Commission must exempt a specific telecommunications service from rate or tariff regulation if it has sufficient competition to ensure fair and reasonable rates or tariffs under Section 17.
The Commission retains residual powers to regulate rates or tariffs when ruinous competition results or when a monopoly or cartel or combination in restraint of free competition exists and rates or tariffs are distorted or unable to function freely, adversely affecting the public under Section 17.
When exercising residual regulation, the Commission must establish either a floor or ceiling on rates or tariffs under Section 17.
Access charge and revenue sharing arrangements between interconnecting carriers must be negotiated by the parties and submitted to the Commission under Section 18.
If parties fail to agree within a reasonable period, the dispute must be submitted to the Commission for resolution under Section 18.
In adopting or approving an access charge formula or revenue sharing agreement, particularly for interconnection involving a local exchange, a mobile radio, an inter-exchange long distance carrier, or an international carrier, the Commission must ensure equity, reciprocity and fairness among parties under Section 18.
The Commission must consider (a) costs of facilities needed to complete interconnection; (b) the need for cross-subsidy to local exchange carriers to increase telephone density; and (c) a rate of return on total local exchange network investment at parity with those earned by other telecommunications industry segments under Section 18.
International carriers and mobile radio operators mandated to provide local exchange services are not exempt from the cross-subsidy requirement when interconnecting with local exchanges of other carriers under Section 18.
Local exchanges operated by international carriers and mobile radio operators are equally entitled to cross-subsidy from other international carriers, mobile radio operators, or inter-exchange carriers interconnecting with them under Section 18.
The Commission must require a uniform system of accounts, which serves as a basis in establishing rates and tariffs under Section 19.
Where a single entity spans more than one category of service, it must maintain separate books of accounts for each category or specialized classification under Section 19.

Telecommunications development measures and transitions

Telecommunications entities with regulated types of services must make a bonafide public offering through stock exchanges of at least thirty percent (30%) of their aggregate common stocks within a period of five (5) years from effectivity of this Act or the entity’s first start of commercial operations, whichever date is later under Section 21.
The public offering must comply with Securities and Exchange Commission rules and regulations under Section 21.
Within three (3) years from effectivity of this Act, the Department must privatize all telecommunications facilities currently owned and/or operated by the government for public use, plus those facilities planned under various bilateral funding arrangements under Section 22.
Unless otherwise authorized by law, privatization of telecommunications facilities and construction of telephone infrastructure must be through public bidding under Section 22.
Any advantage, favor, privilege, exemption, or immunity granted under existing franchises or later granted must ipso facto become part of previously granted telecommunications franchises and must be accorded immediately and unconditionally to the grantees under Section 23.
The equalization rule does not affect franchise provisions concerning territory covered, life span of the franchise, or type of service authorized under Section 23.
Telecommunications services deregulated by the Act that are operating at the Act’s effectivity may continue with their approved rates and tariffs until the end of the calendar year of effectivity under Section 24.
Existing franchises not operating or without pending applications for CPC at the time of effectivity are deemed revoked under Section 24.
Interconnection agreements previously entered into remain in full force and effect, but the parties must within six (6) months from effectivity review their access charge/revenue sharing formula and submit an amendment to the Commission if necessary to comply with Section 18 guidelines under Section 24.

Separability, repeals, and effectivity

Any unconstitutional or invalid portion of the Act does not nullify other portions if the remaining provisions can still subsist and be given effect in their entirety under Section 25.
All inconsistent laws, ordinances, rules, regulations, and other issuances or parts thereof are repealed or modified accordingly under Section 26.
The Act takes effect fifteen (15) days from the date of publication in at least two (2) newspapers of general circulation under Section 27.