RA 9172: Telecom Franchise Renewal

Franchise renewal and term

Section 2 renews/extends the franchise granted under Republic Act No. 808, as amended for another twenty-five (25) years from the date of expiration.
Section 2 deems the renewed/extended franchise ipso facto revoked if the grantee fails to operate continuously for two (2) years.

Amended franchise: nature and scope

Section 1 grants Eastern Telecommunications Philippines, Inc. (Eastern Extension Australasia and China Telegraph Company Limited)—and its successors or assigns—a franchise to construct, install, establish, operate and maintain for commercial purposes and in the public interest wire and/or wireless telecommunications systems throughout the Philippines and between the Philippines and other countries and territories.
Section 1 covers telecommunications systems including mobile, cellular, paging, fiber optic, MMDS, LMDS, satellite transmit and receive systems, switches, and their value-added services such as voice, data, facsimile, control signs, audio and video, information services, and other telecommunications system technologies available now or later through technological advances.
Section 1 also authorizes the grantee to construct, acquire, lease and operate or manage transmitting and receiving stations, lines, cables, or systems as are convenient or essential to efficiently carry out the franchise purpose.

Manner of operation and NTC authority

Section 2 requires the stations or facilities to be constructed and operated so that they result in only the minimum interference on existing stations’ wavelengths or frequencies, without diminishing the grantee’s right to use its selected wavelengths or frequencies and without impairing transmission or reception quality.
Section 2 requires the operation to maximize service rendition and/or availability of services.
Section 3 requires the grantee to secure from the National Telecommunications Commission (NTC) a certificate of public convenience and necessity or the appropriate permits and licenses for construction, installation, and operation of telecommunications systems/facilities.
Section 3 empowers the NTC to impose conditions on construction, operation, maintenance, and service level, and to regulate construction and operation.
Section 3 provides that the grantee shall not use any frequency in radio spectrum without NTC authorization, and the NTC certificate must state the areas covered and the date the grantee shall commence the service.
Section 3 prohibits the NTC from unreasonably withholding or delaying authority, permits, or licenses.

Construction rights: ingress and egress; DPWH standards

Section 4 allows, with prior approval of the Department of Public Works and Highways (DPWH), excavation or laying conduits in public places, highways, streets, lanes, alleys, avenues, sidewalks, or bridges for erecting and maintaining poles or supports and for laying and maintaining underground wires, cables, or other conductors.
Section 4 requires disturbed or altered public places and infrastructure to be repaired and replaced in a workmanlike manner by the grantee in accordance with DPWH standards.
Section 4 provides that if the grantee fails, refuses, or neglects to repair or replace within ten (10) days after notice from the DPWH authority, the DPWH may repair and place the area in good order at double expense to be charged against the grantee.

Public responsibility, service obligations, and operations

Section 5 requires the grantee to conform to the ethics of honest enterprise and prohibits using stations/facilities for obscene or indecent transmission, dissemination of deliberately false information, or willful misrepresentation, and prohibits assisting in subversive or treasonable acts.
Section 5 requires the grantee to provide basic or enhanced telephone service in any municipality where it has an approved NTC certificate for a local exchange service, without discrimination among applicants and in the order of the date of applications, up to the capacity of its local exchange.
Section 5 requires the grantee to increase capacity to meet demand if demand increases beyond exchange capacity.
Section 5 provides an capacity-demand limitation: if the total demand to be satisfied by expansion is less than the smallest viable local exchange available in the market as determined by the NTC, the grantee is not obliged to furnish such service unless the applicant defrays the actual expenses for the installation of the needed telecommunication apparatus, and the NTC may extend the time for furnishing service.

Transmission standards and technological improvement

Section 5 requires the grantee to operate and maintain stations, lines, cables, systems, and equipment for transmission and reception in a satisfactory manner at all times.
Section 5 requires that, as far as economical and practicable, the grantee must modify, improve, or change stations and equipment to keep abreast with advances in science and technology.

Rates, regulation, and unbundling rules

Section 6 provides that charges and rates for telecommunications services—except rates/charges for services declared or considered as nonregulated services—whether flat or measured or variable, are subject to NTC approval or its legal successor.
Section 6 requires regulated rates to be unbundled, separable, and distinct among offered services.
Section 6 requires determination of rates so that regulated services do not subsidize unregulated ones.

Government right in emergencies; radio spectrum as patrimony

Section 7 reserves to the President a special right in times of war, rebellion, public peril, calamity, emergency, disaster, or disturbance of peace and order to:
- temporarily take over and operate the grantee’s stations, transmitters, facilities, or equipment; or
- temporarily suspend operation of any such station, transmitter, facility, or equipment in the interest of public safety, security, and public welfare; or
- authorize temporary use and operation by any government agency.
Section 7 requires due compensation to the grantee for the use of stations, transmitters, facilities, or equipment during such government operation.
Section 7 declares that the radio spectrum is a finite resource part of the national patrimony and that use is a privilege conferred by the State and may be withdrawn anytime, after due process.

Franchise term, condition-based revocation, and acceptance

Section 8 sets the term of the franchise at twenty-five (25) years from the date of effectivity of the Act unless sooner revoked or cancelled.
Section 8 provides ipso facto revocation if the grantee fails to comply with any of the following:
- (a) Commence operations within three (3) years from approval of the grantee’s operating permit or provisional authority by the NTC;
- (b) Operate continuously for two (2) years; and
- (c) Commence operations within five (5) years from effectivity of the Act.
Section 9 requires the grantee’s written acceptance within sixty (60) days from the Act’s effectivity.
Section 9 provides that upon acceptance, the grantee shall exercise the franchise privileges, and nonacceptance renders the franchise void.

Bond requirement and consequences

Section 10 requires the grantee to file a bond issued in favor of the NTC, with the NTC determining the bond amount, to guarantee compliance with and fulfillment of franchise conditions.
Section 10 provides that if, after five (5) years from approval of the grantee’s permit, the grantee has fulfilled the conditions, the bond shall be cancelled by the NTC.
Section 10 provides that if the conditions are not fulfilled, the bond shall be forfeited in favor of the government and the franchise shall be ipso facto revoked.

Interconnection right and NTC review

Section 11 authorizes the grantee to connect or demand connection of its telecommunications systems to any other duly authorized telecommunications systems in the Philippines.
Section 11 limits interconnection purpose to providing extended and improved telecommunications services to the public.
Section 11 requires interconnection under mutually agreed terms and conditions by the parties and subjects those terms/conditions to NTC review or modification.

Taxes, accounts, and audit/inspection duties

Section 12 subjects the grantee, successors, and assigns to payment of all taxes, duties, fees, charges, and other impositions under the National Internal Revenue Code (NIRC) of 1997, as amended, and other applicable laws.
Section 12 preserves existing tax exemptions, incentives, or privileges granted under any relevant law by clarifying that nothing repeals specific tax exemptions/incentives/privileges.
Section 12 requires that rights, privileges, benefits, and exemptions accorded to existing and future telecommunications franchises are extended to the grantee.
Section 12 requires filing the return with the city or province where facilities are located and payment of income tax due to the Commissioner of Internal Revenue or duly authorized representatives under the NIRC, with the return subject to audit by the Bureau of Internal Revenue.
Section 13 requires the grantee to keep separate accounts of gross receipts and to furnish the Commission on Audit (COA) and the National Treasury a copy not later than January 31 of each year for the preceding twelve (12) months.
Section 14 requires that the grantee’s books and accounts be open to inspection by the COA Commissioner (or duly authorized representatives) and requires submission of two (2) copies of quarterly reports on gross receipts, net profits, and general condition of business.
Section 15 requires the grantee to hold national, provincial, city, and municipal governments harmless from all claims, accounts, demands, or actions arising out of accidents or injuries (property or persons) caused by construction or operation of the grantee’s stations, transmitters, facilities, and equipment.
Section 21 requires the grantee to submit an annual report to Congress on compliance with franchise terms and conditions and on operations within sixty (60) days from the end of every year.

Transfer restrictions and Congress approval

Section 16 prohibits the grantee from leasing, transferring, granting usufruct of, selling, or assigning the franchise or the rights and privileges acquired under it to any person, firm, company, corporation, or other commercial or legal entity without prior approval of Congress.
Section 16 prohibits merging with another corporation or entity and prohibits transferring the grantee’s controlling interest, whether as a whole or in parts and whether simultaneously or contemporaneously, without prior Congressional approval.
Section 16 makes any person or entity to whom the franchise is sold, transferred, or assigned subject to the same conditions, terms, restrictions, and limitations of the Act.

Ownership dispersal and automatic revocation

Section 17 requires the grantee, to encourage public participation in public utilities, to offer at least thirty percentum (30%) of its outstanding capital stock (or a higher percentage if later provided by law) in a securities exchange in the Philippines within five (5) years from commencement of operations.
Section 17 provides that noncompliance renders the franchise ipso facto revoked.

Equality clause

Section 18 provides that any advantage, favor, privilege, exemption, or immunity granted under existing franchises or later granted becomes part of previously granted telecommunications franchises and must be accorded immediately and unconditionally to the grantee and other franchisees.
Section 18 excludes equality-clause application from affecting provisions concerning territory covered, life span of the franchise, or type of service authorized.

Separability and congressional amendment

Section 19 establishes separability: if any section or provision is held invalid, the other provisions not affected remain valid.
Section 20 provides that the franchise is subject to amendment, alteration, or repeal by Congress when the public interest requires and that it is not interpreted as an exclusive grant of the privileges provided.