DECISION
AUSTRIA-MARTINEZ, J.:
II
With the proven track record of herein applicant as one of the pacesetters in carrying
out its landlines commitment in its assigned areas, applicant can best respond to
public demand for faster installation of telephone lines in Manila and Navotas.
The grant of this application is, therefore, a fitting recognition that should be accorded
to any deserving applicant, such as herein applicant ICC whose remarkable
performance in terms of public service as mandated by Executive Order 109 and
Republic Act No. 7925 has persuaded this Commission to affix the stamp of its
approval.[14]
The Court will not interfere with these findings of the NTC, as these are matters that
are addressed to its sound discretion, being the government agency entrusted with the
regulation of activities coming under its special and technical forte. [15] Moreover, the
exercise of administrative discretion is a policy decision and a matter that can best be
discharged by the government agency concerned, and not by the courts. [16]
Petitioner insists compliance with the service area scheme (SAS) mandated by
DOTC Dept. Circular No. 91-260, to wit:
The Court is not persuaded. Said department circular was issued by the DOTC in 1991,
before the advent of E.O. No. 109 and R.A. No. 7925. When E.O. No. 109 was
promulgated in 1993, and R.A. No. 7925 enacted in 1995, the service area scheme was
noticeably omitted therefrom. Instead, E.O. No. 109 and R.A. No. 7925 adopted a policy
of healthy competition among the local exchange carrier service providers.
The need to formulate new policies is dictated by evolving goals and demands in
telecommunications services. Thus, E.O. No. 109 acknowledges that there is a need to
promulgate new policy directives to meet the targets of Government through the
National Telecommunications Development Plan (NTDP) of the Department of
Transportation and Communications (DOTC), specifically: (1) to ensure the orderly
development of the telecommunications sector through the provision of service to all
areas of the country; (2) to satisfy the unserviced demand for telephones; and (3) to
provide healthy competition among authorized service providers. Likewise, one of the
national policies and objectives of R.A. No. 7925 is to foster the improvement and
expansion of telecommunications services in the country through a healthy competitive
environment, in which telecommunications carriers are free to make business decisions
and to interact with one another in providing telecommunications services, with the end
in view of encouraging their financial viability while maintaining affordable rates.[17]
Recently, in Pilipino Telephone Corporation vs. NTC,[18] the Court had occasion to
rule on a case akin to the present dispute, involving the same respondent ICC, and the
Pilipino Telephone Corporation (Piltel). In the Piltel case, ICC applied for a provisional
authority to operate a local exchange service in areas already covered by Piltel, which
includes Misamis Occidental, Zamboanga del Sur, Davao del Sur, South Cotabato and
Saranggani. Piltel opposed ICCs application but the NTC denied it, and granted ICCs
application. The Court of Appeals dismissed Piltels petition for review, and
on certiorari before this Court, we affirmed the dismissal. The Court found that the NTC
did not commit any grave abuse of discretion when it granted the ICC a provisional
authority to operate in areas covered by Piltel. We held:
We will not disturb the factual findings of the NTC on the technical and financial
capability of the ICC to undertake the proposed project. We generally accord great
weight and even finality to factual findings of administrative bodies such as the NTC,
if substantial evidence supports the findings as in this case. The exception to this rule
is when the administrative agency arbitrarily disregarded evidence before it or
misapprehended evidence to such an extent as to compel a contrary conclusion had it
properly appreciated the evidence. PILTEL gravely failed to show that this exception
applies to the instant case. Moreover, the exercise of administrative discretion, such as
the issuance of a PA, is a policy decision and a matter that the NTC can best
discharge, not the courts.
PILTEL contends that the NTC violated Section 23 of NTC Memorandum Circular
No. 11-9-93, otherwise known as the Implementing Guidelines on the Provisions of
EO 109 which states:
Section 23. No other company or entity shall be authorized to provide local exchange
service in areas where the LECs comply with the relevant provisions of MTC MC No.
10-17-90 and NTC MC No. 10-16-90 and that the local exchange service area is not
underserved. (Emphasis supplied)
...
Among the declared national policies in Republic Act No. 7925, otherwise known as
the Public Telecommunications Policy Act of the Philippines, is the healthy
competition among telecommunications carriers, to wit:
Furthermore, free competition in the industry may also provide the answer to a much-
desired improvement in the quality and delivery of this type of public utility, to
improved technology, fast and handy mobil[e] service, and reduced user
dissatisfaction.
Likewise, PILTELs argument that the NTC Order violates PILTELs rights as a prior
operator has no merit. The Court resolved a similar question in Republic v. Republic
Telephone Company, Inc. In striking down Retelcos claim that it had a right to be
protected in its investment as a franchise-holder and prior operator of a telephone
service in Malolos, Bulacan, the Court held:
It is expressly provided that in the event the Philippine Government should desire to
maintain and operate for itself the system and enterprise herein authorized, the grantee
shall surrender his franchise and will turn over to the Government said system and all
serviceable equipment therein, at cost, less reasonable depreciation. [19]
Similarly in this case, the grant of a PA to ICC to operate in areas covered by TTPI
is not tainted with any grave abuse of discretion as it was issued by the NTC after taking
into account ICCs technical and financial capabilities, and in keeping with the policy of
healthy competition fostered by E.O. No. 109 and R.A. No. 7925.
In addition, Section 6 of R.A. No. 7925 specifically limits the DOTC from exercising
any power that will tend to influence or effect a review or a modification of the NTCs
quasi-judicial functions, to wit:
ACCESS CHARGES
GENERAL
(a) Until the local exchange service is priced reflecting actual costs, the local
exchange service shall be cross-subsidized by other
telecommunications services.
(c) The subsidy need by the LE service operator to earn a rate of return at
parity with other segments of telecommunications industry shall be
charged against the international and domestic toll and CMTS
interconnect services.[25]
Both issuances allow a local exchange operator to cross-subsidize its operations from
its other telecommunications services, and not solely on the revenues derived from the
operators local exchange service.
Notably, R.A. No. 7617, as amended by R.A. No. 7674, grants TTPI the legislative
franchise to install, operate and maintain telecommunications systems throughout the
Philippines but not limited to the operations of local exchange service or public switched
network, public-calling stations, inter-exchange carrier or national toll transmission,
value-added or enhanced services intelligent networks, mobile or personal
communications services, international gateway facility, and paging services, among
others.[26] From these services, TTPI has other sources of revenue from which it may
cross-subsidize its local exchange operations.
The Court, however, agrees with petitioners that the NTC erred when it failed to
require ICC to make an escrow deposit and a performance bond. Section 27 of NTC
MC No. 11-9-93 specifically provides:
The escrow deposit and the posting of a performance bond are required in each
proposed and approved project of a local exchange operator. Project refers to a
planned undertaking.[27]ICCs project for local exchange service in the Manila and
Navotas areas is separate and distinct from its projects in other areas; hence, the NTC
should have directed ICC to submit such requirements. Evidently, the escrow deposit is
required to ensure that there is available money on hand to defray ICCs expenditures
for its project, while the performance bond will answer for the faithful compliance and
performance of ICCs rollout obligation and to compensate the government for any
damages incurred in case of ICCs default. Without these, the government will be left
holding an empty bag in the event ICC reneges in its rollout obligation.
Section 27 of NTC MC No. 11-9-93 is silent as to whether the posting of an escrow
deposit and performance bond is a condition sine qua non for the grant of a provisional
authority. While the provision uses the term shall, said directive pertains to the NTC,
which shall require the public telecommunications carrier to make such deposit and
posting. In any event, records show that as of May 20, 2004, ICC has been granted an
extension of its provisional authority up to November 10, 2006.[28] Records also show
that ICC has already been providing local exchange carrier service in the areas
concerned, having installed 16,000 lines in the City of Manila, 12,000 of which have
already been subscribed, 624 lines in Caloocan City, all of which have been subscribed,
while the roll-out plan for facilities and provisioning in the City of Navotas is being
finalized.[29] Hence, so as not to disrupt ICCs rollout plan compliance, it would be
more judicious for the Court to merely require ICC to comply with Section 27 of NTC
MC No. 11-9-93, within such period to be determined by the NTC.
Furthermore, it is well to stress that petitioner TTPI cannot claim any exclusive right
to render telecommunications service in areas which the NTC considers to be in need of
additional providers. R.A. No. 7925 is quite emphatic on this score, viz.:
More than anything else, public service should be the primordial objective of local
exchange operators. The entry of another provider in areas covered by TTPI should
pose as a challenge for it to improve its quality of service. Ultimately, it will be the public
that will benefit. As pointed out in Republic of the Phils. vs. Rep. Telephone Co,
Inc.:[30]
Free competition in the industry may also provide the answer to a much-desired
improvement in the quality and delivery of this type of public utility, to improved
technology, fast and handy mobil service, and reduced user dissatisfaction. After all,
neither PLDT nor any other public utility has a constitutional right to a monopoly
position in view of the Constitutional proscription that no franchise certificate or
authorization shall be exclusive in character or shall last longer than fifty (50) years
(ibid., Section 11; Article XIV, Section 5, 1973 Constitution; Article XIV, Section 8,
1935 Constitution).
(1) Deposit in escrow in a reputable bank 20% of the investment required for
the first two years of the implementation of the proposed project; and
(2) Post a performance bond equivalent to 10% of the investment required for
the first two years of the approved project but not to exceed P500
Million.
[1]
Under E.O. No. 109, Section 1 (c), Local Exchange Carrier Service refers to a telecommunications
service, primarily but is not limited to voice-to-voice service, within a contiguous geographic area
furnished to individual subscribers under a common local exchange rate schedule.
[2]
An International Gateway Facility (IGF) Operator is a public telecommunications carrier providing IGF
services consisting of international transmissions, switching and network management facilities
which serve as point of entry and exit in the Philippines of international traffic between the
national network and point/s outside the Philippines, per NTC MC No. 9-7-93, re: Guidelines on
the Interconnection of Public Telecommunications Carriers.
[3]
Entitled Guidelines on the Policy to Improve Local Exchange Carrier Service.
[4]
Republic vs. Express Telecommunication Co., Inc. (Extelcom), G.R. Nos. 147210 & 147096, January
15, 2002, 373 SCRA 316.
[5]
Defined in NTC MC No. 8-9-95, as an authority for a limited period, granted to a qualified applicant to
operate and maintain a public telecommunications facility/service by the Commission, pending
the grant of the CPCN.
[6]
Docketed as NTC Case No. 96-195.
[7]
Penned by Justice Ruben T. Reyes and concurred in by Justices Quirino D. Abad Santos, Jr. and Eloy
R. Bello, Jr.
[8]
CA Rollo, pp. 161-171.
[9]
Rollo, p. 28.
[10]
Id., pp. 29-60.
[11]
PLDT vs. NTC, G.R. No. 88404, October 18, 1990, 190 SCRA 717, 726.
[12]
Extelcom case, supra., Note 4, p. 334.
[13]
Id., p. 342.
[14]
Rollo, pp. 164-165; NTC Order dated November 10, 1997, pp. 9-10.
[15]
Extelcom case, supra., Note 4, p. 346.
[16]
Ibid.
[17]
Section 4 (f), Article II, Rep. Act No. 7925.
[18]
G.R. No. 138295, August 28, 2003.
[19]
Ibid.
[20]
Saado vs. Court of Appeals, G.R. No. 108338, April 17, 2001, 356 SCRA 546, 558; citing De Leon,
Administrative Law: Text and Cases, 1993 ed., pp. 143-144.
[21]
Rollo, p. 44; Petition, p. 36, citing the Dissenting Opinion of Commissioner Kintanar in NTC Order
dated 28 October 1997, NTC Case No. 94-229.
[22]
Provision on Local Exchange (LE) Services, (d).
[23]
Rollo, p. 164; NTC Order dated November 10, 1997, p. 9.
[24]
Extelcom case, supra., Note 4, p. 347.
[25]
CMTS stands for Cellular Mobile Telephone System.
[26]
Section 1.
[27]
Websters Third New International Dictionary, 1981 Ed.
[28]
NTC Records, Volume 3.
[29]
Ibid.
[30]
G.R. No. 64888, November 28, 1996, 265 SCRA 1, 13, citing PLDT vs. NTC, 190 SCRA 717 (1990).