Republic of the Philippines
SUPREME COURT
Manila

EN BANC

 

G.R. No. 94374 August 27, 1992

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, petitioner,
vs.
EASTERN TELECOMMUNICATIONS PHILIPPINES, INC. (ETPI) and NATIONAL TELECOMMUNICATIONS COMMISSION (NTC), respondents.

Meer, Meer, & Meer Law Office and Alampay & Manhit Law Offices for petitioner.

Arthur D. Lim Law Office for private respondent ETPI.

 

GUTIERREZ, JR., J.:

The petition seeks to set aside and annul the decision of the National Telecommunications Commission (NTC) signed by former NTC Commissioner Jose Luis Alcuaz dated November 14, 1989 as well as the order dated July 16, 1990 of the NTC En Banc.

On July, 16, 1987, Eastern Telecommunications Philippines, Inc. (Eastern) filed with the NTC an application (docketed as NTC Case No. 8758) for a Certificate of Public Convenience and Necessity (CPCN) to construct, maintain and operate an International Digital Gateway Facility (IDGF). In its application, Eastern alleged that it is a domestic corporation and that it has the "franchise to land, construct, maintain and operate telecommunications systems by cable, or any other means now known to science or which in the future may be developed for the reception and transmission of messages to and between any point in the Philippines to point exterior thereto . . . (R.A. 5002)

On July 22, 1987, NTC issued a notice of hearing, requiring publication of Eastern's application and submission of financial and technical requirements and setting the case for initial hearing on May 31, 1988.

On June 23, 1988, petitioner Philippine Long Distance Telephone Company (PLDT) filed an "Opposition to Main Application and to Prayer for Provisional Authority" dated June 20, 1988 based primarily on the following grounds:

1. Since PLDT already operates and maintains three (3) international gateway switching facilities or exchanges and will construct and operate by the year 1989 a new large-capacity international digital exchange in Metro Manila, ETPI's proposed international digital gateway constitutes a needless and wasteful duplication of facilities and an improvident expenditure of dollars, contrary to public policy and detrimental to the public interest;

2. ETPI is basically an international data or record carrier and an such it has no local telephone exchanges or much less a telephone network of its own in the Philippines;

3. ETPI's proposal to operate its own international gateway is a device, scheme or strategem to exploit PLDT's domestic telephone network and expand its inordinately lucrative business as a telephone correspondent;

4. ETPI's proposed international gateway will only enable ETPI to relegate to lesser importance its primary obligation to operate as a record carrier, obtain at the expense of PLDT an increasing but undeserved share in revenue from international telephone traffic, for ETPI will ride piggy-back on PLDT's own for nationwide telephone network, and undermine the viability of PLDT's programmed new large-capacity international digital gateway;

5. There will be substantial diminution and stunted growth of PLDT's revenue from its international toll services vis-a-vis its huge investments for its ongoing development projects; and

6. The establishment of ETPI's' proposed international gateway is contrary to the international practice to have one or more gateways of single ownership. (Rollo, pp. 224 to 225)

On July 8, 1988, PLDT served on Eastern a "Request for Admission and Interrogatories" which was answered by Eastern on August 9, 1988.

On August 31, 1988, NTC issued an order defining the issues for trial on the basis of the respective formulations of issues by Eastern and PLDT.

At the scheduled hearing on September 14, 1988, PLDT filed a Motion to Dismiss Eastern's Application, questioning the jurisdiction of the NTC to hear and decide the application upon the ground that Eastern was disqualified by its franchise from acquiring the CPCN applied for. After protracted debate between the parties, the NTC denied the Motion to Dismiss and the trial proceeded.

On various hearing dates, Eastern and PLDT presented their respective documentary and testimonial evidence. Thereafter, both applicant Eastern and oppositor PLDT filed extensive memoranda in support of their respective positions.

On July 10, 1989, NTC motu proprio ordered that hearing be conducted for the purpose of propounding clarificatory questions to Eastern and PLDT. Afterwhich, per order dated November 3, 1989, the case was considered submitted for final resolution.

On November 10, 1989, the NTC through Commissioner Jose Luis A. Alcuaz rendered a decision granting Eastern's application. The dispositive portion reads as follows:

WHEREFORE, in the interest of public service, the Commission hereby issues a Certificate of Public Convenience and Necessity (CPCN) to applicant EASTERN TELECOMMUNICATIONS PHILIPPINES, INC. (ETPI) for the authority to install, operate and maintain an International Digital Gateway Facility in Metro Manila, subject to the following

CONDITIONS:

1. Applicant shall within fifteen (15) days from receipt of this Decision, file with this Commission its acceptance of the terms and conditions herein prescribed.

2. Within sixty (60) days from receipt by this Commission of applicant's acceptance of the terms and conditions of this decision, applicant shall submit to this Commission a detailed schedule of activities together with a detailed listing of all equipments required to carry out this authorization from the start up to the completion of the installation and commencement of operations.

3. That the applicant shall install and establish the proposed international digital gateway including all equipments necessary to put up the system in accordance with the plans and specifications submitted and approved in this case, to wit:

3.1 Exhibit D-1
3.2 Exhibit D-2
3.3 Exhibit D-2-b
3.4 Exhibit D-3-a
3.5 Exhibit D-3

4. Within Ninety (90) days from the date of acceptance of the terms and conditions herein prescribed, applicant ETPI and PLDT shall enter into an interconnection agreement for the provision of adequate interconnection facilities between applicant's gateway switch and PLDT's telephone network and shall jointly submit such interconnection agreement to the Commission for approval. Such interconnection agreement shall include among others the following:

4.1 General Statement of agreement to interconnect and abide with all the terms and conditions included in the interconnection agreement;

4.2 Technical standards of interconnection. inclusive of the agreed interconnection criteria and quality or grade of interconnection facilities;

4.3 Terms and conditions regarding the provision and operation and maintenance of any and all interconnection facilities between network;

4.4 Terms and conditions as well as the manner of traffic revenue sharing and account settlement therefor for all types of service as may be agreed upon by PLDT and applicant ETPI;

4.5 Provisions regarding amendments to the interconnection of ETPI and PLDT insofar as the maintenance, operation and monitoring are concerned and insofar as maintaining a reliable grade of service is concerned; liabilities of anyone or both of the parties for any loss or damages or interruption of service resulting from various causes;

4.6 Any and all terms and conditions necessary to insure an efficient interconnection of the network facilities of both parties;

4.7 Effectivity of the agreement.

5. That applicant shall complete the installation of the system including full interconnection with the Public Switched Telephone Network (PSTN) and commence providing the service within the period three hundred sixty (360) days from the date of this decision and inform the Commission in writing at least fifteen (15) days before the date of commencement of actual service to allow the Technical Staff of this Commission to conduct an ocular inspection and field test of the entire international digital gateway of applicant including its interconnection with the PSTN.

6. Within thirty (30) days from the completion of the installation of the system but before the commencement of actual operations, applicant shall submit to this Commission, a detailed listings of all equipment actually installed to establish the system, together with their specifications and corresponding costs.

7. That applicant, ETPI shall file before the Commission within One Hundred Eighty (180) days from the approval hereof petition for the approval of the corresponding rates to be charged for its international telephone service.

8. That the applicant shall allow interconnection of its international digital gateway switch with other authorized telecommunications network desiring interconnect in accordance with cost efficient interconnection.

9. Applicant shall submit to this Commission on or before March lst of each year, an Annual Report of finances and operations for the previous year ending December 31st as required in Section 7(h) of Commonwealth Act No. 146, as amended, the said report to be prepared in the Annual Report Form prescribed by this Commission.

10. That applicant shall pay to this Commission on or before September 30th of each year, supervision and regulation fees as required under Section 40 of Commonwealth Act 146, as amended.

11. That applicant shall not suspend operation of the herein authorized service without prior authority from this Commission except in cases of emergency or interruption of service, in which case applicant shall inform the Commission in writing at least (2) days from the occurrence of such service interruption with detailed explanation as to the nature, cause and duration of interruption as well as details of immediate measures being undertaken or to restore service in the shortest possible time.

12. The technical staff of this Commission may at any time inspect the facilities of applicant to determine compliance with the requirements of this Commission.

13. That applicant shall not alter, modify, revise any of the approved technical specifications authorized without prior authority from this Commission.

14. That applicant shall comply with all laws, rules and regulations as are now existing and shall be promulgated by the National Telecommunications Commission. (NTC decision dated Oct. 13, 1989, pp. 12 -15; NTC Case No. 87-149; Annex "A")

Commissioner Alcuaz signed the decision on November 10, 1989 and released the same to the NTC Secretariat on November 14, 1989. Thus, the decision was entered into the NTC docket on November 14, 1989. Also on the same day, Eastern was served with a copy of the decision by Commissioner Alcuaz in his NTC office. The next day, Eastern submitted its "acceptance" of the terms and conditions specified in the decision.

A day later, on November 15, 1989, the NTC received a latter dated November 13, 1989 from the Office of the President addressed to Commissioner Alcuaz stating that he had been replaced as head of NTC. President Aquino stated, that she was designating Undersecretary of Transportation Josefina T. Lichauco as acting Commissioner of the NTC.

On January 3, 1990, the NTC En Banc issued an order directing its board Secretary formally to release copies of the NTC decision dated November 14, 1989 to the parties.

PLDT then filed a "Motion To Declare So-Called Alcuaz Decision Void/Inexistent" as well as a motion for reconsideration of that decision. After further pleadings and counter pleadings, the NTC by an order dated July 16, 1990 En Banc denied the PLDT motions assailing the validity of the said decision and confirmed the November 14, 1989 decision signed by Commissioner Alcuaz.

Hence, the present petition for certiorari filed by PLDT premised on the following grounds:

I

THE NTC LACKED OR EXCEEDED ITS JURISDICTION, AND/OR GRAVELY ABUSED ITS DISCRETION IN EXERCISING THE SAME, WHEN IT AUTHORIZED ETPI TO INSTALL AND OPERATE AN EQUIPMENT INHERENT TO OR ESSENTIAL ONLY FOR A TELEPHONE SYSTEM WHICH THE LATTER (ETPI), UNDER ITS LEGISLATIVE FRANCHISE, WAS PROHIBITED OR UNAUTHORIZED TO ENGAGE IN.

II

THE NTC LACKED OR EXCEEDED ITS JURISDICTION, AND/OR GRAVELY ABUSED ITS DISCRETION IN EXERCISING THE SAME, WHEN IT COMPELLED PLDT TO ALLOW THE LINKAGE WITH ITS TELEPHONE SYSTEM, IN THE GUISE OF "INTERCONNECTION," ETPI'S PROPOSED IGS EQUIPMENT, SINCE (A) INTERCONNECTION IS AUTHENTIC AND PROPER ONLY BETWEEN TWO EXISTING TELECOMMUNICATIONS/TELEPHONE SYSTEMS AND AN IGS IS NOT SYSTEM BUT A MERE EQUIPMENT AND (B) SUCH LINKAGE OF ETPI'S PROPOSED IGS WITH PLDT'S TELEPHONE SYSTEM WAS DIRECTED NOT TO MEET OR SATISFY A PUBLIC NEED FOR IT BUT RATHER AND EXCLUSIVELY TO ALLOW ETPI TO EXPLOIT PLDT's PRESENT TELEPHONE SUBSCRIBERS.

III

RESPONDENT NTC LACKED OR EXCEEDED ITS JURISDICTION, AND/OR GRAVELY ABUSED ITS DISCRETION IN EXERCISING THE SAME, WHEN IT DECIDED ETPI'S SUBJECT APPLICATION WITHOUT RECITING THE FACTS AND THE LAW UPON WHICH IT BASED ITS SAID JUDGMENT BUT INSTEAD MERELY ADOPTED WORD FOR WORD VIRTUALLY EN TOTO ITS EARLIER DECISION IN A SIMILAR APPLICATION OF AN ENTIRELY DIFFERENT APPLICANT.

IV

THE NTC LACKED OR EXCEEDED ITS JURISDICTION AND/OR GRAVELY ABUSED ITS DISCRETION IN THE EXERCISE THEREOF WHEN IT COMPELLED PLDT IN ITS SUBJECT DECISION AND ORDER TO INTERCONNECT ITS TELEPHONE SYSTEM WITH ETPI'S PROPOSED IGS ALL TO THE END THAT THE LATTER MIGHT THEREBY ENGAGE ITSELF IN TELEPHONE SERVICES BY TAKING UNDUE ADVANTAGE OF PLDT'S PRESENT TELEPHONE SYSTEM AND OPERATION. (Petition, pp. 13-14)

The basic issue is whether or not the rendition of the assailed NTC decision and order was attended by grave abuse of discretion amounting to lack of jurisdiction on the part of the NTC.

There is merit in the petition.

1. Eastern filed its application for a CPCN to operate an IGF with the NTC on the basis of its franchise granted by law under R.A. 5002. It is undisputed that the proposed IGF is nothing else but an international telephone exchange. (OSG Comment, p. 13) It is an equipment that is a component or constitutive element of a voice or telephone system rather than a non-voice or data service. Since an IGF is useful only for a telephone system, NTC cannot validly grant Eastern the CPCN it seeks because of franchise limitations.

The specific rights and privileges granted to Eastern are recited in Section 1 of R.A. 5002 which reads in full:

Sec. 1. There is hereby granted to "The Eastern Extension Australasia and China Telegraph Company, Ltd." its successors and assigns, hereinafter referred to as the "Grantee" a franchise to land, construct, maintain and operate telecommunication systems by cable, or any other means now known to science or which in the future may be developed for the reception and transmission of messages between any point in the Philippines to points exterior thereto, including airplanes, airships or vessels even though such airplanes airships or vessels may be located within territorial limits of the Philippines. (Emphasis supplied)

It is clear from the foregoing that the privilege so granted by the legislature was for the construction, operation and maintenance of communications systems for the transmission of messages by cables or means other than telephone. This is a significant distinction from the legislative franchise in PLDT v. National Telecommunications, et al. (190 SCRA 717 [1990]) where the franchise of Express Telecommunications Co. specifically used the word "radiotelephony."

The respondents contend that the law does not make any distinction between voice and non-voice transmission of messages. Since a "message" is any written or oral communication or other transmitted information sent by messenger or by some other means (as by signals) and "gateway" is the point of entry and exit for inbound and outbound international messages (data as well as voice) the respondents argue that there is no question that Eastern is qualified to own and operate its own international gateway facility or telephone exchange for receiving had transmitting messages between any point in the Philippines to any exterior part thereto or abroad (OSG Comment, p. 14)

In the absence of any qualification or intention to the contrary, the technical, not the general or ordinary meaning of a word used in a statute should be adopted in the construction of the statute. (Agpalo, Statutory Construction 1986, p. 138) This is particularly true in this case. The word "message," as used in the franchise and in the telecommunication industry has a peculiar meaning when used with reference to communication systems. The literal or common meaning can not be applied to key words in a franchise for highly technical and scientifically advanced services so as to broaden a legislative grant beyond its plain and intended meaning.

We agree with PLDT's contention that no one "transmits" on the telephone his or her "message." Telephone technology precisely eliminates the intermediary role of a messenger (human or mechanical) by allowing the calling and the called parties, respectively, to directly communicate with one another. A party need not "transmit" any "message" through cable to be received and given to the other party. This procedure of sending data (the "message") by cable transmission is characteristic of a telegraph but not of a telephone system. Thus, when RA 5002 speaks of a "telecommunication (system) by cable . . . for the reception and transmission of message," it can only be referring to a record or data service such as a telegraph system.

It is not the product, effect or end result, nor the act of receiving and transmitting messages which is given a franchise. It is the system used, the facility established, and the entire network whose costs run into hundreds of millions of pesos which is given legislative approval. A radio-television company, a computer-network, a cable system, a postal system, a package and message delivery firm, and many other schemes for broadcasting and communicating messages, information, and entertainment are all engaged in the reception and transmission of messages. But to say that their franchises can be interpreted to include a telephone exchange system is to strain interpretation into incredulous limits.

Franchises are always interpreted strictly against the franchise holder, never liberally and certainly not in a strained and exaggerated manner. (Philippine Long Distance Telephone Co. v. National Telecommunications Commission, 190 SCRA 717 [1990]).

The legislative history of the law granting Eastern's franchise is most instructive and belies the arguments of Eastern.

Eastern is actually not the original grantee of the franchise under RA 5002. It acquired its franchise from Eastern Extension Australasia and China Telegraph Co., Ltd., a foreign corporation organized and existing under the laws of Great Britain which was engaged in international telecommunications in Manila since Spanish times. This company was given a concession for the construction, operation and maintenance of a submarine telegraph cable from Hongkong to Manila. On June 21, 1952, when the concession expired, RA 808 was approved granting a legislative franchise "to land, construct, maintain and operate at Manila in the Philippines a submarine telegraph cable connecting Manila with Hongkong."

On May 2, 1967, R.A. 808 was amended by R.A. 5002 by enlarging the scope of the franchise granting Eastern Extension Australasia a franchise to land, construct, maintain and operate telecommunications by cable or other means known to science or which in the future may be developed for the transmission of messages between any point in the Philippines to points exterior thereto.

On July 24, 1974, P.D. 484 was issued by President Ferdinand E. Marcos authorizing Eastern Extension Australasia to transfer and assign the franchise granted to it under R.A. 808, as amended by R.A. 5002 to the Eastern Telecommunications Philippines, Inc. (Commissioner of Internal Revenue v. Court of Tax Appeals, 195 SCRA 444 [1991])

The original legislative grant was a franchise for a submarine telegraph (not telephone) cable. The grantee upon whom Congress vested the franchise was a telegraph and not a telephone company. From 1952 until the franchise was assigned to Eastern and, in fact since Spanish times, it's predecessor never operated any telephone service. The assignment of the franchise contemplated only what the transfer could convey which is a telegraph system. And even from the time of the transfer in 1974, Eastern never operated a telephone service. Eastern has always been aware of the limits of its franchise and the exact nature of its operations.

The clear intention of the law granting the franchise cannot be disputed. If Congress had contemplated the use of telephone, the law would have stated so. Undeniably, telephone technology was already existing in 1952 when R.A. 808 was enacted. To construe the phrased "telecommunication system by cable or any other means now known to science or which in the future may be developed for the reception and transmission of messages" so as to include telephones is well-nigh preposterous. Indeed, telephones did not have to be discovered or developed. They were not for the future. They were already existing at that time. As held in De los Santos v. Mallare (87 Phil. 289 [1950]), the history of the times and state of things when the act was framed must be followed. Conditions of the things at the time of enactment of the law should be considered to determine the legislative intent. (Gomez Garcia v. Hipolito, et al., 2 Phil. 732 [1903]; United States v. De Guzman, 30 Phil. 416 [1915])

Eastern's franchise was intended from the beginning and has been interpreted to cover only record or data telecommunications services. This is bolstered by the fact that at present, Eastern is the holder of various CPCN's from the NTC to operate only non-voice telecommunications services.

2. The only opportunity when Eastern had anything to do with voice communications was in 1977 when President Marcos authorized it to be a correspondent of telephone administrations in Singapore, Taiwan and Hongkong. Eastern wrote Malacañang for approval and the President placed a marginal note on the letter telling Eastern to go ahead. Notwithstanding this authority given by President Marcos, the act of the President did not amend the legislative franchise and is of doubtful validity. The marginal note is certainly not in the exercise of the President's legislative power. It was never published and could not have amended or enlarged an act of Congress.

Eastern, meanwhile, capitalizes on this marginal note on its letter to show that it is also engaged in voice communication. It, therefore, asserts that PLDT is now estopped to question the franchise limitation of Eastern since PLDT entered into an agreement with Eastern involving international telephone service in 1978 (Letter-Agreement dated September 29, 1978, Exhibit "O," ETPI Comment, pp. 8-9)

This argument is specious.

The alleged assent of PLDT to Eastern's operation as a "voice correspondent" is contained in an agreement extracted from PLDT at a time when it could not have resisted such a Presidential imposition. PLDT never intended to voluntarily recognize the validity of Eastern's voice correspondentship. This is shown by the fact that after the former President had been removed from office, PLDT refused to implement the agreement. PLDT can not therefore be deemed in estoppel under these circumstances.

The fact that Eastern agreed "to limit itself to correspondent relationship for voice traffic" can not be taken to mean that Eastern may operate a telephone service now. Its franchise does not authorize it to do so. NTC Circular No. 3-06-88 dated March 16, 1988 provides that "no Certificate of Public Convenience (CPC) can be granted by this Commission to a person or entity who does not hold any valid franchise."

3. Significantly, in its July 29, 1988 answer to a request for admission and interrogatories in NTC Case No. 87-50, Eastern admitted that it does not and has never operated any telephone exchange or network in the Philippines and has no decision or order from any regulatory commission granting it a certificate of public convenience to operate a telephone exchange or network in this country.

This alone shows that Eastern was then fully aware of its franchise limitation that it can not operate a domestic telephone or telecommunications system.

Eastern, however, asserts that it is not asking for authority to install and operate a domestic telephone or telecommunications system. The international gateway facility it proposes to undertake is understood as a system which would mediate between the domestic telephone system of PLDT and the transmitting and carrying facilities of Eastern. The gateway facility will permit messages originating from a person using PLDT's domestic telephone system to enter the transmitting and carrying facilities of Eastern, as well as messages incoming from abroad through Eastern's carrying facilities to enter PLDT's domestic system.

Thus, there is a need to interconnect with PLDT's domestic telephone network as ordered by the NTC. Eastern's expounded services would be useless if it cannot mainly use the existing PLDT grid. Interconnection as the term denotes, contemplates or relates to the linkage of two existing telephone companies with one another in order to allow the subscribers of one system to access or reach the subscribers of the other operator.

Interconnection is proper only between two legitimate companies with valid legislative franchises and not between an international message transmission company and a legitimate telephone firm as in the case at bar. Eastern's franchise can not be strained or distorted to enable it to become a carrier's carrier. Certainly, an interconnection system requires a specific franchise.

While PLDT has franchises for both domestic and international telephone services, Eastern has none. The pretense that it does not need any to tap into an existing domestic telephone network is misleading. Unless it utilizes PLDT's domestic network, the gateway facility or telephone exchange of Eastern would be completely useless. This is the meaning of interconnection whether termed "interfacing" or some other name.

In the absence of legislative authority to operate a telephone system, it was therefore grave abuse of discretion for NTC to order Eastern to interconnect with PLDT.

4. Eastern had no use for a "gateway facility" in its many decades of operations in the Philippines. Only when it decided to go into the telephone business as an expansion of its "message transmission" business because of various hi-tech developments did it suddenly need a gateway facility and read into its franchise something which was never there .The use of gibberish and esoteric jargon and such high sounding technical terms as analog or digital levels, interfacing with broadband transmission, switching maintenance, traffic operations, network maintenance management, transmission center, etc. can not disguise the fact that a gateway facility is part of a telephone system and that Eastern wants to engage in combined international and substantially extensive domestic telephone services without any legislative authority.

The proposed gateway facility by interconnecting with PLDT's domestic telecommunications network will enable local subscribers to talk directly with users of telephones abroad. It is in effect a long distance telephone exchange system. Eastern will charge long distance telephone rates and collect from local subscribers who use its services. This is a far cry from its franchised business of being an international carrier of messages to and from its terminals or landing stations. It will be engaged in domestic services from the gateway or exchange to the local telephone user and international services from the gateway to the foreign country.

Eastern has no telephone system in the Philippines or anywhere else in the world. It does not have a single telephone subscriber. Yet, it has been authorized by NTC to open a telephone exchange connecting PLDT subscribers with telephone systems around the world.

5. In Commissioner of Internal Revenue v. Court of Tax Appeals, (supra), this Court accepted the submissions of Eastern that it is engaged exclusively in international communications and international commerce. We ruled that its legislative franchise was granted on the premise that its operations are international and what it has in the Philippines is a terminal or station only. Eastern argued and this Court agreed in a case involving domestic tax assessments that the company operates only a cable station or a terminal in the Philippines and does not fall under the citizenship requirements of the Constitution. We ruled that the Court "is not prepared to punish the respondent corporation which remained firm in not violating its franchise."

Eastern was firm in not violating its franchise when domestic tax assessments were in issue. Not so when it comes to expanding its business into an entirely different and fast-growing profitable field. It is now adopting an entirely new position. In big advertisements in all major newspapers around May 15, 1992, Eastern advertised as its first line of business, direct dial and cellular international telephone services. We see no reason why the Court should suddenly fall for specious and deceptive arguments and come out with findings and conclusions diametrically opposed to its earlier decision.

6. The main reason for our decision is legal. Eastern has no franchise. It must first go to Congress. An additional point, however, is that there is no urgent public need for the establishment of another IGF.

PLDT puts forth the argument that at present it has five (5) existing gateway facilities to meet the needs of the people but NTC nevertheless approved Eastern's application in the event that PLDT's operations might be suspended i.e. labor dispute, fortuitous event, technical causes etc.

In its order of July 16, 1990, the NTC states that:

. . . [W]ith PLDT's cut-cover of its Makati gateway facility it will have a total of 4575 international switch termination. The combined capacity of the new international gateway operators, namely Philcom and ETPI will only amount to 33% of PLDT's capacity. It is the Commission's position that in the event, therefore, that any of PLDT's gateway facilities become inoperative, relief can be provided by the gateway facilities of Philcom and the applicant. The possibility that any two of the gateway operator's facilities would fail at the same time is very remote. . . . (Emphasis supplied, page 12, Order Annex "B" of petition)

xxx xxx xxx

. . . The Commission is also convinced of the economic viability of another gateway operator and that authorizing applicant is not unnecessary and wasteful duplication. The grant to another operator of another international gateway would provide for excess capacity which will take care of any abnormal increase in the international traffic which can be expected with the trend in the economic activities in the country. . . . (Emphasis supplied; p. 13; Order, Annex "B" of petition).

The proposed combined facilities of applicants Eastern (NTC Case No. 87-149) which will be thirty-three percent (33%) of PLDT's capacity are intended to provide relief" in the event any of PLDT's gateway facilities become inoperative and to provide excess capacity to "take care of any abnormal increase in international traffic."

NTC's fear is more illusory than real. In PLDT's 63 years of existence, it could only point to one outage of consequence at the PLDT gateway which took place in November 1987. But this did not even totally disrupt PLTD's international operations.

We do not see how the common good may be served when there are other remedies available which are less costly and more expedient than constructing and maintaining a sixth gateway in a stand-by capacity which would function only in the extreme case that the other five (5) gateways may shutdown.

7. Finally, NTC's reliance on free competition in the industry is to allow a private purpose for gain to masquerade behind a noble policy against which nobody can dissent.

Citing the recent case of Philippine Long Distance Telephone Co. v. National Telecommunications, supra, that "neither PLDT nor any other public utility has a constitutional right to a monopoly position," PLDT has never claimed as a right the power to exclusively operate IGF's in the Philippines. In fact, Philippine Global Communications (PHILCOM) was granted a CPCN to operate another IGF in NTC Case No. 87-149 under Philcom's legislative franchise, R.A. 4167. (See Urgent Motion Reiterating Prayer for a Temporary Restraining Order, p. 2) But the indubitable fact is that PLDT has invested billions of pesos over decades of operating, maintaining and improving the country's telephone system.

Eastern had been in the Philippines long before petitioner PLDT was incorporated and commenced business. Eastern and PLDT existed peacefully together for decades because they had separate franchises for different and specific purposes. Only when Eastern tried to muscle into PLDT's turf did litigation arise. What Eastern is trying to accomplish is to ride piggy back on the existing infrastructure built and developed by PLDT. It is competing with PLDT's gateway facilities but in order to compete, it must interconnect with PLDT's domestic network. It will become what is known in the business as a carrier's carrier. This is even worse than what Justice Isagani A. Cruz characterized in Philippine Long Distance Telephone Co. v. National Telecommunications Commission (supra) through his story of the little red hen who found some rice but none of the barnyard animals would help her plant, water, harvest, and finally cook it.

PLDT has existing gateway facilities which are used by its own domestic telephone subscribers. The records do not show any urgency for another company, especially a non-franchised one, to operate a similar facility for exactly the same people without having spent a single centavo to build up the domestic system. The proposed international gateway will not add a single telephone unit to existing phones in the country. We fail to see how a non-franchised telephone system will improve telephone services in the Philippines through the proposed scheme. There will be a diversion of profits to Eastern, but no additional telephone anywhere and no improvement of services. Unless, like the proverbial camel in the desert poking its head into a tent, Eastern proposes to later expand into other profitable areas of the telephone business and starts installing its own phones. Eastern should first go to Congress, get its own franchise, and prove that it can really contribute to more efficient telephone services instead of merely riding piggy back on the most profitable aspect of another company's operations.

WHEREFORE, the petition is hereby GRANTED. The decision of the National Telecommunications Commission dated November 14, 1989 as well as the order dated July 16, 1990 are ANNULLED and SET ASIDE.

SO ORDERED.

Narvasa, C.J., Cruz, Bidin, Medialdea, Regalado, Davide, Jr., Nocon, Bellosillo and Melo, JJ., concur.

 

 

 

Separate Opinions

 

FELICIANO, J., dissenting:

I must record my dissent. In my view, the majority decision is profoundly flawed and can scarcely be contemplated without deep foreboding by those who believe in the basic policy principle of free competition rather than monopoly in the area of telecommunications so vital for economic and social development. In my view, and this is submitted with great respect and reluctance, the majority has uncritically embraced an eccentric interpretation urged by the PLDT, an interpretation with absolutely no legal or other basis, save PLDT's own bare assertion. This is commonly known as "boot-strapping" or self-levitation, something which the Court, in other contexts, has vigorously rejected. 1 The extraordinary interpretation peddled by the PLDT is in fact contradicted by PLDT's own legislative franchise, something overlooked by the majority. What must not be lost sight of is that PLDT's highly selective arguments are designed solely to frustrate the NTC's order to interconnect PLDT's domestic system with Eastern's proposed international gateway facility and thereby to protect and further expand PLDT's monopoly position in the Philippine telecommunication industry. In fact, PLDT seeks to overturn in whole or in part the landmark decision written by Mme. Justice Ameurfina M. Herrera for the Court less than two (2) years ago in Philippine Long Distance Telephone Co. v. National Telecommunications Commission, et al. 2 Moreover, PLDT in effect asks us to disregard the explicit provision in its own legislative franchise, which became law after the Herrera decision, authorizing the NTC to order PLDT to allow interconnection of its facilities, for local and international communications, with other telecommunications operators.

Private respondent Eastern Telecommunications Philippines, Inc. (Eastern) filed, on 16 July 1987, with the NTC an application for a Certificate of Public Convenience and Necessity (CPCN) to construct, maintain and operate an International Gateway Facility (IGF), which is estimated to cost US$5 Million. Eastern is a 60% Filipino owned corporation 3 organized under Philippine law and holder of a legislative franchise under R.A. No. 808, as amended by R.A. No. 5002, in relation to P.D. No. 489 granting the right and privilege to:

. . . land, construct, maintain and operate telecommunication systems by cable, or any other means now known to science or which in the future may be developed for the reception and transmission of messages between any point in the Philippines to points exterior thereto, including airplanes, airships or vessels even though such airplanes, airships or vessels may be located within territorial limits of the Philippines. (Emphasis supplied)

Eastern is successor to Eastern Extension Australasia and China Telegraph Company, a British company which had been in the Philippines since the Spanish colonial period. Together with other companies, Eastern invested in the Philippines US$25 Million in submarine cable and related facilities, and installed, owns, maintains and operates submarine cables between the Philippines and Hongkong-Japan, the Philippines and Taiwan, and the Philippines and Singapore.

We turn first to the scope of the franchise authority of Eastern. The contention of PLDT so precipitously embraced by the majority, appears to be that an IGF is inherently part of "a telephone system" since it is "useful only for a telephone system." Thus, PLDT contends that in effect Eastern is asking for a CPCN to establish a telephone system. But Eastern has no franchise to establish a telephone system. Hence, PLDT continues, Eastern cannot be granted the CPCN it seeks.

The IGF facility which NTC authorized Eastern to install and operate, is described in the following technical terms, in the NTC decision of 14 November 1989:

A. System Components

The international gateway shall consist of the international switching maintenance center (ISMC), international transmission center (ITMC), international network maintenance management center (INMC), and traffic operations center (TOC). The ISMC shall provide the switching operations including the maintenance thereof. The ITMC shall provide for the international links and the maintenance of the international circuits. The INMC shall see to it that traffic [is] routed via the best route possible. The management of the entire network is undertaken by the INMC. The traffic operations center shall be where the positions are situated. The TOC shall among others provide for operator-assisted international calls.

B. System Capability

1. The proposed ITMC shall be equipped to accommodate terminating circuits as well as transit facilities. It shall have the capability to interfere with domestic broadband transmission and switching networks operated by other carriers either the analog or digital levels. It will also provide cost effective manner of terminating processing and cross connecting digital capacities. It is designed to support transmission standards for ISDN channels.

2. The proposed ISMC shall be fully ISDN compatible switching system that will carry both broadband and voice band message, data and information switching. It will support various international telephone signalling equipment's, i.e., C5, C6, C7 as well as transparent circuit switching and data/records signalling protocols. It can also provide manual switching capability both for voice and non-voice services. It will also be equipped to act as a tandem switch providing the international switching interface to domestic service carriers.

3. The INMC shall be equipped with the latest in network management technology-that can perform automatic rerouting of circuits and quick mapping of capacities while ensuring a minimum degree of interruption.

4. The proposed gateway shall initially be capable of switching international telephone traffic to countries where applicant has international correspondents. 4

Drawing upon the glossary of epithetical jurisprudence, my learned brother Gutierrez, Jr., J. has disregarded the foregoing technical specifications as "gibberish and exotic jargon" and as "high sounding" and then proceeds to state that the above description "cannot disguise the fact that the gateway facility is part of a telephone system and that Eastern wants to engage in combined international and substantially extensive domestic telephone system without any legislative authority." 5 But epithets are no substitute either for rational argument or for technical specifications.

What I understand from the foregoing technical description by the NTC is that an IGF comprises equipment which makes possible the interfacing or interconnection between a domestic telecommunication system, like that of PLDT, and the cables or other equipment for transmitting electronically messages from points within the Philippines to points outside the Philippines, as well as messages originating from points outside to points inside the Philippines. The IGF constitutes a telecommunications exchange that in effect connects PLDT's subscribers or users with the subscribers and users of telecommunications systems located in different parts of the outside world. The IGF is not in itself a telephone or telecommunication system but it is not, in any case, necessary to try to determine what constitutes a telephone system.

In the first place, the existing legislative franchise of Eastern authorizes it to land, construct, maintain and operate "telecommunications systems" for the purpose of effecting "the reception and transmission of messages between any point in the Philippines to points exterior [to the Philippines]." "Telecommunication" is, in itself, a comprehensive term. Etymologically (tele [from the Greek] + communication), 6 it means simply communication over distance, making no limiting reference to the means or mode of such communication. In the second place, the legislative franchise of Eastern itself expressly elaborates that the "telecommunication systems" which Eastern may install, maintain and operate may be "by cable or any other means now known to science or which in the future may be developed." It is very difficult to craft language more comprehensive in scope than the foregoing phrase. Clearly, the species of method or the particular modality of reception and transmission of messages across the territorial boundaries of the Philippines, was of secondary importance to the legislative authority which granted the franchise. In the third place, there is no basis at all in Eastern's legislative franchise for a supposed distinction (which PLDT tries very hard to suggest) between voice and non-voice transmissions or messages and for a supposed limitation upon Eastern to transmit and receive only non-voice messages. The statute simply does not distinguish between voice or oral and data or non-voice messages or transmissions: the statutory text speaks simply of "messages." There is a basic and well-known scientific reason why the statute makes no such distinction. Voice messages do not travel via wires (cables whether submarine or underground or aerial) or any other media qua voice (i.e., as sound waves); voice transmissions, exactly like data (or non-voice) messages, travel in the form of electronic impulses through cables (or any other media) and are simply converted at the point of reception or destination into other forms visually or audibly perceptible by human being. 7

Fourthly, PLDT's own legislative franchise provides no support for the highly selective reading that PLDT would place upon the word "telephone system." 8 The portion of PLDT's legislative franchise defining the scope of PLDT's franchise authority does not even use the word "telephone" (except in referring to PLDT by name) nor the phrase "telephone system;" instead the oft-repeated and operative term is "telecommunications." It is not by accident that PLDT advertises itself in the broadcast media as a telecommunications company rather than as a telephone company. 9 Even the original 1928 legislative franchise of PLDT did not limit a "telephone company" to the transmission and reception of voice or oral messages. 10

Fifthly, and perhaps most importantly, Eastern in its application was not asking for authority to install and operate a domestic telephone or other telecommunications system, understood as a system for carrying messages from one point in the Philippines to another point also in the Philippines. Eastern was merely asking for authority to install and operate an international gateway facility, which would mediate between the domestic telephone system of PLDT and the transmitting and carrying facilities of Eastern. The gateway facility will permit messages originating from a person using PLDT's domestic telephone system to enter the transmitting and carrying facilities of Eastern, and as well messages incoming from abroad through Eastern's carrying facilities to enter PLDT's domestic system.

Clearly, there is no lack of legal authority on the part of Eastern to install, maintain and operate the IGF that it seeks. The point has been succinctly put by the Solicitor General in his Memorandum for public respondent NTC:

. . . Since a "message" is any "written or oral communication or other transmitted information sent by messenger or by some other means (as by signals)" (Webster's Third New International Dictionary, 1971 ed., p. 1418), and "gateway" is the point of entry and exit for inbound and outbound international messages (data as well as voice) (tsn., Jan. 12, 1989, pp. 96-97), there is no question that under its franchise, [Eastern] is qualified to own and operate its own international gateway facility for telephone messages between any point in the Philippines to any point exterior thereto, or abroad.

In other words, while [Eastern], due to franchise limitations, cannot operate a domestic telephone network, it is not legally disqualified from operating an international telephone exchange or gateway facility. Certainly, there is no law, rule or regulation which requires that an international gateway operator must at the same time be a domestic telephone operator.

In other countries, it is not unusual for ownership and operation of international gateways to be vested in the international operator, not the domestic operator. There, the international telephone exchange operator is not the domestic telephone operator. This is true, for example, in the United States, Japan, Canada, Australia and Thailand (TSN, September 29, 1989, pp. 7-9). 11 (Emphasis partly in the original and partly supplied)

The other issue proffered by PLDT are so peripheral that my brother Gutierrez, Jr. himself did not address them. From another point of view, it is important to note the conclusion reached in the 15-page decision of the NTC:

After careful consideration of all the evidence submitted in this case, pro and con, the Commission is convinced that applicant is legally, technically and financially capable to install, operate and maintain an international digital gateway facilities incorporating transmission, switching and traffic operations facilities. The Commission is also convinced that while there may be complexities involved in interconnection and in having three (3) operators of an international digital gateway, it finds out that another system is technically and economically feasible. The Commission is fully convinced that the advantages of installing, operating and maintaining another gateway by another carrier outweighs the disadvantages and that ultimately, public interest will be served and the growth, development and expansion of telecommunications services in the country will be accelerated. For lack of merit, the opposition of PLDT is hereby OVERRULED. 12 (Emphasis supplied)

Thus, the NTC did not only address the legal capability of, or franchise authority vested in Eastern; 13 it also explicitly considered the technical requirements of the IGF and acknowledged the technical and financial ability of Eastern to install, maintain and operate the facility. 14

In attacking the NTC decision, what PLDT was apparently really trying to say was that the NTC had failed to indicate the necessity or desirability of another international digital gateway facility, considering that PLDT itself already owns and operates three (3) IGFs. Implicitly, PLDT's contention appears to be that to grant Eastern's application for another facility would be to approve an unnecessary duplication of facilities. The NTC addressed this broad contention in the following manner:

As testified to by the applicant, the establishment by it of a new international digital gateway will complement existing as well as planned switching and transmission to provide continuity and security of inter-national service in the event of major facility failure. It will use the latest digital technology and incorporate the most modern very large scale integrated (VLSI) circuit technology which will result in a significant reduction in per termination installed capital costs. This will result in more efficient and less expensive switching, operational and maintenance costs thru benefiting both national carriers and telephone subscribers in the Philippines.

xxx xxx xxx

Applicant strongly advances that the Philippines will be the direct and principal beneficiary of [Eastern's] proposed gateway since the existing facilities will be enhanced and the role of the Philippines as a major telecommunications center for international traffic will be maintained. Since applicant is technically and financially capable of constructing, maintaining and operating international gateway; that its proposed gateway facility is technically and operationally feasible, and that PLDT by its acts and conduct appears to have [the] intention to take over the business of [Eastern], it is imperative to the stability and survival of (Eastern] as an international telecommunications carrier; that it be able to establish and operate its own international gateway. 15 (Emphasis supplied)

Moreover, in its 16 July 1990 Order, the NTC said:

As to the allegation that the decision did not consider PLDT's evidence, the same is inaccurate. The brief prepared by the Technical and Financial Staff of this Commission and the discussions held by the staff with the then Commissioner which were the basis of the conclusion/decision took into consideration the volumes of evidence presented by all parties. It also took into consideration the fact that with PLDT's cut-over of its Makati gateway facility it will have a total of 4575 international switch termination. The combined capacity of the new international gateway operators, namely Philcom and ETPI will only amount to 33% of PLDT's capacity. It is the Commission's position that in the event, therefore, that any of PLDT's gateway facilities become inoperative, relief can be provided by the gateway facilities of Philcom and the applicant. The possibility that any two of the gateway operator's facilities would fail at the same time is very remote. 16 (Emphasis supplied)

The above quoted NTC order makes clear that, whole PLDT complains strenuously about having to compete with Eastern and Philippine Global Communications (the other two international gateway operators granted authority by the NTC), in fact NTC is very protective of PLDT. For the approved combined capacity of the gateway facilities of Philcom and Eastern will amount to only one-third (1/3) of PLDT's existing gateway capacity. PLDT was obviously not satisfied with two-thirds (2/3) of the international end of telecommunications business.

The record shows that additional compelling considerations support the Decision and Order of the NTC which would make possible the establishment of alternative international gateway facilities that is, non-PLDT-owned facilities. During the hearings before the NTC, it was brought out that PLDT had in the past suffered a major facility breakdown, resulting in the disruption of long distance telephone service between the Philippines and the outside world. On 9 November 1987, for instance, such a breakdown occurred with the result that 85% of the country's telecommunications to and from the outside world were out of commission for about 17 to 18 hours. Again, on 21 December 1987, a nationwide strike paralyzed PLDT operations, threatening the security, and reliability of international communications between the Philippines and the rest of' the world. 17 Undeniably, the availability of alternative gateway facilities when interconnected with existing local telephone networks (including but not limited to PLDT's own network and gateway), will substantially increase the reliability and continuity of international telecommunications service in the Philippines.

Still another consideration, fully reflected in the record of this case, supports the decision reached by the NTC. PLDT, is the words of the Solicitor General, "appear[ed] to have abused its monopoly over the country's only gateway facility to the detriment of public service." 18 In 1988, PLDT unilaterally stopped collect-call service from the Philippines to Hongkong in an attempt to pressure Cable Wireless Hongkong (the telephone administration in Hongkong) to appoint PLDT as its Philippine correspondent, to the prejudice, in particular, of families and friends of Philippine overseas workers in Hongkong who rely substantially on such service. The NTC had to order PLDT to restore the collect-call service through a Memorandum dated 13 April 1988. 19 This utilization of its monopoly position was delicately described as "business leverage" by PLDT First Vice President Ramon Santiago in his testimony during the hearings. 20

The record also shows that PLDT exercised its power or "leverage" based on its gateway monopoly position to compel Eastern's telephone correspondents in Singapore and Taiwan to accede to dual
correspondentships. 21

We turn to the issue of interconnection between PLDT's domestic telephone system or network and Eastern's IGF. PLDT strenuously contends that interconnection is proper only between two (2) discrete telephone systems; this argument makes clear why PLDT contended so arduously that Eastern was not a telephone system and therefore not entitled to apply for interconnection with PLDT's system and that NTC was not authorized to require such interconnection between PLDT and Eastern. PLDT went on to contend that interconnection with Eastern "was not directed to meet or satisfy a public need for it but rather, and exclusively, to allow [Eastern] to exploit PLDT's present telephone
subscribers." 22

In the first place, PLDT's contention collides frontally with Section 13 of PLDT's own legislative franchise. Section 13 of R.A. No. 7082 reads:

Sec. 13 The National Telecommunications Commission is hereby authorized, after due notice and hearing, to order the grantee [PLDT] to allow interconnection of its facilities, for both local and international, with other duly authorized telecommunications operators and conversely of the former with the latter under such terms and conditions as the Commission may deem proper and reasonable in the interest of public good. (Emphasis supplied)

In the second place, there is no physical or technical or economic basis for restricting the notion of interconnection to the linking up of two (2) separate telephone systems. Section 13 of PLDT's own franchise makes clear that interconnection may, and in fact does, relate to connecting or linking up a telephone or other telecommunications system and telecommunications facility for transmitting messages from the Philippines to points outside the Philippines and vice versa. The NTC founds as a fact that interconnection can be physically and technically effected between a gateway facility operated by an international carrier and a telephone or other telecommunications system operated by another, local, carrier. 23 Eastern pointed out that its IGF can be and is required to be interconnected not only with the PLDT domestic telephone system but also with other domestic telecommunications systems.

In the third place, PLDT, exhibiting extraordinary proprietary feelings in respect of people using its telephone system, managed to ignore that international calls from the outside world will be transmitted into the Philippines through Eastern's cable system and IGF and fed into PLDT's and other national domestic telephone systems. The number or frequency of calls originating from outside the Philippines as compared with the frequency of calls originating within the Philippines, does not appear in the record. Considering, however, among other things, the number of Filipinos living or working overseas in different continents, and the growing business and financial relations between Philippine enterprises and international companies, international calls from the outside world may well be at least as heavy in volume and might in fact be or become heavier, than those originating from the Philippines. In other words, there may be expected reciprocal flows in a higher aggregate volume of international traffic and more efficient service, at more moderate cost, should come about with the interconnection required by the NTC.

In Philippine Long Distance Telephone Company v. National Telecommunications Company, et al., 24 PLDT made comparable argument in resisting an NTC interconnection order. In overruling these objections, the majority of the Court, speaking through Melencio-Herrera, J., said:

. . . Such regulation of the use and ownership of telecommunications systems is in the exercise of the plenary police power of the State for the promotion of the general welfare. The 1987 Constitution recognizes the existence of that power when it provides:

Sec. 6. The use of property bears a social function, and all economic agents shall contribute to the common good. Individuals and private groups, including corporations, cooperatives, and similar collective organizations, shall have the right to own, establish, and operate economic enterprises, subject to the duty of the State to promote distributive justice and to intervene when the common good so demands (Article XII).

The interconnection which has been required of PLDT is a form of "intervention" with property rights dictated by "the objective of government to promote the rapid expansion of telecommunications services in all areas of the Philippines, . . . to maximize the use of telecommunications facilities available, . . . in recognition of the vital role of communications in nation building . . . and to ensure that all users of the public telecommunications service have access to all other users of the service wherever they may be within the Philippines at an acceptable standard of service and at reasonable cost" (DOTC Circular No. 90-248). Undoubtedly, the encompassing objective is the common good. The NTC, as the regulatory agency of the State, merely exercised its delegated authority to regulate the use of telecommunications networks when it decreed interconnection.

xxx xxx xxx

Department of Transportation and Communication (DOTC) Circular No. 87-188, issued in 1987, also decrees:

12. All public communications carriers shall interconnect their facilities pursuant to comparatively efficient interconnection (CEI) as defined by the NTC in the interest of economic
efficiency
. 25 (Emphasis supplied)

It is important to note that Eastern, contrary to PLDT's egregious pleading, does not seek, nor has it been allowed by NTC, a "free ride" on PLDT'S (domestic) telephone network. The IGF will be paid for by Eastern itself. Revenues derived from international calls originating from, or destined to, a subscriber in PLDT's telephone network are required to be shared by Eastern with PLDT in proportions to be negotiated and agreed upon between PLDT and Eastern with the approval NTC. There is, in particular, no "appropriation" of property of the PLDT without payment of just or reasonable compensation.

It is also appropriate to note, along with my brother Gutierrez, Jr., J., that the other non-PLDT IGF which has been approved by the NTC, the Philippine Global Communications Company, Inc. (Philglobcom) gateway facility, has in fact been installed, interconnected with PLDT's domestic telephone network and is presently in operation. We must assume, therefore, that not only was interconnection found physically and technically feasible, but also that an economically acceptable sharing of revenues between PLDT on one hand and Philglobcom on the other, was in fact reached and is being implemented. The majority opinion, curiously, does not assail the legislative franchise authority of Philglobcom, but, however, fails to point to any relevant distinction between the Philglobcom franchise authority and that of Eastern. 26

Through the egregious interpretation urged by PLDT and, in some measure not yet fully clear, unfortunately adopted by the majority in the instant case, PLDT seeks to monopolize the external transmission and reception of telecommunications messages, i.e., the sending and receiving of such messages across the boundaries of the Philippines. The argument made by PLDT, when adopted so unfortunately by the majority of this Court, will result in local users of PLDT telephones having no choice but to go to PLDT even for the external portion of international telecommunications. Presumably, PLDT cannot object if its subscribers were to walk to offices or branches of Eastern and there to make direct telephone calls to countries outside the Philippines. Yet PLDT, would prevent its own subscribers from using any IGF and facilities for transmission and reception of international messages, except those owned by PLDT. PLDT is here treating subscribers as its proprietary assets to be "exploited" 27 by PLDT alone, rather than as customers to be served in the manner that a public utility is supposed to serve the public. Both local subscribers of PLDT or any other domestic telephone system, as well as callers from across the oceans, should be accorded a choice. The fundamental point is that customers' choice and competition among carriers are essential if reasonable prices and efficient and satisfactory service are to be maintained and the public's needs adequately served.

For all the foregoing, I vote to dismiss the petition for certiorari for lack of merit.

Padilla, Griño-Aquino and Romero, JJ., concur.

 

Separate Opinions

FELICIANO, J., dissenting:

I must record my dissent. In my view, the majority decision is profoundly flawed and can scarcely be contemplated without deep foreboding by those who believe in the basic policy principle of free competition rather than monopoly in the area of telecommunications so vital for economic and social development. In my view, and this is submitted with great respect and reluctance, the majority has uncritically embraced an eccentric interpretation urged by the PLDT, an interpretation with absolutely no legal or other basis, save PLDT's own bare assertion. This is commonly known as "boot-strapping" or self-levitation, something which the Court, in other contexts, has vigorously rejected. 1 The extraordinary interpretation peddled by the PLDT is in fact contradicted by PLDT's own legislative franchise, something overlooked by the majority. What must not be lost sight of is that PLDT's highly selective arguments are designed solely to frustrate the NTC's order to interconnect PLDT's domestic system with Eastern's proposed international gateway facility and thereby to protect and further expand PLDT's monopoly position in the Philippine telecommunication industry. In fact, PLDT seeks to overturn in whole or in part the landmark decision written by Mme. Justice Ameurfina M. Herrera for the Court less than two (2) years ago in Philippine Long Distance Telephone Co. v. National Telecommunications Commission, et al. 2 Moreover, PLDT in effect asks us to disregard the explicit provision in its own legislative franchise, which became law after the Herrera decision, authorizing the NTC to order PLDT to allow interconnection of its facilities, for local and international communications, with other telecommunications operators.

Private respondent Eastern Telecommunications Philippines, Inc. (Eastern) filed, on 16 July 1987, with the NTC an application for a Certificate of Public Convenience and Necessity (CPCN) to construct, maintain and operate an International Gateway Facility (IGF), which is estimated to cost US$5 Million. Eastern is a 60% Filipino owned corporation 3 organized under Philippine law and holder of a legislative franchise under R.A. No. 808, as amended by R.A. No. 5002, in relation to P.D. No. 489 granting the right and privilege to:

. . . land, construct, maintain and operate telecommunication systems by cable, or any other means now known to science or which in the future may be developed for the reception and transmission of messages between any point in the Philippines to points exterior thereto, including airplanes, airships or vessels even though such airplanes, airships or vessels may be located within territorial limits of the Philippines. (Emphasis supplied)

Eastern is successor to Eastern Extension Australasia and China Telegraph Company, a British company which had been in the Philippines since the Spanish colonial period. Together with other companies, Eastern invested in the Philippines US$25 Million in submarine cable and related facilities, and installed, owns, maintains and operates submarine cables between the Philippines and Hongkong-Japan, the Philippines and Taiwan, and the Philippines and Singapore.

We turn first to the scope of the franchise authority of Eastern. The contention of PLDT so precipitously embraced by the majority, appears to be that an IGF is inherently part of "a telephone system" since it is "useful only for a telephone system." Thus, PLDT contends that in effect Eastern is asking for a CPCN to establish a telephone system. But Eastern has no franchise to establish a telephone system. Hence, PLDT continues, Eastern cannot be granted the CPCN it seeks.

The IGF facility which NTC authorized Eastern to install and operate, is described in the following technical terms, in the NTC decision of 14 November 1989:

A. System Components

The international gateway shall consist of the international switching maintenance center (ISMC), international transmission center (ITMC), international network maintenance management center (INMC), and traffic operations center (TOC). The ISMC shall provide the switching operations including the maintenance thereof. The ITMC shall provide for the international links and the maintenance of the international circuits. The INMC shall see to it that traffic [is] routed via the best route possible. The management of the entire network is undertaken by the INMC. The traffic operations center shall be where the positions are situated. The TOC shall among others provide for operator-assisted international calls.

B. System Capability

1. The proposed ITMC shall be equipped to accommodate terminating circuits as well as transit facilities. It shall have the capability to interfere with domestic broadband transmission and switching networks operated by other carriers either the analog or digital levels. It will also provide cost effective manner of terminating processing and cross connecting digital capacities. It is designed to support transmission standards for ISDN channels.

2. The proposed ISMC shall be fully ISDN compatible switching system that will carry both broadband and voice band message, data and information switching. It will support various international telephone signalling equipment's, i.e., C5, C6, C7 as well as transparent circuit switching and data/records signalling protocols. It can also provide manual switching capability both for voice and non-voice services. It will also be equipped to act as a tandem switch providing the international switching interface to domestic service carriers.

3. The INMC shall be equipped with the latest in network management technology-that can perform automatic rerouting of circuits and quick mapping of capacities while ensuring a minimum degree of interruption.

4. The proposed gateway shall initially be capable of switching international telephone traffic to countries where applicant has international correspondents. 4

Drawing upon the glossary of epithetical jurisprudence, my learned brother Gutierrez, Jr., J. has disregarded the foregoing technical specifications as "gibberish and exotic jargon" and as "high sounding" and then proceeds to state that the above description "cannot disguise the fact that the gateway facility is part of a telephone system and that Eastern wants to engage in combined international and substantially extensive domestic telephone system without any legislative authority." 5 But epithets are no substitute either for rational argument or for technical specifications.

What I understand from the foregoing technical description by the NTC is that an IGF comprises equipment which makes possible the interfacing or interconnection between a domestic telecommunication system, like that of PLDT, and the cables or other equipment for transmitting electronically messages from points within the Philippines to points outside the Philippines, as well as messages originating from points outside to points inside the Philippines. The IGF constitutes a telecommunications exchange that in effect connects PLDT's subscribers or users with the subscribers and users of telecommunications systems located in different parts of the outside world. The IGF is not in itself a telephone or telecommunication system but it is not, in any case, necessary to try to determine what constitutes a telephone system.

In the first place, the existing legislative franchise of Eastern authorizes it to land, construct, maintain and operate "telecommunications systems" for the purpose of effecting "the reception and transmission of messages between any point in the Philippines to points exterior [to the Philippines]." "Telecommunication" is, in itself, a comprehensive term. Etymologically (tele [from the Greek] + communication), 6 it means simply communication over distance, making no limiting reference to the means or mode of such communication. In the second place, the legislative franchise of Eastern itself expressly elaborates that the "telecommunication systems" which Eastern may install, maintain and operate may be "by cable or any other means now known to science or which in the future may be developed." It is very difficult to craft language more comprehensive in scope than the foregoing phrase. Clearly, the species of method or the particular modality of reception and transmission of messages across the territorial boundaries of the Philippines, was of secondary importance to the legislative authority which granted the franchise. In the third place, there is no basis at all in Eastern's legislative franchise for a supposed distinction (which PLDT tries very hard to suggest) between voice and non-voice transmissions or messages and for a supposed limitation upon Eastern to transmit and receive only non-voice messages. The statute simply does not distinguish between voice or oral and data or non-voice messages or transmissions: the statutory text speaks simply of "messages." There is a basic and well-known scientific reason why the statute makes no such distinction. Voice messages do not travel via wires (cables whether submarine or underground or aerial) or any other media qua voice (i.e., as sound waves); voice transmissions, exactly like data (or non-voice) messages, travel in the form of electronic impulses through cables (or any other media) and are simply converted at the point of reception or destination into other forms visually or audibly perceptible by human being. 7

Fourthly, PLDT's own legislative franchise provides no support for the highly selective reading that PLDT would place upon the word "telephone system." 8 The portion of PLDT's legislative franchise defining the scope of PLDT's franchise authority does not even use the word "telephone" (except in referring to PLDT by name) nor the phrase "telephone system;" instead the oft-repeated and operative term is "telecommunications." It is not by accident that PLDT advertises itself in the broadcast media as a telecommunications company rather than as a telephone company. 9 Even the original 1928 legislative franchise of PLDT did not limit a "telephone company" to the transmission and reception of voice or oral messages. 10

Fifthly, and perhaps most importantly, Eastern in its application was not asking for authority to install and operate a domestic telephone or other telecommunications system, understood as a system for carrying messages from one point in the Philippines to another point also in the Philippines. Eastern was merely asking for authority to install and operate an international gateway facility, which would mediate between the domestic telephone system of PLDT and the transmitting and carrying facilities of Eastern. The gateway facility will permit messages originating from a person using PLDT's domestic telephone system to enter the transmitting and carrying facilities of Eastern, and as well messages incoming from abroad through Eastern's carrying facilities to enter PLDT's domestic system.

Clearly, there is no lack of legal authority on the part of Eastern to install, maintain and operate the IGF that it seeks. The point has been succinctly put by the Solicitor General in his Memorandum for public respondent NTC:

. . . Since a "message" is any "written or oral communication or other transmitted information sent by messenger or by some other means (as by signals)" (Webster's Third New International Dictionary, 1971 ed., p. 1418), and "gateway" is the point of entry and exit for inbound and outbound international messages (data as well as voice) (tsn., Jan. 12, 1989, pp. 96-97), there is no question that under its franchise, [Eastern] is qualified to own and operate its own international gateway facility for telephone messages between any point in the Philippines to any point exterior thereto, or abroad.

In other words, while [Eastern], due to franchise limitations, cannot operate a domestic telephone network, it is not legally disqualified from operating an international telephone exchange or gateway facility. Certainly, there is no law, rule or regulation which requires that an international gateway operator must at the same time be a domestic telephone operator.

In other countries, it is not unusual for ownership and operation of international gateways to be vested in the international operator, not the domestic operator. There, the international telephone exchange operator is not the domestic telephone operator. This is true, for example, in the United States, Japan, Canada, Australia and Thailand (TSN, September 29, 1989, pp. 7-9). 11 (Emphasis partly in the original and partly supplied)

The other issue proffered by PLDT are so peripheral that my brother Gutierrez, Jr. himself did not address them. From another point of view, it is important to note the conclusion reached in the 15-page decision of the NTC:

After careful consideration of all the evidence submitted in this case, pro and con, the Commission is convinced that applicant is legally, technically and financially capable to install, operate and maintain an international digital gateway facilities incorporating transmission, switching and traffic operations facilities. The Commission is also convinced that while there may be complexities involved in interconnection and in having three (3) operators of an international digital gateway, it finds out that another system is technically and economically feasible. The Commission is fully convinced that the advantages of installing, operating and maintaining another gateway by another carrier outweighs the disadvantages and that ultimately, public interest will be served and the growth, development and expansion of telecommunications services in the country will be accelerated. For lack of merit, the opposition of PLDT is hereby OVERRULED. 12 (Emphasis supplied)

Thus, the NTC did not only address the legal capability of, or franchise authority vested in Eastern; 13 it also explicitly considered the technical requirements of the IGF and acknowledged the technical and financial ability of Eastern to install, maintain and operate the facility. 14

In attacking the NTC decision, what PLDT was apparently really trying to say was that the NTC had failed to indicate the necessity or desirability of another international digital gateway facility, considering that PLDT itself already owns and operates three (3) IGFs. Implicitly, PLDT's contention appears to be that to grant Eastern's application for another facility would be to approve an unnecessary duplication of facilities. The NTC addressed this broad contention in the following manner:

As testified to by the applicant, the establishment by it of a new international digital gateway will complement existing as well as planned switching and transmission to provide continuity and security of inter-national service in the event of major facility failure. It will use the latest digital technology and incorporate the most modern very large scale integrated (VLSI) circuit technology which will result in a significant reduction in per termination installed capital costs. This will result in more efficient and less expensive switching, operational and maintenance costs thru benefiting both national carriers and telephone subscribers in the Philippines.

xxx xxx xxx

Applicant strongly advances that the Philippines will be the direct and principal beneficiary of [Eastern's] proposed gateway since the existing facilities will be enhanced and the role of the Philippines as a major telecommunications center for international traffic will be maintained. Since applicant is technically and financially capable of constructing, maintaining and operating international gateway; that its proposed gateway facility is technically and operationally feasible, and that PLDT by its acts and conduct appears to have [the] intention to take over the business of [Eastern], it is imperative to the stability and survival of (Eastern] as an international telecommunications carrier; that it be able to establish and operate its own international gateway. 15 (Emphasis supplied)

Moreover, in its 16 July 1990 Order, the NTC said:

As to the allegation that the decision did not consider PLDT's evidence, the same is inaccurate. The brief prepared by the Technical and Financial Staff of this Commission and the discussions held by the staff with the then Commissioner which were the basis of the conclusion/decision took into consideration the volumes of evidence presented by all parties. It also took into consideration the fact that with PLDT's cut-over of its Makati gateway facility it will have a total of 4575 international switch termination. The combined capacity of the new international gateway operators, namely Philcom and ETPI will only amount to 33% of PLDT's capacity. It is the Commission's position that in the event, therefore, that any of PLDT's gateway facilities become inoperative, relief can be provided by the gateway facilities of Philcom and the applicant. The possibility that any two of the gateway operator's facilities would fail at the same time is very remote. 16 (Emphasis supplied)

The above quoted NTC order makes clear that, whole PLDT complains strenuously about having to compete with Eastern and Philippine Global Communications (the other two international gateway operators granted authority by the NTC), in fact NTC is very protective of PLDT. For the approved combined capacity of the gateway facilities of Philcom and Eastern will amount to only one-third (1/3) of PLDT's existing gateway capacity. PLDT was obviously not satisfied with two-thirds (2/3) of the international end of telecommunications business.

The record shows that additional compelling considerations support the Decision and Order of the NTC which would make possible the establishment of alternative international gateway facilities that is, non-PLDT-owned facilities. During the hearings before the NTC, it was brought out that PLDT had in the past suffered a major facility breakdown, resulting in the disruption of long distance telephone service between the Philippines and the outside world. On 9 November 1987, for instance, such a breakdown occurred with the result that 85% of the country's telecommunications to and from the outside world were out of commission for about 17 to 18 hours. Again, on 21 December 1987, a nationwide strike paralyzed PLDT operations, threatening the security, and reliability of international communications between the Philippines and the rest of' the world. 17 Undeniably, the availability of alternative gateway facilities when interconnected with existing local telephone networks (including but not limited to PLDT's own network and gateway), will substantially increase the reliability and continuity of international telecommunications service in the Philippines.

Still another consideration, fully reflected in the record of this case, supports the decision reached by the NTC. PLDT, is the words of the Solicitor General, "appear[ed] to have abused its monopoly over the country's only gateway facility to the detriment of public service." 18 In 1988, PLDT unilaterally stopped collect-call service from the Philippines to Hongkong in an attempt to pressure Cable Wireless Hongkong (the telephone administration in Hongkong) to appoint PLDT as its Philippine correspondent, to the prejudice, in particular, of families and friends of Philippine overseas workers in Hongkong who rely substantially on such service. The NTC had to order PLDT to restore the collect-call service through a Memorandum dated 13 April 1988. 19 This utilization of its monopoly position was delicately described as "business leverage" by PLDT First Vice President Ramon Santiago in his testimony during the hearings. 20

The record also shows that PLDT exercised its power or "leverage" based on its gateway monopoly position to compel Eastern's telephone correspondents in Singapore and Taiwan to accede to dual
correspondentships. 21

We turn to the issue of interconnection between PLDT's domestic telephone system or network and Eastern's IGF. PLDT strenuously contends that interconnection is proper only between two (2) discrete telephone systems; this argument makes clear why PLDT contended so arduously that Eastern was not a telephone system and therefore not entitled to apply for interconnection with PLDT's system and that NTC was not authorized to require such interconnection between PLDT and Eastern. PLDT went on to contend that interconnection with Eastern "was not directed to meet or satisfy a public need for it but rather, and exclusively, to allow [Eastern] to exploit PLDT's present telephone
subscribers." 22

In the first place, PLDT's contention collides frontally with Section 13 of PLDT's own legislative franchise. Section 13 of R.A. No. 7082 reads:

Sec. 13 The National Telecommunications Commission is hereby authorized, after due notice and hearing, to order the grantee [PLDT] to allow interconnection of its facilities, for both local and international, with other duly authorized telecommunications operators and conversely of the former with the latter under such terms and conditions as the Commission may deem proper and reasonable in the interest of public good. (Emphasis supplied)

In the second place, there is no physical or technical or economic basis for restricting the notion of interconnection to the linking up of two (2) separate telephone systems. Section 13 of PLDT's own franchise makes clear that interconnection may, and in fact does, relate to connecting or linking up a telephone or other telecommunications system and telecommunications facility for transmitting messages from the Philippines to points outside the Philippines and vice versa. The NTC founds as a fact that interconnection can be physically and technically effected between a gateway facility operated by an international carrier and a telephone or other telecommunications system operated by another, local, carrier. 23 Eastern pointed out that its IGF can be and is required to be interconnected not only with the PLDT domestic telephone system but also with other domestic telecommunications systems.

In the third place, PLDT, exhibiting extraordinary proprietary feelings in respect of people using its telephone system, managed to ignore that international calls from the outside world will be transmitted into the Philippines through Eastern's cable system and IGF and fed into PLDT's and other national domestic telephone systems. The number or frequency of calls originating from outside the Philippines as compared with the frequency of calls originating within the Philippines, does not appear in the record. Considering, however, among other things, the number of Filipinos living or working overseas in different continents, and the growing business and financial relations between Philippine enterprises and international companies, international calls from the outside world may well be at least as heavy in volume and might in fact be or become heavier, than those originating from the Philippines. In other words, there may be expected reciprocal flows in a higher aggregate volume of international traffic and more efficient service, at more moderate cost, should come about with the interconnection required by the NTC.

In Philippine Long Distance Telephone Company v. National Telecommunications Company, et al., 24 PLDT made comparable argument in resisting an NTC interconnection order. In overruling these objections, the majority of the Court, speaking through Melencio-Herrera, J., said:

. . . Such regulation of the use and ownership of telecommunications systems is in the exercise of the plenary police power of the State for the promotion of the general welfare. The 1987 Constitution recognizes the existence of that power when it provides:

Sec. 6. The use of property bears a social function, and all economic agents shall contribute to the common good. Individuals and private groups, including corporations, cooperatives, and similar collective organizations, shall have the right to own, establish, and operate economic enterprises, subject to the duty of the State to promote distributive justice and to intervene when the common good so demands (Article XII).

The interconnection which has been required of PLDT is a form of "intervention" with property rights dictated by "the objective of government to promote the rapid expansion of telecommunications services in all areas of the Philippines, . . . to maximize the use of telecommunications facilities available, . . . in recognition of the vital role of communications in nation building . . . and to ensure that all users of the public telecommunications service have access to all other users of the service wherever they may be within the Philippines at an acceptable standard of service and at reasonable cost" (DOTC Circular No. 90-248). Undoubtedly, the encompassing objective is the common good. The NTC, as the regulatory agency of the State, merely exercised its delegated authority to regulate the use of telecommunications networks when it decreed interconnection.

xxx xxx xxx

Department of Transportation and Communication (DOTC) Circular No. 87-188, issued in 1987, also decrees:

12. All public communications carriers shall interconnect their facilities pursuant to comparatively efficient interconnection (CEI) as defined by the NTC in the interest of economic
efficiency
. 25 (Emphasis supplied)

It is important to note that Eastern, contrary to PLDT's egregious pleading, does not seek, nor has it been allowed by NTC, a "free ride" on PLDT'S (domestic) telephone network. The IGF will be paid for by Eastern itself. Revenues derived from international calls originating from, or destined to, a subscriber in PLDT's telephone network are required to be shared by Eastern with PLDT in proportions to be negotiated and agreed upon between PLDT and Eastern with the approval NTC. There is, in particular, no "appropriation" of property of the PLDT without payment of just or reasonable compensation.

It is also appropriate to note, along with my brother Gutierrez, Jr., J., that the other non-PLDT IGF which has been approved by the NTC, the Philippine Global Communications Company, Inc. (Philglobcom) gateway facility, has in fact been installed, interconnected with PLDT's domestic telephone network and is presently in operation. We must assume, therefore, that not only was interconnection found physically and technically feasible, but also that an economically acceptable sharing of revenues between PLDT on one hand and Philglobcom on the other, was in fact reached and is being implemented. The majority opinion, curiously, does not assail the legislative franchise authority of Philglobcom, but, however, fails to point to any relevant distinction between the Philglobcom franchise authority and that of Eastern. 26

Through the egregious interpretation urged by PLDT and, in some measure not yet fully clear, unfortunately adopted by the majority in the instant case, PLDT seeks to monopolize the external transmission and reception of telecommunications messages, i.e., the sending and receiving of such messages across the boundaries of the Philippines. The argument made by PLDT, when adopted so unfortunately by the majority of this Court, will result in local users of PLDT telephones having no choice but to go to PLDT even for the external portion of international telecommunications. Presumably, PLDT cannot object if its subscribers were to walk to offices or branches of Eastern and there to make direct telephone calls to countries outside the Philippines. Yet PLDT, would prevent its own subscribers from using any IGF and facilities for transmission and reception of international messages, except those owned by PLDT. PLDT is here treating subscribers as its proprietary assets to be "exploited" 27 by PLDT alone, rather than as customers to be served in the manner that a public utility is supposed to serve the public. Both local subscribers of PLDT or any other domestic telephone system, as well as callers from across the oceans, should be accorded a choice. The fundamental point is that customers' choice and competition among carriers are essential if reasonable prices and efficient and satisfactory service are to be maintained and the public's needs adequately served.

For all the foregoing, I vote to dismiss the petition for certiorari for lack of merit.

Padilla, Griño-Aquino and Romero, JJ., concur.

Footnotes

FELICIANO, J., dissenting:

1 Republic v. Court of Appeals, 182 SCRA 290 (1990); Tai Tong Chuache and Co. v. Insurance Commission, 158 SCRA 366 (1988); Lagasca v. De Vera, 79 Phil. 376 (1947); People v. Quebral, 68 Phil. 564 (1939).

2 190 SCRA 717 (1990).

3 The shares registered in the name of Philippine citizens have been under sequestration by the Government since 1586. It is immaterial for present purpose whether the registered owners or the Philippine Government are finally held to be entitled to such shares of Eastern stock.

4 Rollo, pp. 40-42.

5 Opinion, p. 19.

6 Please see Webster's Third New International Dictionary of the English Language (Merriam-Webster; 1986), p. 2349.

7 See "telephone," 21 Encyclopedia Britanica, pp. 774, 778 and 780 [1969 ed.]; 26 Encyclopedia Americana, pp. 374-375 [1954, ed.].

8 Section 1 of PLDT's legislative franchise, Act No. 3436, as consolidated and last amended by R.A. No. 7082 [which lapsed into law without the President's signature on 3 August 1991], reads as follows:

Sec. 1. Subject to the provisions of the Constitution, the Philippine Long Distance Telephone Company (PLDT), its successors or assigns, and hereunder referred to as the grantee, is hereby granted the right, privilege, and authority to carry on the business of providing basic and enhanced telecommunications services in and between provinces, cities and municipalities in the Philippines and between the Philippines and other countries and territories and, for this purpose, to establish, operate, manage, lease, maintain and purchase telecommunications systems, including mobile, cellular and wired or wireless telecommunications systems, fiber optics, multi-channel transmission distribution systems, satellite transmit and receive systems, and other telecommunications systems and their value-added services such as but not limited to transmission of voice, data, facsimile, control signals, audio and video, information service bureau and all other telecommunications systems technologies as are at present available or be made available through technical advances or innovations in the future, or construct, acquire, lease and operate or manage transmitting and receiving stations and switching stations, both for local and international services, lines, cables or systems, as is or are, convenient or essential to efficiently carry out the purposes of this franchise: Provided, however, That the grantee, its successors or assigns shall not, without the permission of the National Telecommunications Commission or its legal successor first had, install, maintain, operate, purchase or lease such stations, lines, cables or systems. (Emphasis supplied)

9 Note also the following Sections of PLDT's present franchise:

Sec. 3. The rates for the telecommunications services which are regulated under the law that the grantee shall offer to the public shall be subject to the approval of the National Telecommunications Commission or its legal successor. (Emphasis supplied)

xxx xxx xxx

Sec. 7. All telecommunications lines and systems for telecommunications services owned, maintained, operated or managed by the grantee, its successors or assigns shall be operated and maintained at all times in a satisfactory manner, and it shall be the further duty of said grantee, its successors or assigns, whenever required to do so by the National Telecommunications Commission or its legal successor, to modify, improve and change such telecommunications systems in such manner and to such extent as the progress in science and improvements in the telecommunications services may make reasonable and proper. (Emphasis supplied)

Sec. 12. The grantee, its successors or assigns shall be liable to pay the same taxes on their real estate, buildings, and personal property, exclusive on this franchise, as other persons or corporations are now or hereafter may be required by law to pay. In addition thereof, the grantee, its successors or assigns shall pay a franchise tax equivalent to three percent (3%) of all grabs receipts of the telephone or other telecommunications businesses transacted under this franchise by the grantee, its successors or assigns, and the said percentage shall be in lieu of all taxes or able franchise or earnings thereof: Provided, . . . (Emphasis supplied) (Section 12 thus makes clear that the "telephone business" is merely one form of "telecommunications business.")

10 Section 1 of Act No. 3436, effective 28 November 1928, reads in relevant part as follows:

Sec. 1. Subject to the conditions established in this Act and the Provisions of Act Numbered Thirty-one hundred and eight, as amended, there is hereby granted to the "Philippine Long Distance Telephone Company," its successors or assigns, for a period of fifty years from the approval of this Act, the right, privilege, and authority to construct, maintain and operate telephone systems covering the most feasible following routes: . . . It being understood that the grantee is authorized to construct, operate and maintain such branch tributary lines within the provinces traversed to connect with the main lines, as the public interest may warrant. The grantee is authorized to carry on the business of the electrical transmission of messages, pictures, and signals in and between provinces and respective municipalities, and for the purpose of operating said telephone systems and transmitting impressions, messages, pictures, and signals by means of electricity, to construct telephone lines in and between said provinces and municipalities and to lay, place, operate and maintain telephone cables between the Philippine Islands and other countries. . . . (Emphasis supplied)

11 Rollo, pp. 232-233.

12 Id., pp. 45-46.

13 Id., pp. 36, 38-39.

14 Id., pp. 43-45.

15 Id., pp. 37, 39-40.

16 Id., p. 61.

17 Id., p. 239.

18 Id., pp. 239-240.

19 TSN, 14 September 1988, pp. 84-85; Exhibit "N."

20 Rollo, p. 240.

21 Mr. Santiago's testimony stated, in relevant part:

Q . . . Now, is it not true that in soliciting dual correspondentships with Singapore and Taiwan and even Hongkong, your company informed these foreign telephone administrations that unless they will appoint PLDT as dual correspondent, their calls cannot pass through your gateway?

A I would like to clarify my answer on that. He said that we will not accept direct calls from them. He said, we accept calls via transit.

xxx xxx xxx

A And what happened to your solicitation of the Singaporean end, you succeeded?

A We succeeded.

Q You are now the dual correspondent of Singapore. What happened to your solicitation of Taiwan, you also succeeded?

A Yes, sir.

xxx xxx xxx

Q Was PLDT's decision to stop collect calls to Hongkong part of that plan to obtain dual correspondentships with the Hongkong stream?

A I would say so, yes, sir. (Rollo, p. 241)

See also Exhibits "G," "H," "I," "J," "K," "L," "P," "Q" and "R" to "R-2," TSN, 14 September 1988, pp. 89-96.

22 Petition, Rollo, p. 21.

23 Rollo, p. 43.

24 190 SCRA 717 (1990).

25 190 SCRA at 734-735.

26 It is submitted that no such relevant distinction may be made. R.A. No. 4617, approved 19 June 1965, granted the following franchise authority to the RCA Communications, Inc. (predecessor of Philglobcom):

Sec. 1. There is hereby granted to the RCA Communications, Inc., hereinafter referred to as the grantee, the right and privilege of constructing, maintaining and operating communications systems by radio, wire, satellites, and other means now known to science or which in the future may be developed for the reception and transmission of messages between any point in the Philippines to points exterior thereto, including airplanes, airships or vessels, even though such airplanes, airships or vessels may be located within the territorial limits of the Philippines. (Emphasis supplied)

The relevant phrase used in R.A. No. 4617 his "communications systems" (See, e.g., Section 2, Section 3 and Section 17) Section 17 of R.A. No. 4617 reads as follows:

Sec. 17. Nothing in this franchise shall be construed to authorize the grantee to engage in domestic communications service. (Emphasis supplied)

27 The term used by PLDT ins assailing Eastern's desire to participate in the international end of telecommunications. See supra, note 22.


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