Haystack: PLDT vs. NTC (GR 126496, 30 April 1997)

PLDT vs. NTC [G.R. No. 88404. October 18, 1990.]

En Banc, Melencio-Herrera (J): 6 concurring

 

Facts: On 22 June 1958, RA 2090, was enacted (An Act Granting Felix Alberto and Company, Incorporated, a Franchise to Establish Radio Stations for Domestic and Transoceanic Telecommunications). Felix Alberto & Co., Inc. (FACI) was the original corporate name, which was changed to ETCI with the amendment of the Articles of Incorporation in 1964. On 13 May 1987, alleging urgent public need, ETCI filed an application with NTC (NTC Case 87-89) for the issuance of a Certificate of Public Convenience and Necessity (CPCN) to construct, install, establish, operate and maintain a Cellular Mobile Telephone System and an Alpha Numeric Paging System in Metro Manila and in the Southern Luzon regions, with a prayer for provisional authority to operate Phase A of its proposal within Metro Manila. PLDT filed an Opposition with a Motion to Dismiss, based primarily on the grounds that (1) ETCI is not capacitated or qualified under its legislative franchise to operate a systemwide telephone or network of telephone service such as the one proposed in its application; (2) ETCI lacks the facilities needed and indispensable to the successful operation of the proposed cellular mobile telephone system; (3) PLDT has itself a pending application with NTC (Case 86-86) to install and operate a Cellular Mobile Telephone System for domestic and international service not only in Manila but also in the provinces and that under the “prior operator” or “protection of investment” doctrine, PLDT has the priority or preference in the operation of such service; and (4) the provisional authority, if granted, will result in needless, uneconomical and harmful duplication, among others. In an Order, dated 12 November 1987, NTC overruled PLDT’s Opposition and declared that RA 2090 should be liberally construed as to include among the services under said franchise the operation of a cellular mobile telephone service. After evaluating the reconsideration sought by PLDT, the NTC, in October 1988, maintained its ruling that liberally construed, and that ETCI’s franchise carries with it the privilege to operate and maintain a cellular mobile telephone service.

 

On 12 December 1988, NTC issued an order opining that “public interest, convenience and necessity further demand a second cellular mobile telephone service provider and finds prima facie evidence showing ETCI’s legal, financial and technical capabilities to provide a cellular mobile service using the AMPS system,” NTC granted ETCI provisional authority to install, operate and maintain a cellular mobile telephone system initially in Metro Manila, Phase A only, subject to the terms and conditions set forth in the same Order. One of the conditions prescribed (Condition 5) was that, within ninety (90) days from date of the acceptance by ETCI of the terms and conditions of the provisional authority, ETCI and PLDT “shall enter into an interconnection agreement for the provision of adequate interconnection facilities between applicant’s cellular mobile telephone switch and the public switched telephone network and shall jointly submit such interconnection agreement to the Commission for approval.” In a “Motion to Set Aside the Order” granting provisional authority, PLDT alleged essentially that the interconnection ordered was in violation of due process and that the grant of provisional authority was jurisdictionally and procedurally infirm. On 8 May 1989, NTC issued an order denying reconsideration and set the date for continuation of the hearings on the main proceedings. PLDT challenged the NTC orders of 12 December 1988 and 8 May 1989 before the Supreme Court.

 

On 15 June 1989, the Supreme Court dismissed the petition for its failure to comply fully with the requirements of Circular 188. Upon satisfactory showing, however, that there was such compliance, the Court reconsidered the order and reinstated the petition. On 27 February 1990, the Court issued a Temporary Restraining Order, upon PLDT’s urgent manifestation, enjoining NTC to “Cease and Desist from all or any of its on-going proceedings and ETCI from continuing any and all acts intended or related to or which will amount to the implementation/execution of its provisional authority.” PLDT was required by the Court to post a bond of P5 million. PLDT complied.

 

The Supreme Court dismissed the petition for lack of merit and lifted the Temporary Restraining Order issued. The bond issued as a condition for the issuance of said restraining Order is declared forfeited in favor of Express Telecommunications Co., Inc.; with cost against PLDT.

 

1. Abuse of discretion or lack of jurisdiction only issue in a special civil action for Certiorari and Prohibition

Being a special civil action for Certiorari and Prohibition, the Court only need determine if NTC acted without jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction in granting provisional authority to ETCI under the NTC questioned Orders of 12 December 1988 and 8 May 1989.

 

2. NTC has jurisdiction

NTC is the regulatory agency of the national government with jurisdiction over all telecommunications entities. It is legally clothed with authority and given ample discretion to grant a provisional permit or authority. In fact, NTC may, on its own initiative, grant such relief even in the absence of a motion from an applicant.

 

3. Section 3 (Provisional Remedy), Rule 15, Rule of Practice and Procedure before the Board of Communications (now NTC)

“Upon the filing of an application, complaint or petition or at any stage thereafter, the Board may grant on motion of the pleaders or on its own initiative, the relief prayed for, based on the pleading, together with the affidavits and supporting documents attached thereto, without prejudice to a final decision after completion of the hearing which shall be called within 30 days from grant of authority asked for.”

 

4. Provisionary authority properly granted

The provisional authority granted by the NTC has a definite expiry period of 18 months unless sooner renewed, and which may be revoked, amended or revised by the NTC; and covers one of four phases. It is also limited to Metro Manila only. The installation and operation of an alpha numeric paging system was not authorized. The main proceedings are clearly to continue as stated in the NTC Order of 8 May 1989. Further, the provisional authority was issued after due hearing, reception of evidence and evaluation thereof, with the hearings attended by various oppositors, including PLDT. It was granted only after a prima facie showing that ETCI had the necessary legal, financial and technical capabilities and that public interest, convenience and necessity so demanded.

 

5. Provisional authority meaningless if grantee is not allowed to operate

Provisional authority would be meaningless if the grantee were not allowed to operate. Its lifetime is limited and may be revoked by the NTC at any time in accordance with law. The initial expenditure of P130M more or less, is rendered necessary even under a provisional authority to enable ETCI to prove its capability.

 

6. Differences exist between a Provisional Authority and a Certificate of Public Convenience and Necessity

Basic differences exist between a provisional authority and a Certificate of Public Convenience and Necessity (CPCN). If what had been granted were a CPCN, it would constitute a final order or award reviewable only by ordinary appeal to the Court of Appeals pursuant to Section 9(3) of BP 129, and not by Certiorari before the Supreme Court.

 

7. The Coverage of ETCI’s Franchise (RA 2090)

RA 2090 grants ETCI (formerly FACI) “the right and privilege of constructing, installing, establishing and operating in the entire Philippines radio stations for reception and transmission of messages on radio stations in the foreign and domestic public fixed point-to-point and public base, aeronautical and land mobile stations, . . . with the corresponding relay stations for the reception and transmission of wireless messages on radiotelegraphy and/or radiotelephony . . . . “

 

8. Radiotelephony defined

As defined by the New International Webster Dictionary the term “radiotelephony” is defined as a telephony carried on by aid of radiowaves without connecting wires. The International Telecommunications Union (ITU) defines a “radiotelephone call” as a “telephone call, originating in or intended on all or part of its route over the radio communications channels of the mobile service or of the mobile satellite service.”

 

9. Radiotelephony construed liberally to include cellular mobile telephone system (CMTS)

In its Order of 12 November 1987, the NTC construed the technical term “radiotelephony” liberally as to include the operation of a cellular mobile telephone system. While under Republic Act 2090 a system-wide telephone or network of telephone service by means of connecting wires may not have been contemplated, it can be construed liberally that the operation of a cellular mobile telephone service which carries messages, either voice or record, with the aid of radiowaves or a part of its route carried over radio communication channels, is one included among the services under said franchise for which a certificate of public convenience and necessity may be applied for.

 

10. Construction given by administrative agency given great weight and respect

The construction given by an administrative agency possessed of the necessary special knowledge, expertise and experience and deserves great weight and respect. It can only be set aside by judicial intervention on proof of gross abuse of discretion, fraud, or error of law.

 

11. Factual issues not subject of a special civil action for certiorari

Whether or not ETCI (previously FACI), in contravention of its franchise, started the first of its radio telecommunication stations within 2 years from the grant of its franchise and completed the construction within 10 years from said date; and whether or not its franchise had remained unused from the time of its issuance, are questions of fact beyond the province of this Court, besides the well-settled procedural consideration that factual issues are not subjects of a special civil action for Certiorari. Moreover, neither Section 4, RA 2090 nor PD 36 should be construed as self-executing in working a forfeiture. Franchise holders should be given an opportunity to be heard, particularly so, where ETCI does not admit any breach, in consonance with the rudiments of fair play.

 

12. Legislative franchise cannot be collaterally attacked; cannot be revoked without due process of law

PLDT’s allegation – that the ETCI franchise had lapsed into non-existence for failure of the franchise holder to begin and complete construction of the radio system authorized under the franchise and that PD 36 (2 November 1972) which legislates the mandatory cancellation or invalidation of all franchises for the operation of communications services, which have not been availed of or used by the party or parties in whose name they were issued – partakes of a collateral attack on a franchise (RA 2090), which is not allowed. A franchise is a property right and cannot be revoked or forfeited without due process of law.

 

13. Forfeiture by non-user proper subject of prerogative writ of quo warranto; Right to assert belongs to the State

The determination of the right to the exercise of a franchise, or whether the right to enjoy such privilege has been forfeited by non-user, is more properly the subject of the prerogative writ of quo warranto, the right to assert which, as a rule, belongs to the State “upon complaint or otherwise” the reason being that the abuse of a franchise is a public wrong and not a private injury. A forfeiture of a franchise will have to be declared in a direct proceeding for the purpose brought by the State because a franchise is granted by law and its unlawful exercise is primarily a concern of Government.

 

14. Section 10 of RA 2090

“The grantee shall not lease, transfer, grant the usufruct of, sell or assign this franchise nor the rights and privileges acquired thereunder to any person, firm, company, corporation or other commercial or legal entity nor merge with any other person, company or corporation organized for the same purpose, without the approval of the Congress of the Philippines first had. . . . . “ The foregoing provision is directed to the “grantee” of the franchise, which is the corporation itself and refers to a sale, lease, or assignment of that franchise. It does not include the transfer or sale of shares of stock of a corporation by the latter’s stockholders.

 

15. Section 20 (h) of CA 146, as amended by CA 454; Acts requiring the approval of the Commission

Subject to established limitations and exceptions and saving provisions to the contrary, it shall be unlawful for any public service or for the owner, lessee or operator thereof, without the approval and authorization of the Commission previously had … … (h) To sell or register in its books the transfer or sale of shares of its capital stock, if the result of that sale in itself or in connection with another previous sale, shall be to vest in the transferee more than forty per centum of the subscribed capital of said public service. Any transfer made in violation of this provision shall be void and of no effect and shall not be registered in the books of the public service corporation. Nothing herein contained shall be construed to prevent the holding of shares lawfully acquired.

 

16. Sales of shares of stock of a public utility governed by Section 20h of the Public Service Act (CA 146)

The sale of shares of stock of a public utility is governed by another law, i.e., Section 20(h) of the Public Service Act (Commonwealth Act 146). Pursuant thereto, the Public Service Commission (now the NTC) is the government agency vested with the authority to approve the transfer of more than 40% of the subscribed capital stock of a telecommunications company to a single transferee. Transfers of shares of a public utility corporation need only NTC approval, not Congressional authorization.

 

17. Grant of provisional authority deemed approval of series of transfers of shares in ETCI

The approval of the NTC may be deemed to have been met when it authorized the issuance of the provisional authority to ETCI. There was full disclosure before the NTC of the transfers that transpired starting in 1964 until 1987. In fact, the NTC Order of 12 November 1987 required ETCI to submit its “present capital and ownership structure.” Further, ETCI even filed a Motion before the NTC, dated 8 December 1987, or more than a year prior to the grant of provisional authority, seeking approval of the increase in its capital stock from P960,000.00 to P40M, and the stock transfers made by its stockholders.

 

18. Distinction between shares of stock and sale of franchise itself; Corporation has separate and distinct personality from its stockholders

A distinction should be made between shares of stock, which are owned by stockholders, the sale of which requires only NTC approval, and the franchise itself which is owned by the corporation as the grantee thereof, the sale or transfer of which requires Congressional sanction. Since stockholders own the shares of stock, they may dispose of the same as they see fit. They may not, however, transfer or assign the property of a corporation, like its franchise. In other words, even if the original stockholders had transferred their shares to another group of shareholders, the franchise granted to the corporation subsists as long as the corporation, as an entity, continues to exist. The franchise is not thereby invalidated by the transfer of the shares. A corporation has a personality separate and distinct from that of each stockholder. It has the right of continuity or perpetual succession.

 

19. PLDT cannot justifiably refuse to interconnect, pursuant to RA 6849

RA 6849, or the Municipal Telephone Act of 1989, approved on 8 February 1990, mandates interconnection providing as it does that “all domestic telecommunications carriers or utilities . . . shall be interconnected to the public switch telephone network.” 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.

 

20. Constitutional mandate as to the use of property (Section 6, Article XII)

Section 6, Article XII, of the 1987 Constitution provides that “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.”

 

21. NTC merely exercised delegated authority when it decreed interconnection

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 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.

 

22. Interconnection; Sections 1 and 5 of Ministry Circular 82-81 (6 December 1982)

Section 1 of Ministry Circular 82-81 provides “that the government encourages the provision and operation of public mobile telephone service within local sub-base stations, particularly, in the highly commercialized areas.” Section 5 on the other hand provides “that, in the event the authority to operate said service be granted to other applicants, other than the franchise holder, the franchise operator shall be under obligation to enter into an agreement with the domestic telephone network, under an interconnection agreement.”

 

22. Interconnection; DOTC Circular 87-188 (1987)

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

 

23. DOTC Circular 90-248 (14 June 1990); Policy on Interconnection and Revenue Sharing by Public Communications Carriers

The sharing of revenue was an additional feature considered in DOTC Circular 90-248. The circular provides that “It is the objective of government to promote the rapid expansion of telecommunications services in all areas of the Philippines. There is s need to maximize the use of telecommunications facilities available and encourage investment in telecommunications infrastructure by suitably qualified service providers. In recognition of the vital role of communications in nation building, there is a need 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. Thus, all facilities offering public telecommunication services shall be interconnected into the nationwide telecommunications network/s; the interconnection of networks shall be effected in a fair and non-discriminatory manner and within the shortest timeframe practicable; and the precise points of interface between service operators shall be as defined by the NTC; and the apportionment of costs and division of revenues resulting from interconnection of telecommunications networks shall be as approved and/or prescribed by the NTC.”

 

24. Other interconnection-related circulars: DOTC Circular 7-13-90 (12 July 1990)

The NTC, on 12 July 1990, issued Memorandum Circular 7-13-90 prescribing the “Rules and Regulations Governing the Interconnection of Local Telephone Exchanges and Public Calling Offices with the Nationwide Telecommunications Network/s, the Sharing of Revenue Derived Therefrom, and for Other Purposes.”

 

25. Interconnection allows parties to discuss and agree terms; Negotiations provides right to be heard

The NTC order to interconnect allows the parties themselves to discuss and agree upon the specific terms and conditions of the interconnection agreement instead of the NTC itself laying down the standards of interconnection which it can very well impose. Thus it is that PLDT cannot justifiably claim denial of due process. It has been heard. It will continue to be heard in the main proceedings. It will surely be heard in the negotiations concerning the interconnection agreement.

 

26. Purpose of interconnection

What interconnection seeks to accomplish is to enable the system to reach out to the greatest number of people possible in line with governmental policies laid down. Cellular phones can access PLDT units and vice versa in as wide an area as attainable. With the broader reach, public interest and convenience will be better served. The interconnection sought by ETCI is by no means a “parasitic dependence” on PLDT. The ETCI system can operate on its own even without interconnection, but it will be limited to its own subscribers. To be sure, ETCI could provide no mean competition, and eat into PLDT’s own toll revenue, but all for the eventual benefit of all that the system can reach.

 

27. Ultimate Considerations to which public utilities must yield

The decisive considerations are public need, public interest, and the common good. Those were the overriding factors which motivated NTC in granting provisional authority to ETCI. Article II, Section 24 of the 1987 Constitution, recognizes the vital role of communication and information in nation building. It is likewise a State policy to provide the environment for the emergence of communications structures suitable to the balanced flow of information into, out of, and across the country (Article XVI, Section 10, ibid.). A modern and dependable communications network rendering efficient and reasonably priced services is also indispensable for accelerated economic recovery and development. To these public and national interests, public utility companies must bow and yield.

 

28. Free competition in industry answer to improvement in telecommunication industry; No public utility has a constitutional right to a monopoly position

Free competition in the industry may also provide the answer to a much-desired improvement in the quality and delivery of this type of public utility, to improved technology, fast and handy mobile service, and reduced user dissatisfaction. After all, neither PLDT nor any other public utility has a constitutional right to a monopoly position in view of the Constitutional proscription that no franchise certificate or authorization shall be exclusive in character or shall last longer than 50 years (ibid., Section 11; Article XIV, Section 5, 1973 Constitution; Article XIV, Section 8, 1935 Constitution). Additionally, the State is empowered to decide whether public interest demands that monopolies be regulated or prohibited (1987 Constitution, Article XII, Section 19).