THE Court of Appeals (CA) has declared valid the circular issued by the National Telecommunications Commission (NTC) requiring new players in the telecom industry to post between P14 billion and P24.7 billion in participation and performance securities.
Thus, in a 38-page decision, penned by Associate Justice Alfredo Ampuan, the CA’s First Division dismissed the bid of Now Telecom Company Inc. to participate as a new major player (NMP) in the telecom industry.
The appellate court upheld the order issued by the Regional Trial Court (RTC), Branch 42, Manila dated November 5, 2018 denying Now Telecom’s petition seeking to scrap the implementation of the said NTC circular.
In its November 5, 2018 order, the trial court held that the petitioner failed to show proof that it has an actual or existing right to be protected from the implementation of the NTC circular.
“Even without DICT [Department of Information and Communications Technology] Memorandum Order No. 1 Series of 2018, the NTC, by law, had the authority to issue subject circular and impose certain reservations or qualifications with respect to the entry of participants to become NMP and, subsequently, to the grant of a CPCN in the NMP’s favor,” the CA explained.
“Moreover, contrary to petitioner’s contentions, the subject circular is not confiscatory and anti-competitive in nature,” it said.
Furthermore, the CA said the imposition of the securities and appeal fee cannot be said to be confiscatory and anti-competitive.
“The imposition, albeit excessive to the mind of petitioner, was proper as it was issued precisely to ensure that only qualified and capable bidders could participate in the selection of the NMP,” the CA noted.
In the case of Now Telecom, the trial court found out that it has no vested right over the radio frequencies that it sought to possess by virtue of its legislative franchise since it has no paid up capital of P10 billion when the complaint was filed.
The trial court also noted that the telco company admitted that it has yet to form a consortium that will render it a participant as NMP, having a combined and aggregate capital of P10 billion.
Franchise
Now Telecom is a legislative franchise holder by virtue of Republic Act (RA) 7940 enacted on March 1, 1995, granting it to operate and provide cellular mobile telecommunications services (NMTS).
Its legislative franchise was extended for another 25 years by virtue of RA 10972 that was signed on February 22, 2018.
In December 2017 or after 22 years from the time it was granted a legislative franchise in 1995, Now Telecom was granted a 20MHz contiguous bandwidth ranging from 3520 to 3540MHz under the 35GHz band.
The petitioner, however, insisted that the frequencies are “grossly inadequate” to support a genuine telco service.
It sent the NTC several letters requesting for a frequency allocation so that it can operate its business, but the agency never acted on said requests.
On January 8, 2018, the DICT issued the “Policy Guidelines for the Entry of a New Major Player in the Telecommunications Market.”
As a result, an oversight committee for the entry of a New Major Player (NMP) in the public telecommunications market was created.
In line with this, the NTC issued Memorandum Circular No. (MC) 09-09-2018 containing the rules and regulations on the selection process for the NMP.
This prompted Now Telecom to file a petition before the lower court seeking to stop the implementation of certain provisions of MC 09-09-2018.
In particular, Now Telecom is seeking to scrap the requirement for prospective bidders to post a participation security with a face value of P700 million equivalent to one-half percent (0.5%) of the minimum Capital and Operational Expenditure at the end of the commitment period.
It argued that the said provision is void for being “excessive and confiscatory.”
Petitioner also said Section 11 of the circular, which requires the posting of a performance security at 10 percent of the remaining cumulative capital and operational expenditures commitment, is “vague and arbitrary.”
The provision essentially requires a potential participant to post P14 billion to P24 billion for performance security.
It also claimed that the non-refundable appeal fee amounting to P10 million under Section 8 of the circular is excessive.
Contrary to the claim of the petitioner, the CA pointed out that nowhere in RA 7940 and RA 10972 was it stated that it is entitled as a matter of right to particular frequencies to the exclusion of other players in the telco industry.
“The grant of a legislative franchise to operate and provide CMTS in favor of the petitioner does not carry with it the right over particular frequencies,” the appellate court said.
“At the outset, it bears stressing that nowhere in the petitioner’s legislative franchise does it show that it is entitled to specific frequencies, including the radio frequency spectrum allocated to the selected NMP by virtue of the subject circular.”
On the contrary, the CA said an examination of petitioner’s legislative franchise shows that it is still subject to the rules and regulations of the NTC itself.
The appellate court explained that petitioner’s legislative franchise to operate CMTS does not entitle it to particular airwaves which would fill the alleged insufficient frequencies.
It added the NTC is not even prohibited from re-allocating the frequencies previously assigned to a grantee of a legislative franchise based on its sound judgment to ensure a wider access to the limited resource of radio frequencies.
Concurring with the ruling are CA Presiding Justice Remedios A. Salazar-Fernando and Associate Justice Pedro B. Corales.