RESTRICTED
WORLD TRADE S/NGBT/W/3/Add.36
16January 1996
ORGANIZATION(96-0152)
Original: English Negotiating Group onBasic Telecommunications
COMMUNICATION FROM THE PHILIPPINES
Response totheQuestionnaire onBasic Telecommunications
Thefollowing communication iscirculated attherequest ofthePhilippines tomembers ofthe
Negotiating Group onBasic Telecommunications.
_______________S/NGBT/W/3/Add.36
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PART I
Definition andMarket Structure
Definition
1. ThereisnodefinitionofbasictelecommunicationsunderPhilippinelaw.Alltelecommunications
services offered tothepublic forcompensation areclassified under theterm"public telecommunications
services". Asageneral concept however, basic telecommunication service refers tolocaltelephone
switched services.
2. None.
3. None.
Market Structure
4. Allbasictelecommunication services aretobeprovided bydulyenfranchised andcertificated
carriers/operators.
5. Thegeographic area, typeorclassification ofactivities, andratesarespecified inacarrier 's
franchise (secured from thePhilippine Congress) andcertificate ofpublic convenience andnecessity
(CPCN) issued bytheNational Telecommunications Commission (NTC).
ThePhilippinetelecommunicationssectorhaslongbeencharacterizedbyahighdegreeofprivate
sector ownership. Allgovernment-owned facilities arebeing privatized pursuant toRepublic Act7925.
6. Nofranchise orCPCN fortheoperation/supply ofbasic telecommunications services shall
begranted except tocitizens ofthePhilippines ortocorporations orassociations organized under the
lawsofthePhilippines atleast60percentofwhose capital isowned bysuchcitizens.
7. ThePhilippines operates under regulated competition. However, competition ispredicated
onthebasic compliance ofanapplicant ofthefranchise andcitizenship requirements.
8. ThePhilippines isaMember oftheInternational Telecommunications Union (ITU) anda
signatory ofsome World Administrative Regulations thatgovern operations ofinternational
telecommunications.
PART II
Competition
A. Subsectors
(i) Overview
Enfranchised andcertificated public telecommunications carriers cancompete intheprovision
ofbasictelecommunications services. Foreign investors canparticipate inthecompetitive environment
through adomestic telecommunications company where theyholdminority equity participation.S/NGBT/W/3/Add.36
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(ii) Modes ofsupply
Telecommunications services canbesupplied byandthrough enfranchised andcertificated
carriers.
(iii) Market access
Provision ofservices issubject tosecuring offranchise andCPCN. Aggregate foreign
shareholding islimited toamaximum offorty percent.
(iv) National Treatment
Other thanthelimitations onforeign shareholding, thefollowing alsoapply:
- Thenumber ofnon-Filipino citizens intheBoard ofDirectors ofanentitiy shallbe
proportionate totheaggregate share offoreign capital ofthatentity.
- Allexecutives andmanagers must becitizens ofthePhilippines.
- Onlycitizens ofthePhilippines orcorporations orassociations atleast60percentof
whose capital isowned bysuchcitizens mayownlandother thanpublic lands and
acquire public lands through lease. Foreign investors mayleaseonly private-owned
lands.
(v) Licensing
Franchises andCPCNs areissued through anopenandtransparent procedure. Dueemphasis
isgiven totechnical, legal, economic, andfinancial considerations.
B. Categories
1&2. Republic Act7925 provides forthefollowing categories oftelecommunications entities:
LocalExchangeOperator-anentityprovidingtransmissionandswitchingoftelecommunications
services, primarily butnotlimited tovoice-to-voice service, inageographic area anywhere
inthePhilippines.
Inter-Exchange Carrier -anentity, sometimes referred toasacarrier 'scarrier ornational
backbone network operator, authorized toinstall, ownandoperate facilities which connect
local-exchanges within thePhilippines andtoengage inthebusiness ofinter-exchange national
longdistance services.
International Carrier -anentity primarily engaged inthebusiness ofproviding transmission
andswitching ofanytelecommunications service between thePhilippines andanyother point
oftheworldtowhichithasanexistingcorrespondentorprospectiveinterconnectionagreements.
Value-added Service Provider (VAS) -anentity which relying onthetransmission, switching
andlocaldistribution facilities ofthelocalexchange andinter-exchange operators, andoverseas
carriers, offers enhanced services beyond those ordinarily provided forbysuchcarriers.S/NGBT/W/3/Add.36
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Mobile Radio Services -awideareamobile radio telephone system withitsownswitch, base
stationsandtransmissionfacilitiescapableofprovidinghighcapacitymobiletelecommunications
byutilizing radio frequencies.
Resale Basis
3&4. Private leased circuit capacities areoffered forafeebyenfranchised andcertificated operators.
Noentity except foraVASsupplier canofferatelecommunications service forafeewithout securing
afranchise andaCPCN.
Facilities-based
5. Enfranchisedandcertificatedbasictelecommunicationsproviderscan(providedtherequirements
onFilipinoownership,controlandmanagementhavebeenmet)constructandoperatetheirownnetworks
orinvest inconsortia toconstruct andoperate suchfacilities.
Public/Non-Public Supply
6. Adulyenfranchised andcertificated carrier isnotprohibited from offering suchservices.
7. Allservices authorized bytheNTC tobeoffered must bemade available tothepublic.
8. Answers toitems 6&7apply.
9. Apublic telecommunications entity mustcomply withallPhilippine telecommunications law;
theterms andconditions ofitsfranchise andCPCN; universal service obligations (e.g., authorized
international gateway andcellular telephone operators arerequired bylawtoinstall asetnumber of
localexchange lines); andcompetition safeguards (e.g., interconnection requirements).
10. Subject tosecuring ofafranchise andCPCN.
11. Only enfranchised andcertificated carriers canoffer theservice.
PART III
Regulatory Issues
Relationship Between Regulatory andOperational Functions
1. Theindustry, theacademe, suppliers, users, etc.areinvolved inthepolicy andregulatory
formulation andenforcement. Thesector hasaFederation thatcoordinates andcooperates with the
government inthese aspects.
2. Yes. TheNTC isprimarily responsible forformulating andenforcing standards.
3. Government agencies responsible fortheformulation ofpolicies andenforcement of
laws/regulations inthetelecommunications sector:
Franchising - ThePhilippine Congress
Policy - ThePhilippine Congress (legislative branch)S/NGBT/W/3/Add.36
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- TheDepartment ofTransportation andCommunications (executive
branch)
Regulatory - TheNational Telecommunications Commission (attached tothe
Department ofTransportation andCommunications)
Frequency Allotment orAssignment
4. TheNTC allots andassigns therequired frequencies needed fortheoperation of
telecommunications services.
Asprovided byRA7925, theNTCshallestablish aRadio Frequency Consultative Committee
(with representatives from allservice categories) which shallrecommend totheNTC guidelines on
theefficient andfairallocation offrequencies including abidding process incasedemand exceeds
availability.
5. OnlyFilipino companies areallowed tooffertelecommunications services inthePhilippines.
Standards, Type Approval andEquipment Attachment
8. Standards enforced include theNational Service Performance andTechnical Standards for
Telecommunications Service andrelevant international standards including thoseestablished under ITU.
9. Yes.Standards aredeveloped andreviewed byNTCthrough itsestablished working committee
composed ofrepresentatives fromtheindustry, theusers, suppliers, etc.Apublic hearing isheldprior
tofinalpromulgation byNTC.
10-13. Type approval isundertaken byNTC pursuant totheestablished Rules andRegulations
governing equipment provided byCustomers/Subscribers ofPublic Networks.
Interconnection
14-16. Mandatory interconnection hasbeen legislated. Allinter-exchange carriers (IXCs) and
international gateway facilities shallinterconnect withalllocalexchange carriers toprovide freedom
ofchoice foraccess oftollfacilities.
Guidelines havebeenissued (including onaccess charges, infrastructure andrevenue sharing
arrangements) toensure thatinterconnection arrangements arefairandreasonable.
17. Interconnection charges arecommercially negotiated taking intoaccount theestablished
guidelines. Allinterconnect agreements (technical aspects andtariffs) aresubmitted totheNTC for
approval.
Competitive Safeguards
18. ThePhilippine Constitution prohibits actsinrestraint oftradeorfaircompetition. Asageneral
rule,thegovernment promotes competition. RA7925andE.O.59mandates interconnection andnon-
discriminatory pricing.
19. Under Philippine law, there isnodefinition ofadominant carrier. However, since the
PhilippineLongDistanceTelephoneCo.(PLDT)hasthebiggestoperationinthecountry,itissometimes
referred toasthedominant carrier.S/NGBT/W/3/Add.36
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20. There arepending billsinthePhilippine Congress aimed atestablishing abroad anti-trust policy
mechanism.
Onmergers andacquisitions -NTC approval isrequired where themerger would constitute
thetransfer inexcess of40%ofvoting shares tooneentity. Where there isa"transfer ofcontrol of
ownership" ofapublic carrier, approval from thePhilippine Congress isrequired.
21. Afranchise limits thescope ofanentity 'sactivities andwhatitcanapply before theNTC.
Pricing Related Measures
22. NTC approves allratesandcharges applied forbyauthorized carriers. Theratesmustbejust,
fairandreasonable.
23. Aproposed rateschedule issubmitted totheNTC foritsapproval. Theratesetting undergoes
aquasi-judicial process ofpublic notice andhearing.
24. Rates mustbefair,justandreasonable andmustbeapplied without discrimination tothepublic.
25. Yes,during public hearings insetting ofrates.
26. TheNTC, inestablishing fairandreasonable ratesandtariffs, takes intoaccount factors such
astheeconomic viability oftelecommunications entities andafairreturn ontheirinvestment considering
theprevailing costofcapital inthedomestic andinternational markets.
27. Newservice ratesareapplied forandapproved byNTC.
Rights ofWayfortheConstruction ofInsfrastructure
28. Thefranchise ofauthorized telecommunications carriers gives themtheprivilege tobuild the
necessary infrastructure support forthesupply oftelecommunication services approved byNTC. They
must, however, apply forthenecessary localornational construction permits.
29. Foreign investors canonlyexercise these privileges through thedomestic telecommunications
company where theyholdminority equity participation.
30-31. Except forVAS, allservices tobeoffered byadulyenfranchised telecommunications carrier
must beapproved bytheNTC, afterdueprocess ofpublic notice andhearing.