PLDT vs NTC

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G.R. No. 88404 October 18, 1990

PHILIPPINE LONG DISTANCE TELEPHONE CO. [PLDT], petitioner,
vs.
THE NATIONAL TELECOMMUNICATIONS COMMISSION AND CELLCOM, INC., (EXPRESS TELECOMMUNICATIONS CO., INC. [ETCI]), respondents.

EN BANC

Facts:

There are two (2) Orders, namely, Order of 12 December 1988 granting private respondent Express Telecommunications Co., Inc. (ETCI) provisional authority to install, operate and maintain a Cellular Mobile Telephone System in Metro-Manila (Phase A) in accordance with specified conditions; and the Order, dated 8 May 1988, denying reconsideration, enacted by the respondent National Telecommunications Commission (NTC) but assailed by petitioner Philippine Long Distance Telephone Company (PLDT).

ETCI filed an application with NTC 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.

But in an Order, dated 12 November 1987, NTC overruled PLDT's Opposition and declared that Rep. Act No. 2090 (1958) 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, applicant's franchise carries with it the privilege to operate and maintain a cellular mobile telephone service.

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.

PLDT urges the Court to annul the NTC Orders of 12 December 1988 and 8 May 1989 and to order ETCI to desist from, suspend, and/or discontinue any and all acts intended for its implementation.

Issues:

1. Whether the status and coverage of Rep. Act No. 2090 includes franchise;

2. Whether there is transfer of shares of stock of a corporation in holding a CPCN; and

3. Whether there is a need to merge principle and procedure of interconnection.

Held:

There is no grave abuse of discretion on the part of NTC, upon the following considerations:

1. NTC Jurisdiction

The 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.

What the NTC granted was such a provisional authority, with a definite expiry period of eighteen (18) months unless sooner renewed, and which may be revoked, amended or revised by the NTC. It is also limited to Metro Manila only.

What is more, the main proceedings are clearly to continue as stated in the NTC Order of 8 May 1989.

The provisional authority was issued after due hearing, reception of evidence and evaluation, with the hearings attended by various oppositors, including PLDT. It was granted only after a prima facie showing that ETCI has the necessary legal, financial, and technical capabilities and that public interest, convenience, and necessity so demanded.

Hence, the final outcome of the application rests within the exclusive prerogative of the NTC. Whether or not a CPCN would eventually issue would depend on the evidence to be presented during the hearings still to be conducted, and only after a full evaluation of the proof thus presented.

2. The Coverage of ETCI's Franchise

Rep. Act No. 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 ...." PLDT maintains that the scope of the franchise is limited to "radio stations" and excludes telephone services such as the establishment of the proposed Cellular Mobile Telephone System (CMTS). However, 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.

3. The Status of ETCI Franchise

PLDT alleges that the ETCI franchise had lapsed into nonexistence for failure of the franchise holder to begin and complete construction of the radio system authorized under the franchise as explicitly required in Section 4 of its franchise, Rep. Act No. 2090.

More importantly, PLDT's allegation partakes of a Collateral attack on a franchise Rep. Act No. 2090), which is not allowed.

A franchise is a property right and cannot be revoked or forfeited without due process of law. 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" (Sections 1, 2 and 3, Rule 66, Rules of Court), 2 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.

4. ETCI's Stock Transactions

ETCI admits that in 1964, the Albertos, as original owners of more than 40% of the outstanding capital stock sold their holdings to the Orbes. In 1968, the Albertos re-acquired the shares they had sold to the Orbes. In 1987, the Albertos sold more than 40% of their shares to Horacio Yalung. Thereafter, the present stockholders acquired their ETCI shares. Moreover, in 1964, ETCI had increased its capital stock from P40,000.00 to P360,000.00; and in 1987, from P360,000.00 to P40M.

In other words, transfers of shares of a public utility corporation need only NTC approval, not Congressional authorization. What transpired in ETCI were a series of transfers of shares starting in 1964 until 1987. But again, whether ETCI has offended against a provision of its franchise, or has subjected it to misuse or abuse, may more properly be inquired into in quo warranto proceedings instituted by the State. It is the condition of every franchise that it is subject to amendment, alteration, or repeal when the common good so requires (1987 Constitution, Article XII, Section 11).

5. The NTC Interconnection Order

In the provisional authority granted by NTC to ETCI, one of the conditions imposed was that the latter and PLDT were to enter into an interconnection agreement to be jointly submitted to NTC for approval.

Rep. Act No. 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.

The importance and emphasis given to interconnection dates back to Ministry Circular No. 82-81, dated 6 December 1982; Department of Transportation and Communication (DOTC) Circular No. 87-188, issued in 1987; The sharing of revenue was an additional feature considered in DOTC Circular No. 90-248, dated 14 June 1990, laying down the "Policy on Interconnection and Revenue Sharing by Public Communications Carriers."

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 clue process. It has been heard. It will continue to be heard in the main proceedings.

6. Ultimate Considerations

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.

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 fifty (50) years.

Ruling:

There is no grave abuse of discretion, tantamount to lack of or excess of jurisdiction, on the part of the NTC in issuing its challenged Orders of 12 December 1988 and 8 May 1989 in NTC Case No. 87-39, and this Petition is DISMISSED for lack of merit.