Republic of the Philippines

SUPREME COURT
Manila

EN BANC

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.

Alampan & Manhit Law Offices for petitioner.

Gozon, Fernandez, Defensor & Parel for private respondent.

MELENCIO-HERRERA, J.:

Petitioner Philippine Long Distance Telephone Company (PLDT) assails, by way of certiorari and Prohibition under Rule 65, two (2) Orders
of public respondent National Telecommunications Commission (NTC), namely, the 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.

On 22 June 1958, Rep. Act No. 2090, was enacted, otherwise known as "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.
Much later, "CELLCOM, Inc." was the name sought to be adopted before the Securities and
Exchange Commission, but this was withdrawn and abandoned.

On 13 May 1987, alleging urgent public need, ETCI filed an application with public respondent NTC
(docketed as NTC Case No. 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 following grounds: (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 No. 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 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.
In the same Order, ETCI was required to submit the certificate of registration of its Articles of
Incorporation with the Securities and Exchange Commission, the present capital and ownership
structure of the company and such other evidence, oral or documentary, as may be necessary to
prove its legal, financial and technical capabilities as well as the economic justifications to warrant
the setting up of cellular mobile telephone and paging systems. The continuance of the hearings was
also directed.

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.

On 12 December 1988, NTC issued the first challenged Order. Opining that "public interest,
convenience and necessity further demand a second cellular mobile telephone service provider and
finds PRIMA FACIE evidence showing applicant'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 No. 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 denied reconsideration and set the
date for continuation of the hearings on the main proceedings. This is the second questioned Order.

PLDT urges us now 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.

On 15 June 1989, we resolved to dismiss the petition for its failure to comply fully with the
requirements of Circular No. 1-88. Upon satisfactory showing, however, that there was, in fact, such
compliance, we reconsidered the order, reinstated the Petition, and required the respondents NTC
and ETCI to submit their respective Comments.

On 27 February 1990, we issued a Temporary Restraining Order 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." This was upon PLDT's urgent manifestation that it had been served an NTC Order, dated
14 February 1990, directing immediate compliance with its Order of 12 December 1988, "otherwise
the Commission shall be constrained to take the necessary measures and bring to bear upon PLDT
the full sanctions provided by law."

We required PLDT to post a bond of P 5M. It has complied, with the statement that it was "post(ing)
the same on its agreement and/or consent to have the same forfeited in favor of Private Respondent
ETCI/CELLCOM should the instant Petition be dismissed for lack of merit." ETCI took exception to
the sufficiency of the bond considering its initial investment of approximately P 225M, but accepted
the forfeiture proferred.
ETCI moved to have the TRO lifted, which we denied on 6 March 1990. We stated, however, that
the inaugural ceremony ETCI had scheduled for that day could proceed, as the same was not
covered by the TRO.

PLDT relies on the following grounds for the issuance of the Writs prayed for:

1. Respondent NTC's subject order effectively licensed and/or authorized a corporate

entity without any franchise to operate a public utility, legislative or otherwise, to
establish and operate a telecommunications system.

2. The same order validated stock transactions of a public service enterprise contrary
to and/or in direct violation of Section 20(h) of the Public Service Act.

3. Respondent NTC adjudicated in the same order a controverted matter that was
not heard at all in the proceedings under which it was promulgated.

As correctly pointed out by respondents, this being a special civil action for certiorari and Prohibition,
we 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.

The case was set for oral argument on 21 August 1990 with the parties directed to address, but not
limited to, the following issues: (1) the status and coverage of Rep. Act No. 2090 as a franchise; (2)
the transfer of shares of stock of a corporation holding a CPCN; and (3) the principle and procedure
of interconnection. The parties were thereafter required to submit their respective Memoranda, with
which they have complied.

We find no grave abuse of discretion on the part of NTC, upon the following considerations:

1. NTC Jurisdiction

There can be no question that 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.

Sec. 3. Provisional Relief. — 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 thirty (30) days from grant of
authority asked for. (Rule 15, Rules of Practice and Procedure Before the Board of
Communications (now NTC).

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 thereof,
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.

PLDT argues, however, that a provisional authority is nothing short of a Certificate of Public
Convenience and Necessity (CPCN) and that it is merely a "distinction without a difference." That is
not so. Basic differences do exist, which need not be elaborated on. What should be borne in mind is
that provisional authority would be meaningless if the grantee were not allowed to operate.
Moreover, it is clear from the very Order of 12 December 1988 itself that its scope is limited only to
the first phase, out of four, of the proposed nationwide telephone system. The installation and
operation of an alpha numeric paging system was not authorized. The provisional authority is not
exclusive. 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. And as pointed out by the Solicitor General, on
behalf of the NTC, 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 Blg. 129,
and not by certiorari before this Court.

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. It said:

In resolving the said issue, the Commission takes into consideration the different
definitions of the term "radiotelephony." As defined by the New International Webster
Dictionary the term "radiotelephony" is defined as a telephone 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." From the above definitions, 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.

The foregoing is the construction given by an administrative agency possessed of the necessary
special knowledge, expertise and experience and deserves great weight and respect (Asturias
Sugar Central, Inc. v. Commissioner of Customs, et al., L-19337, September 30, 1969, 29 SCRA
617). It can only be set aside on proof of gross abuse of discretion, fraud, or error of law (Tupas
Local Chapter No. 979 v. NLRC, et al., L-60532-33, November 5, 1985, 139 SCRA 478). We discern
none of those considerations sufficient to warrant judicial intervention.

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.   PLDT also invokes Pres. Decree No. 36,
1

enacted on 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.

However, whether or not ETCI, and before it 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 ten (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 (Central Bank of the Philippines vs. Court of Appeals, G.R. No. 41859, 8 March 1989,
171 SCRA 49; Ygay vs. Escareal, G.R. No. 44189, 8 February 1985, 135 SCRA 78; Filipino
Merchant's Insurance Co., Inc. vs. Intermediate Appellate Court, G.R. No. 71640, 27 June 1988, 162
SCRA 669). Moreover, neither Section 4, Rep. Act No. 2090 nor Pres. Decree No. 36 should be
construed as self-executing in working a forfeiture. Franchise holders should be given an opportunity
to be heard, particularly so, where, as in this case, ETCI does not admit any breach, in consonance
with the rudiments of fair play. Thus, the factual situation of this case differs from that in Angeles Ry
Co. vs. City of Los Angeles (92 Pacific Reporter 490) cited by PLDT, where the grantee therein
admitted its failure to complete the conditions of its franchise and yet insisted on a decree of
forfeiture.

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),   the reason being that the
2

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.

A ... franchise is ... granted by law, and its ... unlawful exercise is the concern
primarily of the Government. Hence, the latter as a rule is the party called upon to
bring the action for such ... unlawful exercise of franchise. (IV-B V. FRANCISCO, 298
[1963 ed.], citing Cruz vs. Ramos, 84 Phil. 226).

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.
 PLDT contends that the transfers in 1987 of the shares of stock to the new
stockholders amount to a transfer of ETCI's franchise, which needs Congressional
approval pursuant to Rep. Act No. 2090, and since such approval had not been
obtained, ETCI's franchise had been invalidated. The provision relied on reads, in
part, as follows:

SECTION 10. 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. ...

It should be noted, however, that 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.

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 No. 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,
thus:

SEC. 20. Acts requiring the approval of the Commission. Subject to established
stations 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

xxx xxx xxx

(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. (As amended by Com. Act No. 454).

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. 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. 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 P360,000.00 to P40M, and the stock transfers made by 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
(Corporation Code, Sec. 2).

To all appearances, the stock transfers were not just for the purpose of acquiring the ETCI franchise,
considering that, as heretofore stated, a series of transfers was involved from 1964 to 1987. And,
contrary to PLDT's assertion, the franchise was not the only property of ETCI of meaningful value.
The "zero" book value of ETCI assets, as reflected in its balance sheet, was plausibly explained as
due to the accumulated depreciation over the years entered for accounting purposes and was not
reflective of the actual value that those assets would command in the market.

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.

PLDT vehemently opposes interconnection with its own public switched telephone network. It
contends: that while PLDT welcomes interconnections in the furtherance of public interest, only
parties who can establish that they have valid and subsisting legislative franchises are entitled to
apply for a CPCN or provisional authority, absent which, NTC has no jurisdiction to grant them the
CPCN or interconnection with PLDT; that the 73 telephone systems operating all over the
Philippines have a viability and feasibility independent of any interconnection with PLDT; that "the
NTC is not empowered to compel such a private raid on PLDT's legitimate income arising out of its
gigantic investment;" that "it is not public interest, but purely a private and selfish interest which will
be served by an interconnection under ETCI's terms;" and that "to compel PLDT to interconnect
merely to give viability to a prospective competitor, which cannot stand on its own feet, cannot be
justified in the name of a non-existent public need" (PLDT Memorandum, pp. 48 and 50).

PLDT cannot justifiably refuse to interconnect.

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 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.

The importance and emphasis given to interconnection dates back to Ministry Circular No. 82-81,
dated 6 December 1982, providing:

Sec. 1. That the government encourages the provision and operation of public mobile
telephone service within local sub-base stations, particularly, in the highly
commercialized areas;

Sec. 5. 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;

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.

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," thus:

WHEREAS, it is the objective of government to promote the rapid expansion of

telecommunications services in all areas of the Philippines;

WHEREAS, there is a need to maximize the use of telecommunications facilities

available and encourage investment in telecommunications infrastructure by suitably
qualified service providers;

WHEREAS, 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.

WHEREFORE, ... the following Department policies on interconnection and revenue

sharing are hereby promulgated:

1. All facilities offering public telecommunication services shall be

interconnected into the nationwide telecommunications network/s.
 xxx xxx xxx

4. The interconnection of networks shall be effected in a fair and non-

discriminatory manner and within the shortest time-frame practicable.

5. 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.

xxx xxx xxx

Since then, the NTC, on 12 July 1990, issued Memorandum Circular No. 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."

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.
It will surely heard in the negotiations concerning the interconnection agreement.

As disclosed during the hearing, 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. 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. To be sure, ETCI could
provide no mean competition (although PLDT maintains that it has nothing to fear from the
"innocuous interconnection"), and eat into PLDT's own toll revenue cream PLDT revenue," in its own
words), but all for the eventual benefit of all that the system can reach.

6. Ultimate Considerations

The decisive consideration 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.

Despite the fact that there is a virtual monopoly of the telephone system in the country at present.
service is sadly inadequate. Customer demands are hardly met, whether fixed or mobile. There is a
unanimous cry to hasten the development of a modern, efficient, satisfactory and continuous
telecommunications service not only in Metro Manila but throughout the archipelago. The need
therefor was dramatically emphasized by the destructive earthquake of 16 July 1990. It may be that
users of the cellular mobile telephone would initially be limited to a few and to highly commercialized
areas. However, it is a step in the right direction towards the enhancement of the
telecommunications infrastructure, the expansion of telecommunications services in, hopefully, all
areas of the country, with chances of complete disruption of communications minimized. It will thus
impact on, the total development of the country's telecommunications systems and redound to the
benefit of even those who may not be able to subscribe 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
(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).

WHEREFORE, finding no grave abuse of discretion, tantamount to lack of or excess of jurisdiction,

on the part of the National Telecommunications Commission in issuing its challenged Orders of 12
December 1988 and 8 May 1989 in NTC Case No. 87-39, this Petition is DISMISSED for lack of
merit. The Temporary Restraining Order heretofore issued is LIFTED. The bond issued as a
condition for the issuance of said restraining Order is declared forfeited in favor of private
respondent Express Telecommunications Co., Inc. Costs against petitioner.

SO ORDERED.

Paras, Feliciano, Padilla, Sarmiento, Cortes, Griño-Aquino and Regalado, JJ., concur.

Separate Opinions  
GUTIERREZ, JR., J., dissenting:

I share with the rest of the Court the desire to have a "modern, efficient, satisfactory, and continuous
telecommunications service" in the Philippines. I register this dissent, however, because I believe
that any frustrations over the present state of telephone services do not justify our affirming an illegal
and inequitable order of the National Telecommunications Commission (NTC). More so when it
appears that the questioned order is not really a solution to the problems bugging our telephone
industry.

My dissent is based on three primary considerations, namely:

(1) The Court has sustained nothing less than the desire of respondent ETCI to set-up a profitable
business catering to an affluent clientele through the use of billions of pesos worth of another
company's properties. No issues of public welfare, breaking up of monopolies, or other high
sounding principles are involved. The core question is purely and simply whether or not to grant
ETCI's desire for economic gains through riding on another firm's investments.

(2) The Court has permitted respondent ETCI to operate a telephone system without a valid
legislative franchise. It strains the imagination too much to interpret a legislative franchise
authorizing "radio stations" as including the provisional permit for a sophisticated telephone system
which has absolutely nothing to do with radio broadcasts and transmissions. The Court subverts the
legislative will when it validates a provisional permit on the basis of authority which never envisioned
much less intended its use for a regular telephone system catering to thousands of individual
receiver units. There is nothing in Rep. Act No. 2090 which remotely suggests a cellular mobile
telephone system.

(3) The authority given by Rep. Act No. 2090 has expired. ETCI is not only riding on another
company's investments and using legislative authority for a purpose never dreamed of by the
legislators but is also trying to extract life from and resurrect an unused and dead franchise.

My principal objection to the disputed NTC order arises from the fact that respondent Express
Telecommunications Co. Inc. (ETCI) cannot exist without using the facilities of Philippine Long
Distance Telephone Co. (PLDT). Practically all of its business will be conducted through another
company's property.

While pretending to set up a separate phone company, ETCI's cellular phones would be useless
most of the time, if not all the time, unless they use PLDT lines. It would be different if ETCI phone
owners would primarily communicate with one another and tap into PLDT lines only rarely or
occasionally.

To compare ETCI with the Government Telephone System (GTS) or with an independent phone
company serving a province or city is misleading. The defunct GTS was set up to connect
government offices and personnel with one another. It could exist independently and was not
primarily or wholly dependent on PLDT connections. A provincial or city system serves the residents
of a province or city. It primarily relies on its own investments and infrastructure. It asks for PLDT
services only when long distance calls to another country, city, or province have to be made.

I can, therefore, understand PLDT's reluctance Since it has its own franchise to operate exactly the
same services which ETCI is endeavoring to establish. PLDT would be using its own existing lines.
Under the Court's decision, it would be compelled to allow another company to use those same lines
in direct competition with the lines owner. The cellular system is actually only an adjunct to a regular
telephone system, not a separate and independent system. As an adjunct and component unit or as
a parasite (if a foreign body) it must be fed by the mother organism or unit if it is to survive.

Under the disputed order, ETCI will be completely dependent upon its use of the P16 billions worth
of infrastructure which PLDT has built over several decades. The vaunted payment of compensation
everytime an ETCI phone taps into a PLDT line is illusory. There can be no adequate payment for
the use of billions of pesos of investments built up over 60 years. Moreover, it is actually the phone
owner or consumer who pays the fee. The rate will be fixed by Government and will be based on the
consumer's best interests and capacity, ignoring or subordinating the petitioner's investments.
Payment will depend on how much the phone user should be charged for making a single phone call
and will disregard the millions of pesos that ETCI will earn through its use of billions of pesos worth
of another company's investments and properties.

The "hated monopoly" and "improved services" arguments are not only misleading but also illusory.

To sustain the questioned NTC order will not in any way improve telephone services nor would any
monopoly be dismantled. The answer to inadequate telephone facilities is better administrative
supervision. The NTC should pay attention to its work and compel PLDT to improve its services
instead of saddling with the burden of carrying another company's system.

For better services, what the country needs is to improve the existing system and provide enough
telephone lines for all who really need them. The proposed ETCI cellular phones will serve mostly
those who can afford to tide in expensive cars and who already have two or three telephones in their
offices and residences. Cellular phones should legally and fairly be provided by PLDT as just
another facet of its expansion program.

The mass of applicants for new telephones will not benefit from cellular phones. In fact, if PLDT is
required by NTC to open up new exchanges or interconnections for the rich ETCI consumers, this
will mean an equivalent number of low income or middle income applicants who will have to wait
longer for their own PLDT lines. The Court's resolution favors the conveniences of the rich at the
expense of the necessities of the poor. *

I agree with the petitioner that what NTC granted is not merely provisional authority but what is in
effect a regular certificate of public convenience and necessity or "CPCN".

Starting with seven cell sites for 3,000 subscribers in Metro Manila, the cellular mobile system will
establish 67 cell sites beginning October 1991. The initial expenses alone will amount to P130
million. At page 8 of its Comment, ETCI admits that that "the provisional authority to operate will
be useless to ETCI if it does not put up the system and interconnnect said system with the existing
PLDT network."(Emphasis supplied) The completion of interconnection arrangements, the setting up
of expensive installations, the requirements as to maintenance and operation, and other conditions
found in the NTC order are anything but provisional.

The authority given to ETCI is entirely different from the provisional authority given to MERALCO or
oil companies to increase the price of oil or electricity or to bus and jeepney operators to raise fares
a few centavos. In these cases the need for increases is not only urgent but is usually a foregone
conclusion dictated by pressing circumstances. Further hearings are needed only to fix the amount
which will be finally authorized. The NTC orders can also be easily revoked. Increased prices of oil
or rates of transportation services can be lowered or struck down if the preliminary determinations
are wrong. In the instant case, NTC has authorized a new company to start operations even if the
issues have not been thoroughly threshed out. There is no urgent need which warrants operations
before a final permit is granted. Once in operation, there can be no cancelling or revocation of the
authority to operate, no dismantling of thousands of cellular phones and throwing to waste of over
P100 million worth of investments in fixed facilities. Theoretically, it can be done but it is clear from
the records that what was granted is really a CPCN.

There is no dispute that a legislative franchise is necessary for the operation of a telephone system.
The NTC has no jurisdiction to grant the authority. The fact that ETCI has to rely on a 1958
legislative franchise shows that only Congress can give the franchise which will empower NTC to
issue the certificate or CPCN.

Rep. Act No. 2090 is a franchise for the construction and operation of radio stations. Felix Alberto
and Co. Inc. (FACI) was authorized in the operation of those radio stations to acquire and handle
transmitters, receivers, electrical machinery and other related devises. The use of radio telephone
was never intended or envisioned for a regular telephone company. "Radio telephony" is governed
and circumscribed by the basic purpose of operating radio stations. Telephony may be used only to
enable communications between the stations, to transmit a radio message to a station where it
would be transcribed into a form suitable for delivery to the intended recipient. FACI was authorized
to communicate to, between, and among its radio stations. There is no authority for thousands of
customers to be talking to PLDT subscribers directly. FACI was never given authority by Rep. Act
2090 to operate switching facilities, wire-line transmissions, and telecommunication stations of a
telephone company. The entire records can be scrutinized and they will show that ETCI has all but
ignored and kept silent about the purpose of its alleged franchise-which is for the real operation of
radio stations. There can be no equating of "radio stations" with a complete cellular mobile telephone
system. The two are poles apart.
The most liberal interpretation can not possibly read in a 1958 franchise for radio stations, the
authority for a mobile cellular system vintage 1990. No amount of liberal interpretation can supply
the missing requirement. And besides, we are not interpreting a Constitution which is intended to
cover changing situations and must be read liberally. Legislative franchises are always
construed strictly against the franchise.

The remedy is for ETCI to go to Congress. I regret that in dismissing this petition, we may be
withholding from Congress the courtesy we owe to it as a co-equal body and denigrating its power to
examine whether or not ETCI really deserves a legislative franchise.

My third point has to do with the sudden resurrection of a dead franchise and its coming to life in an
entirely different form-no longer a radio station but a modern telephone company.

I have searched the records in vain for any plan of ETCI to operate radio stations. It has not
operated and does not plan to operate radio stations. Its sole objective is to set up a telephone
company. For that purpose, it should go to Congress and get a franchise for a telephone company.
NTC cannot give it such a franchise.

Section 10 of Rep. Act No. 2090 prohibits the transfer of the franchise and the rights and privileges
under that franchise without the express approval of Congress. No amount of legal niceties can
cloak the fact that ETCI is not FACI, that the franchise was sold by FACI to ETCI, and that the permit
given by NTC to ETCI is based on a purchased franchise.

When the owners of FACI sold out their stocks, the 3,900 shares were on paper worth only 35
centavos each. The company had no assets and physical properties. All it had was the franchise, for
whatever it was worth. The buyers paid P4,618,185.00 for the company's stocks, almost all of the
amount intended for the franchise. It was, therefore, a sale or transfer of the franchise in violation of
the express terms of Rep. Act No. 2090 which call for approval by Congress.

ETCI tried to show a series of transactions involving the sales of almost all of its stocks. Not only are
the circumstances surrounding the transfers quite suspicious, but they were effected without the
approval and authorization of the Commission as required by law.

Sec. 4 of Rep. Act No. 2090 also provides that the franchise shall be void unless the construction of
radio stations is begun within two years or June 22, 1960 and completed within ten years or June 22,
1968.

As of April 14, 1987, ETCI formally admitted that it was still in the pre-operating stage. Almost 30
years later, it had not even started the business authorized by the franchise. It is only now that it
proposes to construct, not radio stations, but a telephone system.

During the oral arguments and in its memorandum, ETCI presented proof of several radio station
construction permits. A construction permit authorizes a construction but does not prove it. There is
no proof that the entire construction of all stations was completed within ten years. In fact, there is
not the slightest intimation that ETCI, today, is operating radio stations. What it wants is to set up a
telephone system.

In addition to the franchise being void under its own charter, P.D. 36 on November 2, 1972,
cancelled all unused or dormant legislative franchises. Rep. Act No. 2090, having been voided by its
own Section 4, suffered a second death if that is at all possible.
The violations of law-(1) the giving of life to an already dead franchise, (2) the transfer of ownership
against an express statutory provision, and (3) the use of a franchise for radio stations to justify the
setting up of a cellular mobile telephone system are too glaring for us to ignore on the basis of
"respect" for a questionable NTC order and other purely technical considerations. We should not
force PLDT to open its lines to enable a competitor to operate a system which cannot survive unless
it uses PLDT properties.

The NTC bases its order on alleged grounds of public need, public interest, and the common good.
There is no showing that these considerations will be satisfied, at least sufficient to warrant a
strained interpretation of legal provisions. Any slight improvement which the expensive ETCI project
will accomplish cannot offset its violation of law and fair dealing.

I, THEREFORE, VOTE to GRANT the petition.

Fernan, C.J., Narvasa, Gancayco, Bidin and Medialdea, JJ., concur.

CRUZ, J., concurring and dissenting:

As one of the many dissatisfied customers of PLDT, I should have no objection to the grant of the
provisional authority to ETCI. I have none. Its admission will improve communication facilities in the
country conformably to the constitutional objective. It will also keep PLDT on its toes and encourage
it to correct its deficient service in view of the competition.

I fully agree with all the rulings in the ponencia except the approval of the requirement for PLDT to
interconnect with ETCI. I think it violates due process. It reminds me of the story of the little red hen
who found some rice and asked who would help her plant it. None of the animals in the farm was
willing and neither did they help in watering, harvesting and finally cooking it. But when she asked,
"Who will help me eat the rice?" everyone wanted to join in. The little red hen is like PLDT.

If ETCI wants to operate its own telephone system, it should rely on its own resources instead of
riding piggy-back on PLDT. It seems to me rather unfair for the Government to require PLDT to
share with a newcomer and potential rival what it took PLDT tremendous effort and long years and
billions of pesos to build .

The case of Republic of the Philippines v. PLDT, 26 SCRA 620, is not applicable because it was the
Government itself that was there seeking interconnection of its own telephone system, with PLDT.
The Court recognized the obvious public purpose that justified the special exercise (by the
Government of the power of eminent domain. But in the case before us, the intended beneficiary is a
private enterprise primarily organized for profit and, indeed, to compete with PLDT. In effect, the
Government is forcing PLDT to surrender its competitive advantage and share its resources with
ETCI, which may not only supplement but, possibly, even ultimately supplant PLDT. I do not think
government authority extends that far.

The majority disposes of the question of due process by simply saying that PLDT will have frill
opportunity to be heard in the ascertainment of the just compensation ETCI will have to pay for the
interconnection. That is not the issue. What PLDT is objecting to is not the amount of the just
compensation but the interconnection itself that is being forced upon it.

I feel there is no due process where private property is taken by the Government from one private
person and given to another private person for the latter's direct benefit. The fact that compensation
is paid is immaterial; the flaw lies in the taking itself (Davidson v. New Orleans, 90 U.S. 97). The
circumstance that PLDT is a public utility is no warrant for taking undue liberties with its property,
which is protected by the Bill of Rights. "Public need" cannot be a blanket justification for favoring
one investor against another in contravention of the system of free enterprise. If PLDT has misused
its franchise, I should think the solution is to revoke its authority, not to force it to share its resources
with its private competitors.

The rule is that where it is the legislature itself that directly calls for the expropriation of private
property, its determination of the thing to be condemned and the purpose of the taking is conclusive
on the courts (City of Manila v. Chinese Community, 40 Phil. 349). But where the power of eminent
domain is exercised only by a delegate of the legislature, like ETCI, the courts may inquire into the
necessity or propriety of the expropriation and, when warranted, pronounce its invalidity (Republic of
the Philippines v. La Orden de PO Benedictinos de Filipinas, 1 SCRA 649). I think this is what the
Court should do in the case at bar.

A final point. It is argued that requiring ETCI to start from scratch (as PLDT did) and import its own
equipment would entail a tremendous outflow of foreign currency we can ill afford at this time.
Perhaps so. But we must remember that the Bill of Rights is not a marketable commodity, like a
piece of machinery. Due process is an indispensable requirement that cannot be assessed in dollar
and cents.

Fernan, C.J., and Narvasa, J., concur.

Footnotes

1 SEC. 4. This franchise shall continue for a period of fifty years from the date the
first of said stations shall be placed in operation, and is granted upon the express
condition that same shall be void unless the construction of said station be begun
within two years from the date of the approval of this Act and be completed within ten
years from said date.

2 SECTION 1. Action by Government against individuals. An action for the

usurpation of office or franchise may be brought in the name of the Republic of the
Philippines against:

(a) A person who usurps, intrudes into, or unlawfully holds or exercises a public
office, or a franchise, or an office in a corporation created by authority of law;
xxx xxx xxx

SECTION 2. Like actions against corporations. — A like action may be brought
against a corporation:

(a) When it has offended against a provision of an Act for its creation or renewal;

(b) When it has forfeited its privileges and franchises by non-user;

(c) When it has committed or omitted an act which amounts to a surrender of its
corporate rights, privileges, or franchises;

(d) When it has misused a right, privilege, or franchise conferred upon it by law, or
when it has exercised a right, privilege, or franchise in contravention of law.
SECTION 3. When Solicitor General or fiscal must commence action.-The Solicitor
General or a fiscal, when directed by the President of the Philippines, or when upon
complaint or otherwise he has good reason to believe that any case specified in the
last two preceding sections can be established by proof, must commence such
action.

GUTIERREZ, JR., J.: Dissenting Opinion

* The subscriber pays P38,000.00 for a vehicle borne telephone for a portable
phone. and P57,000.00 for a Pocketphone, although NTC allow 15% discounts on
these amounts. There is a basic charge which includes P750.00 a month for free
answering services. If the subscriber uses his phone from 7:00 AM to 7:00 PM, he
pays P7.00 for the first minute and P5.50 for each additional minute. For a long
distance calls, the PLDT toll is added. Even for unsuccessful and unconnected
operator assisted calls there is a P4.00 charge per call.