The Constitutionality of the VoIP Guidelines

Atty. Rudy Salalima, Globe’s Senior VP and General Counsel, made an interesting remark in an INQ7 story on the VoIP draft rules issued by the NTC.

“The Constitution requires that a public utility must have a [Congressional] franchise,” he said. The NTC draft rules indicate however that prospective VoIP providers will not be required to apply for a Congressional franchise before offering the service.

So I checked the Constitution in particular Art. XII on National Economy and Patrimony and Section 11 which deals with public utilities. It reads:

Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens; nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines.

Is he correct?

First, the provision can be read to mean that only those with franchises can operate a public utility. This would uphold Atty. Salalima’s position that the NTC cannot authorize non-enfranchised companies to offer VoIP. But his take on the Constitution may be inaccurate. The Constitution does not close the possibility that public utilities can be authorized through means other than a congressional franchise (which is for all intents and purposes, a law passed by both houses and signed by the President). The Constitution contemplates certificates and “any other form of authorization.” Therefore, the NTC’s VoIP rules can be read to comply with the Constitution.

Second, if Atty. Salalima’s position were to be upheld, then it would also mean that the provisions on value added services in the Public Telecoms Policy Act of 1997 are also unconstitutional. It will be remembered that the law permits value added service providers to offer services to the public without the need for a congressional franchise. In fact, mere registration with the NTC is enough. Atty. Salalima’s constitutional argument would void the VAS scheme because this is an example where the law permits services to be rendered to the general public without a franchise.

My view is that his analysis could be improved. After all, the Constitutional Commission might have intended for all public utilities to go to Congress for a franchise. I’m not sure. Certainly, if this were the case, then Atty. Salalima’s point would have compelling basis.

As it is, I believe it is an argument that won’t be upheld by a court. Which leads me back to my earlier point about the cellcos bringing suit before the courts to question the validity of the VoIP rules. This is a viable option and Atty. Salalima’s argument being constitutional can bring the case all the way the Supreme Court. In that sense, he’s doing a great job because he’s giving his client the option to sue or better yet, not to sue.  Either way, the VoIP rules are destined to fail in bringing the full benefit of VoIP to the consuming public. 

But we can always hope and pray that this does not come to pass.