Here’s the Telcos’ Legal Strategy for Killing VoIP

As I understand it, there are about 50,000 lawyers in this country of 80 million people.  That’s about 6/10 of 1% of the population.  In yesterday’s NTC hearing on the draft VOIP rules, there were about 20 or so lawyers from among the 100 or so present.  In short, there was an unusually high concentration of lawyers in the NTC. So much so, that if the building were bombed, then some would say, it would have been a good thing for this country.

We should not forget that the NTC Commissioner is a lawyer. Apart from himself, the lawyers for Smart, Globe, and PLDT were present.  Other lawyers representing VoIP clients were also in attendance was well as lawyers (like myself) who were there just for the fun of it.  Everyone likes a good fight and the hearings did not disappoint.

The lawyers were not only present.  They dominated the discussion.  This was equally lamented in INQ7’s report on the hearing.  The lawyers for the telcos took their turns laying out to the Commission the meat of their legal strategy:  WE WILL SUE TO STOP ANY FORM OF VOIP BUSINESS THAT IS NOT LIMITED TO THE TELCOS (aka the PTEs).  There’s a bit of irony here especially since the new players are beneficiaries of the NTC’s policies that de-regulated the telecom industry in the mid-90’s.  Now, as part of the entrenced status quo, they want to keep things the way they are. 

Back to the legal issues.  Here’s an outline of the telcos’ arguments:

1. Constitutional attack.  For lawyers (particularly defense counsel), Constitutional issues bring the most joy to their faces.  This means, they can tie up the case for years as it winds through the maze that is our judiciary.  For the telcos, the VoIP rules are unconstitutional because the 1987 Constitution provides that public utilities must be duly enfranchised by Congress.  In other words, the NTC has no authority to authorize anyone other than PTEs (or the Telcos) to offer VoIP. 
2. Attack on NTC’s authority. Atty. Salalima of Globe added a twist to this argument — if the NTC is a successor of the Public Service Commission, then its authority is limited to entities providing public service. If the NTC holds (as the VoIP rules do) that VoIP is not a public service, then the NTC has no authority over VoIP.  The legal basis for NTC’s rule-making power disappears in a puff of legal logic.
3. Statutory attack.  In support of the Constitutional attack, the telcos (or their lawyers) cite the provisions of the Public Telecoms Policy Act which also reserves voice services to the telcos. 
4. The VAS attack.   The heart of the issue of course is the definition of Value Added Service under the Public Telecom Policy Act.  The NTC is of the opinion that VAS can include VoIP. The telcos see it otherwise.  The law says that VAS is an “enhanced service”.  The telcos are so creative that they’ve attacked this on two fronts.  First they cite the NTC’s own memo saying that VoIP is a service which is not at par with regular voice services.  Well, if it’s not as good, then it’s not “enhanced” and therefore, cannot qualify as VAS.  Second, if VoIP is better than regular voiceservices, then they revert to the Statutory attack — only telcos are allowed to offer it.
5. The Slippery Slope Attack.  This argument was ably presented by Atty. Roger Quevedo of Smart/Piltel.  Essentially, he believes that if the NTC declares VoIP as VAS, then the NTC places itself in a slippery slope as it can then declare any service as VAS.  This would have the effect of exempting service providers from the Constitutional requirement of securing a legislative franchise.He calls this “the path of chaos.”

Excellent arguments, they are (spoken like Yoda). But not entirely correct, they are, too.  But that’s beside the point.  The leverage brought about by a slow judicial process is enough to make these attacks worthy of serious consideration.

As I mentioned, the telcos at yesterday’s hearings sent a clear message: WE WILL SUE.

And that is most unfortunate because they have failed to present to the NTC the true reasons for their legal positions.  Instead of legal posturing the telcos should explain why they believe a deregulated VoIP market would be detrimental to the public interest. These are financial and economic arguments that strike at the heart of the matter.  I believe that the Telcos are concerned about the cannibalization of their International Gateway revenues as cheaper VoIP calls will be the norm and users shy away from standard long-distance calls.  If that’s the case, then the telcos should make this argument and prove it instead of calling out their lawyers to grandstand and cloud the issues.  On the other hand, the VoIP industry (if there is one) should equally be required to make their case — that VoIP deregulation will not kill the telcos or even financially harm them as the total number of calls expands the market and total revenues for overseas calls in general.  Both sides need to make their case to the NTC.

If the NTC will discharge its mandate of protecting the public interest, then it should force the different sides to dialogue on the true issues rather than resort to arguments on legal minutiae.  If economic concerns are addressed then the lawyer can stand down and go about their regular business. 

I believe if the NTC fails to do this, then the VoIP rules are bound for failure and litigation.  The structure of the arguments above is not solid - I believe many of the arguments are plain wrong.  But we have to contend with the fact that the law is a slow moving machine that does not consider the pace of either techonological innovation or the rigors of the open marketplace.  VoIP stands in the middle of these three spheres.  If the law will fail to resolve this dispute, then the market and technology will.  So, this is a final call for the NTC — if nothing happens here, then other forces will see this to some sort of conclusion.