Network Peering and Interconnection Agreements in the Philippines: A Legal Guide

Interconnection, as defined by Republic Act No. 7925 (the Public Telecommunications Policy Act of the Philippines), is the linkage of two or more existing telecommunications carriers or operators for the purpose of allowing the subscribers of one carrier to access or reach the subscribers of the other. Philippine law treats interconnection not as a purely private commercial matter but as a policy imperative: the state declares that a fair and reasonable interconnection of facilities of public network operators and other providers of telecommunications services is necessary to achieve viable, efficient, reliable and universal telecommunications services. For network operators, data centers, and carriers, this means peering and interconnection arrangements sit at the intersection of contract law and regulated public service.

The legal basis for mandatory interconnection

Republic Act No. 7925 sets out the framework. Under Section 4, it is a declared national policy that a fair and reasonable interconnection of facilities of public network operators and other providers of telecommunications services is necessary to achieve viable, efficient, reliable and universal telecommunications services. The same section states that a healthy competitive environment shall be fostered in which telecommunications carriers are free to make business decisions and to interact with one another in providing telecommunications services.

The law also directs the National Telecommunications Commission (NTC) to mandate a fair and reasonable interconnection of facilities of authorized public network operators and other providers of telecommunications services through appropriate modalities of interconnection and at a reasonable and fair level of charges. The NTC is the principal administrator of the Act and is responsible for ensuring the quality, safety, reliability, security, compatibility and inter-operability of telecommunications facilities and services.

Who must interconnect

The obligation to interconnect attaches to specific categories of telecommunications entities under the law.

Inter-exchange carriers are expressly required to interconnect with other networks in the same category and with local exchange carriers or other telecommunications entities, upon application and within a reasonable time period, and under a fair and reasonable level of charges, so that domestic and international long distance services are made possible.

Local exchange operators are protected from uncompensated bypass or overlapping operations of other telecommunications entities in need of physical links or connections to their customers — except when the local exchange operator is unable to provide, within a reasonable period of time and at the desired standard, the interconnection arrangements required by such entities. In other words, the protection yields to the interconnection duty.

International carriers must produce a firm correspondent or interconnection relationship with major overseas telecommunications authorities or carriers within one year from the grant of authority, and failure to comply is a ground to cancel the authority to operate as an international carrier.

How interconnection agreements are negotiated and approved

Under Section 18 of Republic Act No. 7925, the access charge and revenue sharing arrangements between all interconnecting carriers shall be negotiated between the parties, and the agreement between the parties shall be submitted to the NTC. If the parties fail to agree within a reasonable period of time, the dispute shall be submitted to the Commission for resolution.

When adopting or approving an access charge formula or revenue sharing agreement, the NTC must ensure equity, reciprocity and fairness among the parties. The Commission considers the costs of the facilities needed to complete the interconnection, the need to provide cross-subsidy to local exchange carriers to increase telephone density, and the assurance of a rate of return on the total local exchange network investment at parity with other segments of the industry.

International carriers and mobile radio operators mandated to provide local exchange services are not exempt from the requirement to provide the cross-subsidy when they interconnect with the local exchanges of other carriers.

Peering, transit, and the limits of the framework

The statute speaks of interconnection between telecommunications carriers and operators. Peering arrangements between internet networks and content providers generally involve the same physical and logical linkage, and the same policy considerations of fair and reasonable charges and non-discrimination apply where a regulated public telecommunications entity is a party. Value-added service providers occupy a distinct position: provided it does not put up its own network, a VAS provider need not secure a franchise, and it may lease or rent telecommunications equipment and facilities necessary to provide its specialized services in accordance with network compatibility.

Telecommunications entities that provide value-added services must secure prior approval of the Commission to ensure such offerings are not cross-subsidized from the proceeds of their utility operations, must not discriminate against other VAS providers in rates or deny them equitable access to their facilities, and must maintain separate books of accounts for the VAS.

The regulator's role and enforcement

The NTC's mandate includes fostering fair and efficient market conduct and protecting telecommunications entities from unfair trade practices of other carriers. Under the Implementing Rules and Regulations of Republic Act No. 11659, the NTC is among the administrative agencies that continue to regulate and supervise public services under existing laws, and it retains the power to fix and determine fair and reasonable rates, tolls, charges, classifications and tariffs when the public interest requires.

The IRR also provides penalties: in the absence of a specific fine under the agency's charter or special law, a public service that violates or fails to comply with the terms and conditions of any certificate or any order, decision, or regulation of the relevant administrative agency is subject to a fine of not lower than Five Thousand Pesos (P5,000.00) but not exceeding Two Million Pesos (P2,000,000.00) per day for every day the violation continues.

Frequently asked questions

Is interconnection mandatory in the Philippines? Yes. Republic Act No. 7925 declares fair and reasonable interconnection a national policy and directs the NTC to mandate interconnection of facilities of authorized public network operators and other providers of telecommunications services.

Do interconnection agreements need NTC approval? The access charge and revenue sharing arrangements between interconnecting carriers are negotiated between the parties, and the agreement must be submitted to the NTC. If the parties cannot agree within a reasonable period, the dispute is submitted to the Commission for resolution.

Can a local exchange operator refuse interconnection? A local exchange operator is protected from uncompensated bypass or overlapping operations, but that protection does not apply when it is unable to provide the interconnection arrangements required by another entity within a reasonable period and at the desired standard.

Practical takeaways

• Interconnection is a statutory policy, not merely a commercial option, for public telecommunications entities in the Philippines.
• Access charge and revenue sharing terms are privately negotiated but must be submitted to the NTC, which resolves deadlocks.
• The NTC must ensure equity, reciprocity and fairness, and considers facility costs and cross-subsidy to local exchange carriers.
• Inter-exchange carriers, international carriers, and local exchange operators each carry distinct interconnection obligations under Republic Act No. 7925.
• Non-compliance with NTC orders or certificate conditions can trigger daily fines under the IRR of Republic Act No. 11659.

Primary sources

The rules discussed above are drawn from the following primary sources, as published in the Official Gazette and the national statute book.

• IRR of REPUBLIC ACT NO. 11659 - IMPLEMENTING RULES AND REGULATIONS OF THE REPUBLIC ACT NO. 11659 OR AN ACT AMENDING COMMONWEALTH ACT NO. 146, OTHERWISE KNOWN AS THE PUBLIC SERVICE ACT, AS AMENDED

• REPUBLIC ACT NO. 7925 - AN ACT TO PROMOTE AND GOVERN THE DEVELOPMENT OF PHILIPPINE TELECOMMUNICATIONS AND THE DELIVERY OF PUBLIC TELECOMMUNICATIONS SERVICES

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.