NTC CPCN Requirements in the Philippines: Process for Telecom Franchise Holders

A Certificate of Public Convenience and Necessity (CPCN) is the authority issued by the National Telecommunications Commission (NTC) that allows a franchise holder to operate as a public telecommunications entity. Under Republic Act No. 7925, no person may commence or conduct the business of being a public telecommunications entity without first obtaining a franchise, and the NTC grants the CPCN that carries the conditions of the privilege. The franchise itself is a privilege conferred by Congress; the CPCN is the regulatory authorization on top of it. The process therefore begins with a legislative franchise and ends with an NTC-issued CPCN.

Who needs a CPCN and who does not

A public telecommunications entity is any person, firm, partnership or corporation, government or private, engaged in the provision of telecommunications services to the public for compensation. Under Section 16 of Republic Act No. 7925, no person shall commence or conduct the business of being a public telecommunications entity without first obtaining a franchise.

A value-added service provider (VAS) is different. Under Section 11 of Republic Act No. 7925, provided that it does not put up its own network, a VAS provider need not secure a franchise. This is a common point of confusion for data center and digital infrastructure projects that ride on the facilities of licensed carriers.

The franchise requirement comes first

The franchise is a privilege conferred upon a telecommunications entity by Congress, authorizing that entity to engage in a certain type of telecommunications service. A telecommunications entity is authorized to operate in one or more categories mentioned in the law, provided each category is covered by its franchise.

The categories defined in Republic Act No. 7925 include the local exchange operator, the inter-exchange carrier, the international carrier, the value-added service provider, mobile radio services, and radio paging services. Each category carries its own obligations. An international carrier, for instance, must provide local exchange services and must demonstrably show technical and financial capability to install and operate an international gateway facility.

What the NTC requires before issuing a CPCN

The NTC is the principal administrator of Republic Act No. 7925 and is responsible for adopting an administrative process that facilitates the entry of qualified service providers. In granting a CPCN, the Commission may impose conditions as to duration and termination of the privilege, the concession, the standard or technical aspects of the equipment, rates, or service, provided these are not contrary to the terms of the franchise.

A franchise statute typically reinforces this. Under the franchise framework illustrated by Republic Act No. 11151, the grantee cannot exercise any right or privilege under the franchise without first obtaining a CPCN and such other permits or licenses from the NTC. That law also provides that the franchise does not take effect, and no power may be exercised, until the NTC allots the frequencies and wavelengths to be used, determines the stations to and from which each frequency and wavelength may be used, and issues a license for such use. The NTC may not unreasonably withhold or delay the grant of such authority, permits or licenses.

How long a CPCN lasts

Section 16 of Republic Act No. 7925 sets the term. In no case shall the CPCN be shorter than five (5) years, nor longer than the life of the franchise. A CPCN expiring at the same time as the franchise is deemed renewed for the same term if the franchise itself is also renewed or extended.

What does not need NTC approval

Two situations are expressly exempt from NTC approval under Section 16:

• Expansion and financing of network and services using equipment compatible with or homologous to existing or previously approved plant and facilities, to serve additional demand in the same areas already covered.
• Upgrading existing plant and network facilities, including financing, to retire or replace obsolete equipment with state-of-the-art technology to improve service quality within the same areas already covered.

The NTC will not grant a subsequent CPCN for another segment of service or extend the area service coverage of an entity that has failed to satisfactorily comply with its commitments to provide a particular service in the original area coverage under an earlier authorization.

Other NTC approvals tied to operations

A CPCN is not the only NTC requirement. Depending on the service, the entity may also need prior authority from the Commission. Mobile radio service providers, for example, must secure prior authority from the Commission and comply with the conditions imposed on VAS providers and with the norms on radio frequency spectrum utilization. Telecommunications entities that offer VAS must secure prior approval of the Commission to ensure the offerings are not cross-subsidized from the proceeds of their utility operations, must not discriminate against other VAS providers, and must maintain separate books of accounts for the VAS.

Frequently asked questions

Do I need a franchise before applying for a CPCN? Yes. Section 16 of Republic Act No. 7925 states that no person shall commence or conduct the business of being a public telecommunications entity without first obtaining a franchise. The CPCN is granted on top of that franchise.

How long is a CPCN valid in the Philippines? It cannot be shorter than five (5) years and cannot be longer than the life of the franchise. If the CPCN expires at the same time as the franchise, it is deemed renewed for the same term when the franchise is renewed or extended.

Does a value-added service provider need a CPCN or franchise? A VAS provider that does not put up its own network need not secure a franchise under Section 11 of Republic Act No. 7925. Telecommunications entities offering VAS, however, must secure prior approval of the Commission.

Practical takeaways

• A CPCN is issued by the NTC; a franchise is granted by Congress. Both are generally required to operate as a public telecommunications entity.
• The franchise must cover the category of service the entity intends to operate.
• A CPCN runs for at least five (5) years and no longer than the life of the franchise.
• Network expansion and equipment upgrading within the same approved areas generally do not require NTC approval.
• Entities that fail to comply with commitments in an earlier authorization may be denied a subsequent CPCN or an extension of service coverage.

Primary sources

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

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

• REPUBLIC ACT NO. 11151 - AN ACT RENEWING FOR ANOTHER TWENTY-FIVE (25) YEARS THE FRANCHISE GRANTED TO ISLA COMMUNICATIONS COMPANY, INC., PRESENTLY KNOWN AS INNOVE COMMUNICATIONS, INC. AMENDING FOR THE PURPOSE REPUBLIC ACT NO. NO. 7372 ENTITLED "AN ACT GRANTING THE ISLA COMMUNICATIONS CO. A FRANCHISE TO INSTALL, OPERATE AND MAINTAIN TELECOMMUNICATIONS SERVICE WITHIN THE TERRITORY OF THE REPUBLIC OF THE PHILIPPINES AND INTERNATIONAL POINTS AND FOR OTHER PURPOSES

• NTC MEMORANDUM CIRCULAR NO. 7-3-2000, March 01, 2000

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