Telecommunications Franchise in the Philippines: Requirements and How to Obtain One

A telecommunications franchise in the Philippines is a privilege conferred by Congress on an entity, authorizing it to engage in a certain type of telecommunications service. No person may commence or conduct the business of being a public telecommunications entity without first obtaining a franchise. A franchise alone, however, is not enough: the grantee must also secure a Certificate of Public Convenience and Necessity (CPCN) and other permits from the National Telecommunications Commission (NTC) before operating.

What the law says about the franchise requirement

Section 16 of Republic Act No. 7925, the Public Telecommunications Policy Act of the Philippines, is explicit: no person shall commence or conduct the business of being a public telecommunications entity without first obtaining a franchise. The same law defines a franchise as a privilege conferred upon a telecommunications entity by Congress, authorizing that entity to engage in a certain type of telecommunications service.

Under the Implementing Rules and Regulations of Republic Act No. 11659, any franchise or certificate necessary for the operation of a public service shall be granted by Congress unless otherwise previously delegated by law to the relevant administrative agency. The rules add that nothing in the law shall diminish, limit, or restrict the authority of Congress from granting franchises to public services.

This is why telecommunications franchises in the Philippines are legislative: they are granted through a law passed by Congress and signed by the President.

The requirements to obtain a telecommunications franchise

A telecommunications entity must be authorized to operate in one or more of the categories under Republic Act No. 7925, provided each category is covered by its franchise. These categories include:

• Local exchange operator — transmission and switching of telecommunications services, primarily voice-to-voice, in a geographic area.
• Inter-exchange carrier — facilities connecting local exchanges and national long-distance services.
• International carrier — transmission and switching of services between the Philippines and other points.
• Value-added service provider (VAS) — enhanced services beyond those ordinarily provided by carriers.
• Mobile radio telephone system — wide-area mobile service with its own switch and base stations.
• Radio paging services — voice or data paging.

Applicants must also show that they are qualified. Under the IRR of Republic Act No. 11659, a certificate authorizing the operation, management, or control of a public service shall be issued only to corporations, partnerships, associations, or joint stock companies organized under Philippine laws. The nature and scope of the franchise must also be defined — a legislative franchise typically states the services authorized, the territory covered, and the term.

How the franchise process works

Step 1: Determine the service category. Identify which telecommunications category the business will operate under, since the franchise must cover each category.

Step 2: Secure the legislative franchise. A bill is filed in Congress, deliberated by the committees on legislative franchises, passed by both chambers, and submitted to the President. The franchise is granted by law, not by the NTC.

Step 3: Obtain the CPCN and NTC permits. Under Section 16 of Republic Act No. 7925, the NTC, in granting a CPCN, may impose conditions as to duration and termination of the privilege, technical aspects of equipment, rates, or service, not contrary to the terms of the franchise. The CPCN shall not be shorter than five (5) years, nor longer than the life of the franchise.

Step 4: Comply with continuing obligations. Franchise grantees must meet the conditions in their franchise and applicable regulations, including reportorial requirements and, where required, dispersal of ownership.

What a franchise does not cover

Two important limits stand out. First, Section 4 of Republic Act No. 7925 provides that no single franchise shall authorize an entity to engage in both telecommunications and broadcasting, whether through the airwaves or by cable. Second, a VAS provider need not secure a franchise, provided it does not put up its own network.

Frequently asked questions

Do I need a franchise to operate a telecommunications business in the Philippines? 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 from Congress.

Can one franchise cover both telecommunications and broadcasting? No. Under Section 4 of Republic Act No. 7925, no single franchise shall authorize an entity to engage in both telecommunications and broadcasting, either through the airwaves or by cable.

What is the difference between a franchise and a CPCN? A franchise is the privilege granted by Congress authorizing the entity to engage in a certain type of telecommunications service. A CPCN is issued by the NTC, which may impose conditions on duration, equipment, rates, or service, and which cannot be shorter than five (5) years nor longer than the life of the franchise.

Practical takeaways

• A legislative franchise from Congress is mandatory before operating as a public telecommunications entity.
• The franchise must cover each telecommunications category the entity intends to operate in.
• A CPCN from the NTC is required in addition to the franchise; it runs at least five (5) years and no longer than the franchise term.
• One franchise cannot cover both telecommunications and broadcasting.
• A VAS provider that does not put up its own network does not need a franchise.

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

• 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

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