THIRTEENTH CONGRESS OF THE REPUBLIC 
) 
OF THE PHILIPPINES 
1 
First Regular Session 
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S E N A T E  
s-. 
S. No. 
Introduced bv Senator S. R. OsmeAa Ill 
EXPLANATORY NOTE 
Global communications have evolved in a way that we have never 
imagined it to be. Geographical borders and distance have become irrelevant 
mainly due to the continuing development of our information and communication 
technology services. Technology has ceased to be a one-purpose medium; 
defying earlier inventions. 
The telephone communication-a solely 
voice 
communication until more or less 20 years ago- has been improved to enable 
data and video communication possible. The result: Internet technology. 
But before everything else became possible, there is what we call a 
convergence of technologies where one or more different technologies come 
together to create a harmonious transmission of sound, video and data coursed 
through the information gateway that is the Internet and any other wireless 
means. It has become synonymous to a multi-tasking person, thereby increasing 
productivity that essentially boils down to good business. 
However, previous laws passed particularly R.A. 7925 and E.O. 436 are 
now deemed to be insufficient to satisfy the need for increasing demand of these 
newly-established services. 
This bill seeks to promote the establishment of more information and 
communication technology services companies in the country. Further, it also 
seeks to remove unnecessary regulatory prohibitions previously provided for in 
the law while anticipating 
constitutional limitations on foreign investments in 
certain in d u st ri es. 
In view of the foregoing, the early passage of this bill is earnestly sought. 
SERGIO OSMENA 111 
Senator 


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THIRTEENTH CONGRESS OF THE REPUBLIC 
) 
OF THE PHILIPPINES 
First Regular Session 
S E N A T E  
S. ‘No. 
Introduced by Senator S. R. OsmeAa 111 
AN ACT 
TO ESTABLISH STRUCTURAL REFORMS IN THE INFORMATION AND 
COMMUNICATIONS 
SECTOR 
TO 
PROMOTE 
THE 
DEVELOPMENT, 
DELIVERY AND USE OF CONVERGENT SERVICES 
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled: 
SECTION 1. Short Title - This Act shall be known as the “Convergence 
Policy Act of 2004”. 
SEC. 2. Scope and Limitations - This Act shall apply to application 
services and network services as defined herein. In does not deal with the 
regulation of the content provided by such services. 
SEC. 3. Definitions - For purposes of this Act, the following terms shall: 
(a) Convergence - the integration of two or more communications 
services in one common network; technologies moving together 
towards a common point and elimination of differences between the 
provisioning of video, audio and data, using digital and other emerging 
technologies; the coming together of two or more disparate 
disciplines; the coming together of two or more disparate disciplines 
or technologies; the ability of different network platforms to carry any 
and all kinds of services, and the coming together of consumer 


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devices such as, but not limited to the telephone television and 
personal computer. 
(b) Audio communication services - services provided through the 
transtnission and reception of sound signals including voice. 
(c) Data communication services - services provided through the 
transmission and reception of fixed images and or texts, including 
alphanumeric and special characters using wire or wireless means. 
(d) Network - a physical infrastructure comprising of two or more sets of 
modes and links capable of connecting two or more defined points. 
(e) Network Service - a service that provides connectivity between and 
among application service providers and end-users. 
Application Service - a service that provides audio, video, data, or 
any combination or enhancements thereof that are captured, 
processed, stored and communicated through electronic means. 
(9) Closed-user group - a lawfully organized group of individuals having 
its own communication network within 
a limited 
contiguous 
(f) 
geographical area such as a building, residential subdivision, 
industrial park, economic zone, commercial complex and unserved 
ba ra ng ays. 
SEC. 4. Declaration of National Policies - The development and 
delivery of application services converged through a single network shall be 
pursued in accordance with the following national policies; 
a. To enhance the vital role of communications and information in nation- 
building and to the economic development and security of the 
Philippines; 
b. To respond to technological advances that made possible the 
provisioning of applications communications services converged 
through a single network thus allowing a more efficient utilization of 
network facilities. 


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c. To promote the development and use of increased bandwidth, 
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transmission capacity, and advanced communication networks. 
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d. To facilitate, contribute and expedite the goal of the government in 
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achieving universal access and thus strengthen the economic, 
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educational and cultural, social and political fabric of the Philippines. 
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e. To attract investments in the building of telecommunications 
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infrastructures and in the provisioning of application services subject to 
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laws on foreign ownership limitations; and 
f. To provide applications services users the effective power to choose 
among convergent applications services providers. 
SEC. 5. Policy Objectives - Pursuant to the above national policies, this 
Act is enacted to address certain legal and regulatory issues rising from the 
technological advances rendering possible the delivery of all kinds of applications 
services through a single network, including but not limited to, the ownership and 
management of application service providers and network service providers, the 
need for a legislative franchise and other governmental authorizations, consumer 
rights, fair competition, rights and obligations of service providers, and powers of 
concerned government agencies. 
SEC. 6. Ownership and Management - Application Service Providers 
shall be subject to rules and restrictions on foreign ownership, control and 
operation as provided under the Constitution and existing laws. In any case 
where different rules and restrictions apply to the individual communications 
services converged, that which is most restrictive on foreign ownership, control 
and operation shall apply. 
Network Service Providers shall be open to ownership, control and 
operation by citizens of the Philippines and by corporations or cooperatives 
organized under Philippine laws at least sixty percent (60%) of the capital of 
which is owned and controlled by citizens of the Philippines. 


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Persons or entities acting both as Applications Service Providers and 
Network Service Providers shall be subject to rules and restrictions on foreign 
ownership, control and operation as provided under the Constitution, this Act and 
other existing laws. In any case where different rules and restrictions apply to the 
individual Applications Services converged and to those provided under this Act 
in the case of Network Services, that which is most restrictive in foreign 
ownership, control and operation shall apply. 
The participation of foreign nationals in the governing body of any 
Applications Service Provider and/or Network Service Provider shall be limited to 
their proportionate share in its capital. 
SEC. 7. Franchise and Other Government Authorizations - All 
Network Service Providers that shall operate on a nation-wide or region-wide 
basis shall obtain a legislative franchise, while all other Network Service 
Providers shall obtain a local franchise only from the appropriate local 
government unit/s wherein they shall operate; Provided, that all Network Service 
Providers shall also secure all such certificates, permits, licenses and 
authorizations as may be required by the National Telecommunications 
Commission and other relevant agencies under such rules and regulations 
existing and/or to be issued by such agencies. 
SEC. 8. Lease of Facilities - All network service providers may lease or 
sublease capacity to applications service providers other network access service 
providers. 
SEC. 9. Non-Discriminatory Service - All network service providers 
shall provide their services to all application service providers and other network 
service providers in a non-discriminatory manner. 
SEC. 
I O .  Rates and Tariffs - Network services and applications services 
shall be individually priced. The aggregate price of two or more converged 
applications services shall be less than the sum of the individual prices of the 


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applications services availed of. Prices shall be based on the prevailing cost of 
providing the service/s. 
An entity both network service and application servicels shall maintain a 
separate book of accounts for each service. 
Any entity providing network service shall apply uniform rates to all 
applications service providers, including those affiliated with such entity, and to 
all other network service providers. 
The Commission shall establish rates and tariffs, which are fair and 
reasonable and which provide for fair and just competition for regulated services. 
The Commission shall exempt, pursuant to an application, any specific 
convergent applications service and network service from its rate or tariff 
regulations if the service has sufficient competition to ensure fair and reasonable 
rates or tariffs. The Commission shall, however, retain its residual powers to 
regulate rates or tariffs when ruinous competition results or when a monopoly or 
a cartel or combination in restraint of free competition exists and the rates or 
tariffs are distorted or unable to function freely and the public is adversely 
affected. In such cases, the Commission shall either establish a floor or ceiling 
on the rates or tariffs. 
SEC. 11. Equity of Treatment - Any advantage, favor, privilege, 
exemption, or immunity granted under existing franchises, or may hereafter be 
granted, shall ipso facto become part of franchises covered under this Act and 
shall be accorded to the grantees of such franchises insofar as such neither 
apply to nor affect provisions of franchises concerning territory covered by the 
franchise, the life span of the franchise, or the type or service authorized by the 
franchise. 
SEC. 12. Rights of Users - Users’ right shall be recognized including the 
following: 
a. Right to change from one convergent applications service provider or 
network service provider to another. 


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b. Right to provide accessory facilities to their customer premises 
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equipment (CPE) in addition to the facilities provided by the service 
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provider under this Act, to enable him to access competitive 
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convergent communication services. 
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subscribers thereto. 
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d. Right to non-discriminatory, reliable, and efficient services conforming 
c. Right to form closed-user groups and to connect their networks with 
any duly authorized network service providers operating therein as 
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to the minimum standards prescribed by the Commission. 
e. Right to choose and pay only for the service(s) availed of. 
f. Right to regular, timely, and accurate billing and courteous and efficient 
service. 
g. Right to thorough and fair investigation and prompt resolution by the 
Commission of any service-related complaint. 
SEC. 13. Rights of Service Providers - Service Providers shall have the 
following rights: 
a. Right to prompt resolution by the Commission of any petition for 
service rates adjustments. 
b. Right to demand from its users the connection of only type-approved 
CPEs by the NTC or duly recognized NTC accreditation bodies. 
c. Right to prompt interconnection in a non-discriminatory manner at just 
and reasonable rates and conditions, and prompt resolution of any 
disputes pertaining thereto. 
SEC. 14. Department of Transportation and Communications (DOTC) 
- The Department, in addition to its existing powers, functions and 
responsibilities, and in coordination with other concerned agencies, shall, 
pursuant to this Act: 
a. Ensure that the policies and objective of this Act are fully adhered to; 


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b. Recommend incentives to convergent applications services providers 
and network service providers in unserved areas, educational 
institutions, libraries, social-service agencies, tourist destinations such 
as national parks, and under served rural areas. 
c. Promote the development and transfer of technologies that allow 
convergence of applications services. 
SEC. 15. National Telecommunications Commission (NTC) - The 
Commission in addition to its existing powers, functions and responsibilities, 
shall, pursuant to this Act: 
a. Ensure that all entities provide services in a non-discriminatory 
manner. 
b. Ensure the interconnection and inter-operability of all networks. 
c. Formulate and implement a numbering or addressing system to 
facilitate access to communication services. 
d. Formulate and implement rules to prevent unfair competition and trade 
practices. 
e. Formulate and implement rules and regulations and procedures to act 
upon application for exemption from regulation of rates and tariffs. 
f. Require the submission by the network service providers and 
application service providers of periodic reports of finances and 
operations. 
g. Prescribe and collect fees and charges to cover reasonable costs and 
expenses for the regulation and supervision of network service 
providers and application service providers. 
h. Formulate and implement rules and regulations and procedures to 
protect the rights of the service providers and users. 
Formulate and implement rules, regulations, and procedures for the 
prompt issuance of authorizations, certificates, licenses and permits for 
the provision of services under this Act. 
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j. Promulgate the schedule of fines and penalties to be issued for 
violations of any prov/sion of this Act. 
SEC. 16. Sanctions - Failure to comply with any provision of this Act 
shall be dealt with in accordance with the schedule of fines and penalties to be 
promulgated and issued by the NTC. 
SEC. 17. Separability Clause - Any portion or provisions of this Act that 
may be declared unconstitutional or invalid shall not have the effect of nullifying 
other portions or provision hereof as long as such remaining portions or 
provisions can still subsist and be given effect in their entirety. 
SEC. 18. Repealing Clause - All laws, ordinances, rules, regulations and 
other issuances or parts thereof, which are inconsistent with this Act are hereby 
repealed or modified. Nothing in this Act shall be construed as to exempt an 
entity from a provision of any law relevant to any of services converged in its 
business by reason solely of the fact that such service is not being offered as a 
separate service but as service converged with another. 
SEC. 19. Effectivity Clause - This Act shall take effect fifteen (1 5) days 
from the date of its publication in the Official Gazette or in at least two (2) 
newspapers of general circulation. 
Approved,