SEVENTEEN’
REPUBLIC OF TH.
Second Regular Session

SENATE
S.B.No.1'742

Introduced by Senator Ana There:

PROVIDING FOR THE

EXPLANATORY NOT

The radio frequency spectrum is critical to modern telecommunications, The
State apportions spectrum to telecommunications entities, enabling them to provide
services to the public, such as mobile telephony and i to the internet: services that
form the backbone of our social media networks, rid ‘Sharing services, and online
commerce platforms.

The radio frequency is composed of naturally occurring,
electromagnetic radiating ener; s natural resource, unlike oil, g id minerals, is
non-depletable but finite. Because spectrum is a limited resource, its use is considered a
privilege which may be withdrawn by the State at any time in the interest of public
welfare.

The Philippines itself has experienced substantial growth in the demand for
mobile data communications, with roughly 67 million internet users consuming an
estimated 150,000 terabytes of data annually.

However, in OpenSignal's latest State of LTE Report, using data parsed from over
50 billion measurements worldwide, taken between October 1 to December 29, the
Philippines ranked 75" out of 88 countries in terms of 4G availability (at 63.73%
consistent accessibility) and 85" in terms of 4G speed (at an average speed of 0.49
Mbps).

Secretary Eliseo Rio, Jr. of the Department of Information and Communications
‘Technology (DICT) has stated that one of the reasons the country has lagged behind the
rest of the world has been a lack of competition in the telecommunications sector, which
is currently dominated by the duopoly of Globe Telecom, Inc. and Smart
Communications, Inc. This lack of competition has been exacerbated by the scarcity of
ilable spectrum for allocation to new players looking to break the duopoly.

This scarcity limits competition from new entrants and increases the cost of using
spectrum to business and consumers. Similarly, the lack of unassigned usable spectrum
stifles and delays the introduction and development of new technology.

National Telecommunications Commission (NTC) Memorandum Circular No. 3-
3-96 provides that, where demand for specific frequencies exceeds availability,
allocation shall be through open tenders. Despite thi spectrum has not been allocated



in this manner. Instead the Commission has chosen to assign frequencies through
administrative “beauty contests” to various telecommunications entities.

The great irony is that, where spectrum has been as
way, lucrative secondary markets have commonly arisen, resulting in licenses and
permits being warehoused and sold to other parties. ‘This has often led to the anti-
competitive concentration of spectrum resources in the hands of a few industry players,
as is the current situation in the Philippines.

igned and allocated in this

Consequently, economists and other commentators have long questioned the
wisdom of granting valuable spectrum rights to commercial entities for a fraction of
their actual economic value.

In other jurisdictions, auctions of portions of the radio spectrum have led to
substantial windfalls for the public: in Thail and, the auction of the 900 MHz license
earned the government 4.2 billion USD; in India, auctions held in March 2015 earned 13
billion USD; in the United Kingdom, auctions held in 2000 for the frequencies
hecessary to support the 3G mobile telephony standard earned 36.9 billion EUR; and, in
Canada, an auction held in 2008 raised 4.25 billion USD.

Assignments of spectrum in the Philippines have also been open-ended:
subsisting until annulled, revoked, or suspended by the Commission or by the expiration
or termination of the assignee’s corporate existence. This has led to a regulatory regime
where mergers and acquisitions have resulted in the hoarding of critical frequencies,
specifically those required for mobile telephony and data.

‘This accentuates the need for a better framework to manage this critical resource
by, among others, establishing a system to regularly reallocate or re-farm portions of the
spectrum through competitive bidding. It is respectfully submitted that this will not only
generate additional revenue for the government, it will also, by promoting competition
and more efficient use of a scarce public resource, lead to better telecommunications
services for the public

Hence, the immediate passage of th

Qk by cttiorrop—
ANA THERESIA “RISA” HOWLPIVEROS-

BARAQUEL

measure is earnestly sought.



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tice of ie Sec

SEVENTEENTH CONGRESS OF THE) ena
REPUBLIC OF THE PHILIPPINES )

Second Regular Session ) “18 MAR 13 P207

SENATE
S.B.No. 1742 ECE 5 p

INTRODUCED BY SENATOR ANA THERESIA “RISA” HONTIVEROS
BARAQUEL

AN ACT
PROVIDING FOR THE ALLOCATION AND MANAGEMENT OF THE
RADIO FREQUENCY SPECTRUM

Be it enacted by the Senate and Wouse of Representatives of the Philippines in Congress assembled

SECTION 1. Svort Tite. This Act shall be known as the “Philippine Spectrum
Management Act.”

SECTION 2. Declaration of Policy. The radio frequency spectrum is a scarce public
resource that shall be administered in the public interest and in accordance with international
agreements and conventions to which the Philippines is a pany. The government shall
allocate the radio frequency spectrum to service providers capable of efficiently and
effectively using it to meet public demand for telecommunications services. The use of any
Portion of the radio frequency spectrum is a privilege conferred by the State which may,
after due process, be withdrawn at any time,

SECTION 3. Objectives. The objectives of this Act are, as follows:
@ Encourage the development and rapid deployment of new technology,

() Ensure better service by preventing excessive concentration and
consolidation of spectrum licenses;

© Recover a greater portion of the economic value of the radio frequency
spectrum for the public; and

@ Promote more efficient use of spectrum,

SECTION 4. Spectrum Management Plan. The Commissioner of the National
Telecommunications Commission (NTC and the Secretary of the Department of
Information & Communications Technology (DICT) shall meet at least annually to develop

a spectrum management plan for the Philippines with respect to the following issues, among
others:

@ Public revenue generated from the radio frequency spectrum,

(0) Future spectrum requirements for public and private use;

(© Spectrum allocation measures necessary to accommodate those uses; and
(Measures necessary to promote the efficient use of spectrum.



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SECTION 5. Definition of Terms. As used in this Act, the following terms are defined
as follows:

@ “Allocation” refers to an entry in the National Radio Frequency Allocation
Table of a given frequency band for the purpose of its use by one or more
telecommunication services;

(b) “Assignment” refer to an authorization given to a Licensee to use specific
frequencies or channels;

6) “Block” refers to a portion of the radio frequency spectrum allocated to a
Licensee pursuant to this Act.

(@ “License” refers to a license to be granted pursuant to this Act to establish
oF use a wireless telegraphy station or install or use wireless telegraphy apparatus in
the Philippines at frequencies comprising a portion or several portions of the radio
frequency spectrum;

0) “Licensee” refers t0 a natural or juridical person issued a License to
pursuant to this Act; and

0) “Material Interest” refers to any interest, whether direct or indirect, in any
share which carries, or any shares which together carry, more than twentyéfive per
cent (25%) of the votes emtitled to be cast at a general meeting of a Licensee; or any
share or shares in the case where the consent of the holder of that share or those
shares is required for the conduct of any business of a Licensee; or the right to
appoint or remove a majority of Licensee’s board of directors or trustees.

SECTION 6. Siope. Only the portions of the radio frequency spectrum designated by
the International Telecommunications Union (ITU) as purposed for telecommunications,
telemetry, navigation, public safety, and broadcast may be licensed pursuant to this Act. The
National Telecommunications Commission (NTO) shall ensure that a portion of the radio
frequency spectrum is allocated for unlicensed public use, such as those needed for
consumer electronics, citizens’ band radio, national defense, and VHF and UHF ham radio.

SECTION 7. Allocation of the Rudio Vrequency Spectrum. Insofar as consistent with
national priorities and demand for radio frequency spectrum, the allocation of the radio
frequency spectrum shall be in accordance with the International Table of Radio Frequency
Allocation issued by the International Telecommunications Union (ITU). The NTC shall
have the authority to allocate, assign, reallocate, or reassign portions of the radio frequency
spectrum to achieve the objectives of this Act, including the express authority to revoke or
annul any such allocations or assignments, and impose terms and conditions for the use
thereof.

The NTC shall divide the usable radio frequency spectrum into a sufficient number
of Blocks in each spectrum band for the purposes of ensuring adequate competition in the
telecommunications industry as well as preventing harmful interference. The NTC shall also
reserve a sufficient number of Blocks for non-commercial use by the government and
members of the public,

If primary use of a Block wo be allocated involves, or is likely to involve, the receipt of
compensation from subscribers t0 receive or transmit communications. signals using
allocated frequencies, the NTC shall cany out the allocation to qualified public

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telecommunications entities through auction or competitive bidding. As provided in the
implementing rules and regulations issued pursuant to this Act, portions of the radio
frequency spectrum may be allocated on a territorial basis.

SECTION 8. lutions, The NTC and DICT shall establish a competitive bidding
methodology for the allocation of Blocks pursuant to this Act. This methodology shall
include safeguards to protect the public interest as well as measures to promote the stated
objectives of this Act. Thus, the NCT and DICT shall:

@ Consider alternative payment schedules and methods of calculation,
including lump sums or guaranteed installment payments, with or without royalty
Payments, or other schedules or methods that promote the objectives of this Act, and
combinations of such schedules and methods;

(0) Include performance requirements, such as appropriate deadlines and
Penalties for performance failures, to ensure prompt delivery of services to the public,
prevent stockpiling or warehousing of spectrum, and promote investment in and
rapid deployment of new technologies and services:

© Prescribe methods for allocation and assignment that promote an equitable
distribution of licenses and services among geographic areas, economic opportunity
for a wide variety of applicants, including small businesses, and businesses owned by
members of minority groups and women, and investment in and rapid deployment of
new technologies and services; and

@ Require such transfer disclosures and anti-trafficking restrictions and
payment schedules as may be necessary to prevent unjust enrichment as a result of
the methods employed to issu

licenses.

SECTION 9. Walidity of Licenses for the Use of the Radio Vrequeney Spectrum. Unless
sooner withdrawn, revoked, or voluntarily surrendered in accordance with current rules and
regulations, all existing licenses for the utilization of the radio frequency spectrum shall be
deemed revoked three (3) years from the effectivity of this Act. Licenses issued pursuant to
this Act shall be valid for five years (5), unless a shorter period is provided in the
implementing rules and regulations thereof.

SECTION 10. Prohibition on Sale, Lease, Transfe
shall not lease, transfer, grant the usufruct of, sell nor assign a License issued pursuant to this
Act, or the rights and privileges acquired thereunder, to any person, firm, company,
corporation, or other commercial or legal entity.

Usufruct and Assignment. A licensee

SECTION 11. Meryers and “lequisitions. A Licensee shall not merge with any person,
firm, company, corporation or entity, nor shall a Material Interest in a Licensee be

transferred, whether as a whole or in pans, and whether simultaneously or

contemporaneously, to any such person, firm, company, corporation or entity, without the
prior approval of the NTC and the Philippine Competition Commission (PCO.

SECTION 12. Qualifications. Licensee:

hall possess the following qualifications:
(@) Filipino citizenship;

(b) Holder of a Congressional franchise.



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© The techni
services to the public;

and financial capacity to wilize allocated spectrum to provide

(@) The Licensee, or any other person, firm, company, corporation or entity
which holds a Material Interest in the Licensee, or in which the Licensee holds a
Material Interest, must not have been allocated an aggregate amount of spectrum
greater than the spectrum cap provided for in this Act;

(©) Not otherwise disqualified by law or existing regulations,

SECTION 13. Spectrum Cap. No entity or group of entities sharing a Material Interest

in each other, may hold more than 25% of the licensed radio frequency spectrum in any
given band.

SECTION 14. Obligations of a Licensee. Every Licensee shall be bound by the

following obligations:

@ Observe the spectrum ea
(0) Utilize allocated spectrum to provide telecommunications services to the
public;

© Comply with this Act, its implementing rules and regulations, and all other

applicable administrative issuanc

@ Payment of lawful fees, charges and taxes due the national government in
connection with Licenses issued pursuant to this Act; and

© Obtain prior approval from the NIC and PCC prior to any merger,
acquisition, or transfer of Material Interest in a Licensee.

SECTION 15. Rercution of Licenses aml Return of Assigned Vrequencies. A License shall

be revoked by the National Telecommunications Commission and reallocated in the
following circumstances:

@) Violation by a Licensee of its obligations hereunder;
6) Loss of corporate personality or cessation of business;

C) Expiration of a License’s validity period; and

@ Failure to pay lawful fees, charges and taxes due the national government in

connection with Licenses issued pursuant to this Act.

SECTION 16. Preparation and Publication of National Radio Vrequency Allocation Viable.

‘The NTCshall prepare a National Radio Frequency Allocation Table (NRFAT) containing a
list of all spectrum holders and the portion of the radio frequency spectrum assigned to
them. An updated NRFAT must be published annually, posted on the NTC’s website, and
otherwise made available to the public.

SETION 17. Implementing Rules and Regulations (IRR). — The Secretary of Information

and Communications ‘Technology, upon the recommendation of the NTC and PCC, shall
issue the Implementing Rules and Regulations for the effective implementation of this Act,
within sixty (60) days from the approval thereof,

SECTION 18. Sepursbilty Clase. - If any provision of this Act is declared

unconstitutional or invalid bya court of competent jurisdiction, the remaining provisions not
affected thereby shall continue to be in full force and effect.

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SECTION 19. Repealing Clause. ~ Section 3 of Republic Act 3846 insofar as it
provides for the allocation of the radio frequency spectrum, as well as all other laws, decrees,
executive orders, department or memorandum orders and other administrative issuances or
pans thereof which are inconsistent with the provisions of this Act, are hereby modified,
superseded or repealed accordingly.

SECTION 20. lifjectirity. - This Act shall take effect fifteen (15) days after
publication in the Oficial Gazette or in at least two (2) newspapers of general circulation.

Approved,