THIRTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
1 
First Regular Session 
) 
. .  
Introduced by Senator Jinggoy Ejercito Estrada 
EXPLANATORY NOTE 
The telecommunications and information services industries of the Philippines 
stand at a critical juncture today. The liberalization policies undertaken in the recent 
past have brought noticeable gains in access and improved service to consumers. 
At the same time, key developments in information technology, such as 
computerization and the digitalization of broadband services have rendered traditional 
service differentiation obsolete. Networks are now able to carry simultaneously voice, 
video, and data. The convergence of these technologies services, which is the objective 
of this bill, now enables an optimization of networks with resultant reductions in costs 
and new and increased service offerings. 
The current legislative and regulatory scheme prevents the full realization of the 
benefits currently available. R.A. 7925, drafted over five years ago and E.O. 436 "no 
longer adequately address the regulatory status of cable television, Internet and other 
multi-media services that have now emerged as major industries. 
It is readily accepted that our information services industries would greatly benefit 
from regulatory clarity and predictability, increased foreign investment and the 
availability of new services to address identifiable social and economic goals, such as 
increasing universal access and educational television delivered via satellite to remote 
areas. 
The bill also supports the national goal of establishing a world-class Philippine 
Information Infrastructure interconnected to the Asia Pacific Information Infrastructure 
and the Global Information. Infrastructure by promoting the development, delivery and 
use of convergent communication technologies and services. 
The proposed legislation removes unnecessary regulatory prohibitions, is pro- 
investment, while respecting Constitutional limitations on foreign investments in certain 
industries. 
There is a consensus across the affected industry sectors that this bill should be 
enacted. In light of the above explanation, we urge the early passage of this bill. 


THIRTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
1 
First Regular Session 
1 
S E N A T E  
S.B. No. 1042 
L
'
 
Introduced by Senator Jinggoy Ejercito Estrada 
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 the Philippines" of 2004. 
SECTION 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. 
SECTION 3. Definitions - For purposes of this Act, the following terms shall: 
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 or technologies; the ability of different network 
platforms to carry any and all 
kinds of services, and the coming together of consumer devices 
such as, but not limited to the telephone, television and ,personal 
computer. 
Audio communication services - services provided through the 
transmission and reception of sound signals including voice. 
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 
(f) 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 geographical area such as 
a building, residential subdivision, industrial park, economic zone, commercial 
complex and unserved barangays. 
application service providers and end-users. 
SECTION 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: 
To enhance the vital role of communications and information in nation- 
building and to the economic development and security of the Philippines; 
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. 
c. 
To promote the development and use of increased bandwidth, 
transmission capacity, and advanced communication networks. 
d. 
To facilitate, contribute and expedite the goal of the government in 
achieving universal access and thus strengthen the economic, educational 
and cultural, social and political fabric of the Philippines. 
e. 
To 
attract 
investments in the 
building of 
telecommunications 
a. 
b. 
infrastructures and In the provisioning of application services subject to 
laws on foreign ownership limitations; and 
To provide applications services users the effective power to choose 
among convergent applications services providers. 
f. 
SECTION 5. Policy Objectives - Pursuant to the above national policies, this 
Act is enacted to address certain legal and regulatory issues arising 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. 
SECTION 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. 
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 on 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. 
SECTION 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 units 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. 
SECTION 8. Lease of Facilities - All network service providers may lease or 
sublease capacity to applications service providers other network access service 


providers. 
SECTION 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. 
SECTION 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 applications services 
availed of. Prices shall be based on the prevailing cost of providing the service/s. 
An entity providing 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. 
SECTION 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 are relevant and applicable: 
Provided, however, that the foregoing shall 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. 


SECTION 12. Rights of User - Users' rights shall be recognized including the 
following: 
a. 
Right to chaqge from one convergent applications service provider or 
network service provider to another. 
Right to provide accessory facilities to their customer premises equipment 
(CPE) in addition to the facilities provided by the service provider under 
this Act, to enable him to access competitive convergent communication 
services. 
Right to form closed-user groups and to connect their networks with any 
duly authorized network service providers operating therein as subscribers 
there to. 
Right to non-discriminatory, reliable, and efficient services conforming to 
the minimum standards prescribed by the Commission. 
Right to choose and pay only for the service(s) availed of. 
Right to regular, timely, and accurate billing and courteous and efficient 
service. 
Right to thorough and fair investigation and prompt resolution by the 
Commission of any service-related coniplaint. 
b. 
c. 
d. 
e. 
f. 
g. 
SECTION 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. 
CPEs by the NTC or duly recognized NTC accreditation bodies. 
Right to prompt interconnection in a non-discriminatory manner at just and 
reasonable rates and conditions, and prompt resolution of any disputes 
pertaining thereto. 
b. 
Right to demand from its users the connection of only type approved 
c. 
SECTION 14. Departmenf of Transportation and Cotnmunicafions (DOTO) - 
The Department, in addition to its existing powers, functions and responsibilities, and in 
coordination with other concerned agencies, shall pursuant to this Act: 
a. 
b. 
Ensure that the policies and objectives of this Act are fully adhered to; 
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 . 
SECTION 1 5. Nafional Telecommunications Commission (NTC) - The 
Commission in addition to its existing powers, functions and responsibilities, shall, 
pursuant to this Act: 
a. 
b. 
C. 
d. 
e. 
f. 
g. 
h. 
I .  
J. 
Ensure that all entities provide services in a non-discriminatory manner. 
Ensure the interconnection and inter-operability of all networks. 
Formulate and implement a numbering or addressing system to facilitate 
access to communication services. 
Formulate and implement rules to prevent unfair competition and trade 
practices. 
Formulate and implement rules and regulations and procedures to act 
upon application for exemption from regulation of rates and tariffs. 
Require the submission by the network service providers and application 
service providers of periodic reports of finances and operations. 
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. 
Formulate and implement rules and regulations and procedures to protect 
he 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. 
Promulgate the schedule of fines and penalties to be issued for violations of 
any provision of this Act. 
SECTION 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. 
SECTION 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. 
SECTION 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. 
SECTION 19, €Hecfjvjfy’- 
This Act shall take effect fifteen (15) days from the 
date of its publication in the Official Gazette or in at least two (2) newspapers of general 
circulation. 
Approved,