NTC plan to review cellphone rates hit

A plan by the National Telecommunications Commission (NTC) to review voice and text messaging rates to remove "distortion" has come under attack from the country‘s four leading cellular companies who claim that there can never be any rate distortion since they have been found not guilty of collusion.

The NTC earlier asked the four companies – Globe Telecom, Smart Communications, Isla Communications (Islacom), and Pilipino Telephone Inc. (Piltel) – to explain why their decision to reduce the amount of free text messages by 67 percent on a staggered basis would not result in a distortion of rates which could adversely affect the public.

It said there is indication that the reduction in free text messaging allocation will distort the rates since their cellular networks, which have been primarily designed for voice, are now being used more for text messaging.

But in the same order, the NTC found the four companies not guilty of collusion, in their decision to reduce free text allocations.

In separate comments, Globe, Smart, Piltel, and Islacom argued that the commission’s stand on the existence of rate distortion runs contrary to the very same findings of the NTC had also found them not guilty of collusion, upon the recommendation of the CCAD.

Republic Act 7924 provides that rate distortion must be the result of ruinous competition, or the existence of a monopoly, cartel, or a combination, in order for the NTC to exercise its residual powers. Text messaging, being a value-added service, has already been dereregulated but the NTC can regulate it using its residual powers in case of collusion.

"Apparently, the CCAD report misinterpreted the concept of rate distortion under RA 7925 and is under the impression that rate distortion is equivalent to revenue distortion," Smart legal affairs chief Rogelio Quevedo.

For their part, Globe and Islacom said RA 7925 "miserably failed to define what distortion is, its meaning, parameters or limit." But they added that the NTC and its CCAD cannot legislate what rate distortion means via its show cause order issued last Sept. 14.

"The show cause order does not even state any comprehensible to define rate distortion. Unfortunately, RA 7925 does not in any way define rate distortion. The law on the point is perfectly vague, unclear, and not self-executory. So the NTC/CCAD can only guess. This is bad for due process," Globe assistant vice president for legal affairs Froilan Castelo said.

He also added that the NTC cannot "reregulate" text messaging rates based on the existence of a vague rate distortion. "It would be a great disservice to the country if the NTC would reregulate short messaging service on a perceived and mistaken notion that its rates are distorted and adversely affecting the public. The deregulation of SMS is the single most important reason why it has developed rapidly in the country, bringing in competition which resulted in affordable prices. Reregulating it would certainly destroy these accomplishments," Castelo pointed out.

NTC commissioner Eliseo Rio said the commission will release its final decision in mid-November.