Reasonable means and end

Regulations have to be reasonable, not only in so far as the amount of fees are concerned, but also the end that they seek to achieve.

Take for instance Memorandum Circular 09-09-2003 of the National Telecommunications Commission (NTC) covering wireless data network (WDN) and devices which includes bluetooth-enabled mobile phones and similar gadgets. The said circular not only imposes a P100 registration fee but also a penalty of P5,000 for each unregistered phone.

So what’s wrong with this?

At the heart of the matter is NTC’s definition of indoor WDN equipment, which includes bluetooth-enabled cellular phones.

It had been reported that the Philippine mobile market averages 600,000 units per month or around 7.2 million units per year. That means P720 million in fees for the NTC.

But data from the NTC have revealed that only 1.99 million handsets have been imported and covered by import permits for the period of January to May 2011 or about 400,000 handsets per month.

Compared to MyPhone’s importation of 769,616 handsets for the same period, Nokia and Cherry Mobile phones covered by NTC permits to import total only 37,551 and 8,920 units respectively. This despite GSK data that pegs Nokia as the number one brand market share leader for the past 10 years and Cherry Mobile’s sales of 200,000 to 400,000 per month.

Meanwhile, imported handsets covered by NTC permits for the same period of Sony Ericsson and Apple totalled only 868 and 17, respectively. In 2011, Globe was targetting to sell 200,000 iPhones.

The NTC circular, therefore, penalizes those who honestly declare their import volumes and rewards smuggling by individuals or entities who do not pay the proper taxes and duties to the BIR and customs bureau.

It appears that as early as 2010, the Solid Group which manufactures phones abroad and sells them here under the Filipino brand MyPhone had written NTC asking it to cancel the P100 registration fee, if not exclude mobile phones and similar gadgets from the coverage of MC 09-09-2003. Solid Broadband Corp. was being charged a penalty of P5,000 per phone allegedly for non-payment of the P100 registration fee, when in fact about half of the MyPhone handsets sell for less than P5,000.

While other companies appear to understate their import volumes to escape paying the P100 fee, here is a company that honestly declares its volumes and yet will have to pay P100 per unit, and now a P5,000 per phone penalty.

In its letters to the NTC, the Solid Group claimed that the circular is redundant, if not unreasonable and oppressive, since it unjustly subjects importers/distributors of bluetooth-enabled mobile phones to another round of securing import permits and type approval certificates. These same importers are already required to secure the same permit and certificate under NTC circulars 1-04-88 and 02-01-2001 on type approval of customer premises equipment (CPE).

It is also alleged that the sweeping definition of indoor WDN equipment can include bluetooth USB dongles, many of which sell for under P100.

As aptly put by David Lim, chairman of My Solid Technologies and Devices Corp., in his February 2013 letter to NTC, no useful purpose is served by the questioned NTC circular if only legitimate importers and manufacturers are compelled to pay permit and license fees and smuggling is encouraged.

The company has asked NTC to review and revisit the assailed circular and that pending review, that its implementation be deferred or suspended.

If the BIR and Bureau of Customs want to increase their revenue generation, then this is one matter that they should seriously look into.

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