CONSTITUTIONAL*LAW*II*DIGESTS*(2012*–*2013)*
*SEDFREY*CANDELARIA*
!
Globe&Telecom,&Inc.&v.&NTC&[G.R.&No.&143964,&&July&26,&2004]&
! situation!into!the!present!impasse.”!
Ponente:!TINGA,!J.!
Petitioner:!GLOBE!TELECOM,!INC.!
Respondents:! THE! NATIONAL! TELECOMMUNICATIONS! COMMISSION,!
COMMISSIONER! JOSEPH! A.! SANTIAGO,! DEPUTY! COMMISSIONERS!
AURELIO! M.! UMALI! and! NESTOR! DACANAY,! and! SMART!
COMMUNICATIONS,!INC.!
! been!providing!SMS!without!authority!from!it,!in!violation!of!
Summary:!Petition!is!granted.!The!CA!decision!and!the!assailed!Order!of!
the!NTC!are!set!aside.!No!cost.!
! prior!approval!from!NTC!through!an!administrative!process.!!
BACKGROUND:&
4!June!1999,!Smart!filed!a!Complaint!with!NTC,!praying!that!NTC!order!
the! immediate! interconnection! of! Smart's! and! Globe's! SMS! or! texting!
services.! Smart! alleged! that! Globe,! with! evident! bad! faith! and! malice,!
refused!to!grant!Smart's!formal!request!for!the!interconnection!of!SMS.!
7! June! 1999,! NTC! issued! a! Show! Cause! Order,! informing! Globe! of! the!
Complaint,! specifically! the! allegations! of! refusing! Smart’s! request! in!
violation!of!the!mandate!of!RA7925,!Executive!Order!No.!39,!and!their!
respective!implementing!rules!and!regulations.!
• Globe! filed! its! Answer! with! Motion! to! Dismiss! on!
interposing! grounds! that! the! Complaint! was! premature,!
Smart's! failure! to! comply! with! the! conditions! precedent!
required!in!Section!6!of!NTC!Memorandum!Circular!9X7X93,!
and! its! omission! of! the! mandatory! Certification! of! NonX
Forum! Shopping.! Smart! responded! that! it! had! already!
submitted! the! voluminous! documents! asked! by! Globe! in!
connection! with! other! interconnection! agreements!
between! the! two! carriers,! and! that! everything! may! be!
merely! amending! the! parties'! existing! CMTSXtoXCMTS!
interconnection!agreements!
19!July!1999,!NTC!issued!the!Order!now!subject!of!the!present!petition.!!
It! found! that! both! Smart! and! Globe! were! "equally! blameworthy"! for!
their! lack! of! cooperation! in! the! submission! of! the! documentation!
*
Chan=Gonzaga*Evardone*Gutierrez*Lopez*Miclat*Nadal*Radoc*Superio*Tan*Tong*Valdez*Varela*
* * *********ATTY.
required! for! interconnection! and! for! having! "unduly! maneuvered! the!
• NTC! also! held! that! since! SMS! falls! squarely! within! the!
definition! of! "valueXadded! service"! or! "enhancedXservice"!
given!in!NTC!!!Memorandum!!Circular!!No.!8X9X95!!(MC!No.!
8X9X95)! the! ! implementation! ! of! SMS! interconnection! is!
mandatory!pursuant!to!Executive!Order!(E.O.)!No.!59.23!
• NTC!furthermore!declared!that!both!Smart!and!Globe!have!
Section! 420! (f)! of! MC! No.! 8X9X95! which! requires! PTEs!
intending! to! provide! valueXadded! services! (VAS)! to! secure!
Instead! of! issuing! a! Show! Cause! Order! with! a! Cease! and!
Desist! Order! ,! they! directed! the! parties! to! secure! the!
requisite! authority! to! provide! SMS! within! thirty! (30)! days,!
subject! to! the! payment! of! fine! in! the! amount! of! two!
hundred!pesos!(P200.00)!"from!the!date!of!violation!and!for!
every!day!during!which!such!violation!continues.”!
• Globe! filed! with! the! Court! of! Appeals! a! Petition! for!
Certiorari!and!Prohibition!to!nullify!and!set!aside!the!Order!
and! to! prohibit! NTC! from! taking! any! further! action! in! the!
case;! claiming,! among! others,! that! NTC! acted! without!
jurisdiction! in! declaring! that! it! had! no! authority! to! render!
SMS,!pointing!out!that!the!matter!was!not!raised!as!an!issue!
before! it! at! all.! ! Finally,! Globe! alleged! that! the! Order! is! a!
patent!nullity!as!it!imposed!an!administrative!penalty!for!an!
offense! for! which! neither! it! nor! Smart! was! sufficiently!
charged! nor! heard! on! in! violation! of! their! right! to! due!
process.!
31!August!1999,!The!CA!issued!a!Temporary!Restraining!Order.!
• In!its!Memorandum,!Globe!also!contended!that!in!an!earlier!
decision! involving! the! application! of! Isla! Communications!
Co.,!Inc.!("Islacom")!to!provide!SMS,!NTC!held!that!SMS!is!a!
deregulated! special! feature! of! the! telephone! network! and!
therefore!does!not!require!its!prior!approval.!Globe!alleged!
CONSTITUTIONAL*LAW*II*DIGESTS*(2012*–*2013)* * * *********ATTY.*SEDFREY*CANDELARIA*
!
that! its! departure! from! its! ruling! in! the! Islacom! case! may! not! legally! require! either! Smart! or! Globe! to! secure! prior! approval!
constitutes!a!denial!of!equal!protection!of!the!law.! before!providing!SMS.!
21! December! 1999,! Globe! filed! a! Motion! for! Partial! Reconsideration,! !
seeking!to!reconsider!only!the!portion!of!the!Decision!that!upheld!NTC's! &
finding! that! Globe! lacked! the! authority! to! provide! SMS! and! its! &
imposition!of!a!fine.!!! &
• It! alleges! among! others! that! the! more! salient! issue! was! ISSUES:&
whether! NTC! complied! with! its! own! Rules! of! Practice! and! Procedural!
Procedure! before! making! the! finding! of! want! of! authority! (1) Whether! or! not! Globe! should! have! first! filed! a! motion! for!
and!imposing!the!fine,!and!that!it!has!been!legally!operating! reconsideration!before!the!NTC!
its! SMS! system! since! 1994! and! that! SMS! being! a! Substantive!
deregulated!special!feature!of!the!telephone!network!it!may! (1) Whether! or! not! SMS! is! a! VAS! under! the! PTA,! or! special!
operate!it!without!prior!approval!of!NTC.! feature!under!NTC!MC!No.!14X11X97!
• After! the! Court! of! Appeals! denied! the! Motion! for! Partial! (2) Whether! or! not! NTC! acted! with! due! process! in! levying! the!
Reconsideration,! Globe! elevated! the! controversy! to! this! fine!against!Globe.!!
Court!contending!that!it!erred!in!holding!that:! (3) Whether! or! not! NTC! may! legally! require! Globe! to! secure!
(1) the! NTC! has! the! power! under! Section! 17! of! the! NTC!approval!before!it!continues!providing!SMS!!
Public! Service! Law! to! subject! Globe! to! an! !
administrative! sanction! and! a! fine! without! prior! RESOLUTIONS:!
notice! and! hearing! in! violation! of! the! due! process! P(1)!–!No,!as!the!circumstances!adverted!to!are!among!the!recognized!
requirements;!! exceptions! to! the! general! rule! that! the! motion! for! reconsideration! is! a!
(2) Due!process!was!denied!Globe!because!the!hearings! must.!
actually! conducted! dwelt! on! different! issues;! and,! ! Ratio!
the! appellate! court! erred! in! holding! that! any! I. Generally,!a!motion!for!reconsideration!is!a!prerequisite!for!
possible!violation!of!due!process!committed!by!NTC! the!filing!of!a!petition!for!certiorari.!
was! cured! by! the! fact! that! NTC! refrained! from! • In!not!filing,!Globe!has!asserted!that!the!case!fell!within!
issuing!a!Show!Cause!Order!with!a!Cease!and!Desist! exceptions!to!the!rule.!According!to!Globe,!the!order!is!
Order,! directing! instead! the! parties! to! secure! the! a! patent! nullity,! being! violative! of! due! process,! hence!
requisite!authority!within!thirty!days.!!! the! issue! raised! was! purely! one! of! law.! Indeed,! the! CA!
(3) Globe! also! contends! that! in! treating! it! differently! noted! the! procedural! defect! but! chose! to! rule! on! the!
from! other! carriers! providing! SMS! the! Court! of! merits!anyway.!
Appeals!denied!it!equal!protection!of!the!law.! II. Moreover,! the! issues! are! of! relative! important! and! novelty!
22! March! 2004,! Case! called! for! oral! argument.! Smart! changes! its! that! it! is! judicious! for! the! Court! to! rule! on! the! merits! and!
position!from!praying!that!the!assailed!Decision!and!Order!be!affirmed! dispense!with!the!procedural!fineries.!
to!the!argument!that!SMS!is!not!ValueXadded!service!(VAS)!and!that!NTC! !

*
Chan=Gonzaga*Evardone*Gutierrez*Lopez*Miclat*Nadal*Radoc*Superio*Tan*Tong*Valdez*Varela*
CONSTITUTIONAL*LAW*II*DIGESTS*(2012*–*2013)*
!
S(1)!–!Neither,!there!is!no!legal!basis!to!denominate!SMS!as!either!a!VAS!
under!the!PTA,!or!special!feature!under!NTC!MC!No.!14X11X97!
Ratio!
I. First!look!at!the!Public!Telecommunications!Act!(PTA)!which!
is! the! authority! behind! the! circulars! being! questioned! and!
the!law!that!governs!all!public!telecommunications!entities!
("PTEs")!in!the!Philippines.!!!
• Section! 11! of! the! PTA! governs! the! operations! of! a!
"valueXadded! service! provider,"! which! the! law! defines!
as! "an! entity! which! relying! on! the! transmission,!
switching! and! local! distribution! facilities! of! the! local!
exchange! and! interXexchange! operators,! and! overseas!
carriers,! offers! enhanced! services! beyond! those!
ordinarily! provided! for! by! such! carriers."Section! 11!
recognizes! that! VAS! providers! need! not! secure! a!
franchise,! provided! that! they! do! not! put! up! their! own!
network.!
• However,! a! different! rule! is! laid! down! for!
telecommunications! entities! such! as! Globe! and! PLDT.!
Section!11!unequivocally!requires!NTC!approval!for!the!
operation!of!a!valueXadded!service.!!This!requirement!is!
tied!to!a!definite!purpose,!which!is!"to!ensure!that!such!
VAS! offerings! are! not! crossXsubsidized! from! the!
proceeds! of! their! utility! operations."! The! reason! is!
related! to! the! fact! that! PTEs! are! considered! as! public!
services,! and! mandated! to! perform! certain! public!
service!functions.!
• There!is!an!implicit!recognition!that!VAS!is!not!strictly!a!
public! service! offering! in! the! way! that! voiceXtoXvoice!
lines!are!but!merely!supplementary!to!the!basic!service.!
Thus!the!attitude!of!the!State!towards!VAS!offerings!by!
PTEs! should! be! to! treat! its! provisioning! as! a! "business!
decision"! subject! to! the! discretion! of! the! offeror,! so!
long! as! such! services! do! not! interfere! with! mandatory!
public! service! requirements! imposed! on! PTEs! such! as!
*
Chan=Gonzaga*Evardone*Gutierrez*Lopez*Miclat*Nadal*Radoc*Superio*Tan*Tong*Valdez*Varela*
* * *********ATTY.*SEDFREY*CANDELARIA*
those! under! E.O.! No.! 109.! Thus,! nonXPTEs! are! not!
similarly! required! to! secure! prior! approval! before!
offering! VAS,! as! they! are! not! burdened! by! the! public!
service!requirements!prescribed!on!PTEs.!
II. On!the!pertinent!NTC!Memorandum!Circulars!established!as!
the!regulatory!framework!in!dealing!with!VAS!
• NTC!relied!on!Section!420(f)!of!the!Implementing!Rules!
of!the!PTA!("Implementing!Rules")!as!basis!for!its!claim!
that! prior! approval! must! be! secured! from! it! before!
Globe!can!operate!SMS.!!
o It!defined!“enhanced!services”!as!those!“which!
add! a! feature! or! value! not! ordinarily! provided!
by! a! public! telecommunications! entity! such! as!
format,! media! conversion,! encryption,!
enhanced! security! features,! computer!
processing,!and!the!like."!This!definition!applies!
to! “VAS”! as! PTA! defines! “VAS”! as! an! enhanced!
service.!!
o This! definition! is! still! too! general! hence;! NTC!
should! promulgate! further! issuances! defining!
whether! or! not! a! specific! feature! newly!
available!in!the!market!is!a!VAS,!which!it!has!not!
done.!
• Globe!invokes!MC!No.!14X11X97!as!basis!to!classify!SMS.!
As! during! Islacom’s! application! to! offer! SMS,! it! was!
advised! by! NTC! to! adhere! to! the! provisions! of! this!
circular.!
o “Special! feature”! is! defined! in! the! circular! like!
VAS! under! the! PTA,! as! those! “not! ordinarily!
provided”!by!the!company.!The!addition!of!this!
new! concept! merely! adds! to! the! overall!
confusion.! Especially! since! there! is! no!
requirement!that!a!PTE!seeking!to!offer!"special!
features"! must! secure! prior! approval! from! the!
NTC!
CONSTITUTIONAL*LAW*II*DIGESTS*(2012*–*2013)*
!
• Whether!SMS!is!a!VAS,!“enhanced!service,”!or!a!“special!
feature,”!is!a!matter!that!is!also!unsure!to!NTC!since!it!
held! for! Islacom! that! it! was! a! “special! feature,”! while!
holding!now!in!the!present!case!that!it!is!“VAS.”!
o No! pertinent! law! and! regulation! has! changed!
since! the! application! of! Islacom! and! it!
furthermore! has! not! required! them! to! seek!
approval! for! SMS! after! their! similar! order! to!
Globe!and!Smart.!
o Though!Smart!sought!prior!approval,!it!was!only!
given! 4! years! later,! which! shows! the! lack! of!
seriousness!on!the!part!of!NTC!to!implement!its!
own!rulings.!!
III. Legal!basis!invoked!by!NTC!in!claiming!that!SMS!is!VAS!has!
not! been! duly! established.! The! fault! falls! squarely! on! NTC!
for! complicating! the! regulatory! framework! with! its! dual!
classification!of!SMS!as!a!special!feature!and!a!VAS!and!the!
varying!rules!pertinent!to!each!classification.!
! i. The! NTC! Order! is! not! supported! by! substantial!
S(2)!–!NTC!did!not!act!with!due!process!in!levying!the!fine!against!Globe!
Ratio!
I. The! assailed! order! and! corresponding! penalty! was!
promulgated! by! NTC! in! the! exercise! of! its! quasiXjudicial!
functions.!!
• Hence! despite! the! fact! that! process! in! obtaining! prior!
approval! under! the! PTA! and! its! implementing! rules! is!
administrative! nature,! all! the! requirements! of! due!
process! attendant! to! the! exercise! of! quasiXjudicial!
power!apply!to!the!present!case.!!
II. Ang$ Tibay$ v.$ CIR,! lists! down! the! seven! cardinal! primary!
rights!in!justiciable!cases!before!administrative!tribunals:!
i. Right!to!a!hearing!
ii. Right! of! the! party! interested! or! affected! to!
present! his! own! case! and! submit! evidence! in!
support!thereof.!!
*
Chan=Gonzaga*Evardone*Gutierrez*Lopez*Miclat*Nadal*Radoc*Superio*Tan*Tong*Valdez*Varela*
* * *********ATTY.*SEDFREY*CANDELARIA*
iii. The! party! must! be! given! an! opportunity! to!
present! his! case! and! to! adduce! evidence!
tending!to!establish!the!rights!which!he!asserts.!
iv. The! tribunal! must! consider! the! evidence!
presented.!!
v. While! the! duty! to! deliberate! does! not! impose!
the! obligation! to! decide! right,! it! does! imply! a!
necessity!which!cannot!be!disregarded,!namely,!
that!of!having!something!to!support!its!decision.!!
vi. Not! only! must! there! be! some! evidence! to!
support! a! finding! or! conclusion,! but! the!
evidence!must!be!substantial.!!
vii. The!decision!must!be!rendered!on!the!evidence!
presented! at! the! hearing,! or! at! least! contained!
in! the! record! and! disclosed! to! the! parties!
affected.!
• NTC!violated!several!of!these!cardinal!rights!due!Globe!
in!the!assailed!Order.!!
evidence.!Neither!does!it!sufficiently!explain!the!
reasons! for! the! decision! rendered.! As! was!
discussed,! there! was! lack! of! legal! basis! for!
classifying! SMS! as! VAS! due! to! their! failure! to!
adopt!clear!rules!and!regulations!to!that!effect.!
It! fails! to! show! how! SMS! fits! as! an! “enhanced!
service”! under! M.C.! No.! 8X9X95.! If! it! is! to! be!
understood! as! falling! under! “transmission! of!
data! over! [the]! CMTS,”! then! it! already! is!
contemplated! in! Globe! and! Smart’s! franchise.!
Moreover,! the! Order! does! not! explain! why!
there!was!a!departure!from!the!precedent!they!
laid! out! absent! clear! reason! on! why! previous!
standards! no! longer! apply! or! was! overturned.!
NTC! has! not! offered! any! sensible! explanation!
why! Islacom! was! accorded! to! a! less! onerous!
CONSTITUTIONAL*LAW*II*DIGESTS*(2012*–*2013)* * * *********ATTY.*SEDFREY*CANDELARIA*
!
regulatory! requirement,! nor! have! they! fine! is! a! sanction,! regulatory! and! even! punitive!
compelled! Islacom! to! suffer! the! same! burdens! in! character.! The! right! to! notice! and! hearing! is!
as! Globe! and! Smart,! which! shows! the! lack! of! essential!to!due!process!and!its!nonXobservance!
rational!basis!for!the!decision.! will,! as! a! rule,! invalidate! the! administrative!
ii. Globe! and! Smart! were! denied! opportunity! to! proceedings.! No! such! notice! and! hearing! was!
present! evidence! on! the! issues! relating! to! the! done! especially! since! NTC! imposed! the! fine!
nature! of! VAS! and! the! prior! approval.! Prior! to! upon! the! complaint! of! Smart! that! rested! solely!
this! decision,! Globe! and! Smart! were! never! on!an!interconnection!issue!and!nothing!more.!!
informed!of!the!fact!that!their!operation!of!SMS! !
without! prior! authority! was! at! all! an! issue! for! !
consideration.! It! is! clear! that! before! NTC! could! !
penalize! Globe! and! Smart! for! unauthorized! !
provision! of! SMS,! it! must! first! establish! that! S(3)! –! No,! NTC! may! not! legally! require! Globe! to! secure! NTC! approval!
SMS!is!VAS.!Since!there!was!no!express!rule!or! before!it!continues!providing!SMS.!
regulation! on! that! question,! Globe! and! Smart! • Order!being!effectively!discriminatory!and!arbitrary!as!it!is,!
would! be! well! within! reason! if! they! submitted! was!issued!with!grave!abuse!of!discretion!and!it!must!be!set!
evidence! to! establish! that! SMS! was! not! VAS.! aside.!!!
Unfortunately,!no!such!opportunity!arose.!
iii. The! imposition! of! fine! is! void! for! violation! of!
due! process.! NTC! basis! for! imposing! the! fine!
rests!on!Sections!17!and!21!of!the!Public!Service!
Act! which! confer! two! distinct! powers! on! NTC.!!
Under! Section! 17,! NTC! has! the! power! to!
investigate! a! PTE! compliance! with! a! standard,!
rule,! regulation,! order,! or! other! requirement!
imposed!by!law!or!the!regulations!promulgated!
by! NTC,! as! well! as! require! compliance! if!
necessary.! By! the! explicit! language! of! the!
provision,!NTC!may!exercise!the!power!without!
need! of! prior! hearing.! ! However,! Section! 17!
does!not!include!the!power!to!impose!fine!in!its!
enumeration.! ! It! is! Section! 21! which! adverts! to!
the! power! to! impose! fine! and! in! the! same!
breath! requires! that! the! power! may! be!
exercised!only!after!notice!and!hearing!because!

*
Chan=Gonzaga*Evardone*Gutierrez*Lopez*Miclat*Nadal*Radoc*Superio*Tan*Tong*Valdez*Varela*