AUSL Technology & the Law

The implication of the National Telecommunications Commission’s value added service requirements on Voice over Internet Protocol and its relation in the proliferation of popular software allowing telephone calls over the Internet such as Skype and Yahoo Voice, among others.
by Medilyn S. Molina

Introduction

Telecommunications has gained its pride and status in the Philippines by reason of its benefits and advantages especially in this fast-growing community brought about by the developments in technology. Developments in telecommunications are greatly attributed to the introduction of the Internet. Most if not all the new and innovative products and services that are unheard of a decade ago, was only made possible because of the liberalizing environment provided by the Internet. As a result, it provided the consuming public a cost effective and efficient communication services. As recognized by the National Telecommunications Commission, “Internet becomes available over virtually all technologies and platforms, from traditional fixed copper lines to satellites to mobile phones and to cable, to name just the most obvious, market dynamics are changing faster than law and rules”.¹

Part of such developments in technology is the emergence of value added service provided in the internet. Value Added Service (VAS), as defined, is a telecommunications industry term for non-core services or, in short, all services beyond standard voice calls and fax transmissions. On a conceptual level, value added services add value to the standard service offering. It is supplied either in-house by the mobile network operator themselves or by a third­party value added service provider.² Value added service provider, on the other hand, as defined under Section 3, Article I of Republic Act 7925, is an entity which, relying on the transmission, switching and local distribution facilities of the local exchange and inter-exchange operators and overseas carriers, offers enhanced services beyond those ordinarily provided for by such carriers.³ As acknowledged by Senator Osmeria in his sponsorship speech, “New technologies have fundamentally altered the structure, the economics and the nature of competition in the telecommunications business. Voice telephony is perhaps the most popular face of telecommunications, but it is no loner the only one. There are other faces such as data communications, electronic mail, voice mail, facsimile transmission, video conferencing, mobile radio services like trunked radio, cellular radio, and personal communication services, radio paging, and so on .⁴

At the present, the proliferation and wide use of value added service in the country has found its niche in the Filipino society. One of those widely used services is the Voice over Internet Protocol (VoIP), which is considered the most inexpensive way and means of communication especially through popular applications such Skype and Yahoo Voice. As pointed out by Ms. Jojie Yap in her speech entitled `Voice on the Net’, “Voice over Internet Protocol is a generic term for sending voice data from one point to another using the Internet protocol. As with any Internet data packet it is medium-independent so it can be sent and received via a dialup, broadband or even wireless connection. As a generic term, VoIP covers all the standard and proprietary protocols to transmit, route and receive Voice or even Video data. Many Internet users use it everyday to talk in real-time using a WebCam for Videoconferencing or FreeTel and Dialpad for Internet telephony. What is important to note is that VoIP applications require the user, at a minimum, to use a device that is essentially a small computer that supports the Internet Protocol and the VoIP application.

VoIP does not necessarily mean using an ordinary phone to make a phone call to somebody in another country, though this is possible and is being utilized by most, if not all, carriers in some segments of their infrastructure today. Most VoIP applications require an end-to-end IP connection”.⁵

As already mentioned, the wide use of the VoIP is generally attributed to the proliferation of those popular applications that offer the most inexpensive way of communicating, if not at all for free. By such condition, it can be gainsaid that proper regulation, provisioning and determination of enhanced services should be done concerning the wide use of VoIP, by the National Telecommunications Commission, which is mandated by Republic Act 7925 as the principal administrator of the said law -to take the necessary measures to implement the policies and objectives in the pursuance of telecommunications services.⁶

This paper aims to present the implication of the National Telecommunications Commisssion’s value added service requirements on VoIP and its relation in the proliferation of popular software allowing telephone calls over the internet such as Skype nad Yahoo Voice, among others. It also aims to take a grasp on the non-core services of telecommunications companies which add value to their standard service offering beyond those standard voice calls and fax transmission.

The Status on the use of Value Added Service in the Philippines

Value Added Service or enhanced services as termed in the implementing rules of the Public Telecommunications Act of 1995 (Memorandum Circular no. 8-9-95) are those which are provided to 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.⁷ In the definition above given, it may be deduced that certain characteristics have already been given to consider one to be value-added. However, there is really not a definite rule to determine whether one may be considered enhanced service or merely a special feature of a particular existing service. The definition of the “enhanced services” in the implementing rules, while more distinct than that under the PTA, is still too sweeping because rather than enumerating what possible features could be classified as VAS or enhanced services, the rules instead focuses on the characteristics of these features.⁸

One example of such perplexity on the issue and use of VAS would be the issue on Voice-over Internet Protocol which is puzzled to be merely a telephone service because it is marketed as such and that it is a service which is already being offered by existing carriers who have complied with the law to put up at least four million fixed lines before they were allowed to operate.⁹ Furthermore, Globe senior vice president Rodolfo Salalima said, “The reality is that VOIP is marketed as a telephone service, that is, a person using a telephone set can talk over the system to another person at the other end using a telephone set. That is why it is aptly called Internet Telephony. And telephony is voice service. The moment a VAS provider offers voice service to the public in exchange for compensation, such would be a clear violation of law, absent compliance with the clear statutory requirements.”¹⁰ On the other hand, the Philippine Internet Services Organization’s (PISO) say on the matter is that VoIP is a value-added service because it is a product of internet technology and one which uses the Internet Protocol instead of relying on the traditional switching mechanism to exist.¹¹

Given the complexity on the issue of VAS, lapses and flaws may still be had in such determination and classification. Debates on the topic may still arise. Furthermore, this may also be brought about by the different levels in the knowledge of the net, as one may be complex for one which may be too basic for another. The question of the proper legal classification of VAS is uniquely technical, tied as at is to the scientific and technological application of the service or feature.¹² Thus, if what is going to be the basis will be that which is the collaboration of simple features and processes or protocols, such may be flawed as it hinges on such disparity. This will then call for more definite guidelines to determine the matter. The definition laid down in the Implementing Rules may validly serve as a guide for the National Telecommunications Commission (NTC) to determine what emergent offerings would fall under VAS but still, owing to the general nature of the definition laid down in the Implementing Rules, the expectation arises that the NTC would promulgate further issuances defining whether or not a specific feature newly available in the market is a VAS.

The Emergence of Skype and Yahoo Voice and Other Software

Skype, as defined in Wikipedia, is a software that allows users to make telephone calls in the internet. Calls to other users of the service and to free-of-charge numbers are free, while calls to other landlines and mobile phones can be made for a fee. It also has additional features which include instant messaging, file transfer and video conferencing.¹³

Yahoo Voice, also works and offers features similar to that of Skype. Specifically, it is a Voice over PC to PC, PC to phone and Phone to PC service provided by Yahoo via its Yahoo Messenger instant messaging application.¹⁴

In the Philippines, these software, among others, are considered as the most inexpensive way to make international calls. It benefited most of its users because it allows them to gain access of services which are offered by other communication entities for a large fee. Instead of making telephone calls using other communication networks, a great number of people who are aware of the services of Skype and Yahoo Voice availed of the said services than of those software which are offered for a fee. It can be attributed to such characteristic of the said software why it proliferated in the Philippines and patronized by most of the Filipinos who are aware of them. Its proliferation in the country and wide access to it by the public can be gainsaid to be incessant, which made it deemed necessary to examine the rules and the law promulgated by the government entity sought to be charged to its regulation, which is the National Telecommunications Commission.

The Present Requirements on Value Added Service

The National Telecommunications Commission, as enshrined in Republic Act 7925, shall be the principal administrator of the said law, particularly in fostering fair and efficient market conduct through, but not limited to, the protection of telecommunications entities from unfair trade practices of other carriers, among others.¹⁵ In carrying out its mandate, it seeks to promulgate and implement regulatory measures and rules that will protect and promote the market economy of telecommunication in the country.

In the widespread, ready access and promotion of the use of value added service, particularly the VoIP, the NTC issued Memorandum Circular 5-8-2005, which classified VoIP as a Value Added Service within the contemplation of RA 7925 and Memorandum Order 3-11-2005 which seeks to impose certain guidelines for the registration of VoIP Service Providers and Resellers, where Skype and Yahoo Voice should be covered. In the said memorandum order, it already provided a legal definition to VoIP that was notably not provided in RA 7925. As provided for in the said memorandum, a VoIP Service Provider shall refer to a person or entity providing VoIP services to the public, directly or through resellers, for compensation. Any person or entity that intends to derive or source VOIP from a duly registered VOIP provider under an agreement to resell the service directly to retail end-user customers, shall register with the Commission as a Reseller. The primary condition provided in the guidelines are the requirement of VoIP service providers to have paid up capitalization of at least Php 10 million and that each VoIP service provider should post a performance bond of Php 5 million, while resellers are to post a bond of Php 1 million. In contrast, existing telecommunication companies in the Philippines are not subjected to the capitalization requirements because such was not specifically covered and mentioned in the said guidelines.¹⁶

The Dilemma: The Implication of the NTC’s Requirement on VoIP and its relation in the Proliferation of Popular Software such as Skype and Yahoo Voice

Amidst the widespread and ready access of the public to different software that offers inexpensive services compared to the other software that offered the same service for a large fee, it should be noted that the very rationale and objective of Republic Act 7925 in regulating the telecommunications industry is to promote and assure competition in the telecommunications market. As mandated in the said law, “a healthy competitive environment shall be fostered, one in which telecommunications carriers are free to make business decisions and to interact with one another in providing telecommunications services, with the end in view of encouraging their financial viability while maintaining affordable rates”.¹⁷

It is evident that new and innovative products and services, while unheard of decades ago, was only made possible through the liberalization of the environment mostly through the internet. And the introduction of new technologies, such as Voice over Internet Protocol, are blurring the traditional boundaries between computing, telecommunications, and broadcasting, and continue to fundamentally alter the structure, economics and nature of competition in the telecommunications sector.¹⁸ Before the promulgation of Memorandum Order 03-11-2005, the main issue posed in Value Added Servicing is not so much the inability to provide end to end telephony services in the way telecommunication providers do but on the infringement on the rights and changing the definition of value added service providers. It is the attempt to regulate a supposedly unregulated industry that caused issues.¹⁹

As discussed earlier, upon the introduction of the said Memorandum Order, several measures and guidelines were introduced to regulate the telecommunications industry. But despite the introduction of several measures and regulations by various government entities,
there are still uncertainties over certain aspects of what is or is not allowed in offering VoIP services in the country. Such condition can very well said to be discouraging and causes the hampering of entry of new and potential VoIP service providers. It also causes the introduction and use of those unregulated services offered by Skype and Yahoo Voice, to the detriment of competition in the telecommunications market in the country.²⁰

The concerns and challenges posed by the introduction and use of VoIP to both the government and incumbent players must be realized. And laws and regulatory measures which they implement to promote the general welfare of the public and of the entities providing telecommunication services for profit.²¹ It should be noted that it is a given fact that most of the time, profit and public welfare struggle in gaining priority or advantage over the other. A particular business that has the objective of gaining profit or at least the return of its capital but is engaged in the provision of an indispensable commodity for the public should generally be protected more under the law because they tend to carry out the broader policy objectives of promoting the general welfare of the public that should primarily be provided by the government itself. With the current proliferation of Skype and other software offering services for free, it only conforms the fact that the laws which should protect the telecommunications industry in the country still lacks the teeth that it should have to carry out its mandate of in developing and maintaining a viable, efficient, reliable and universal telecommunications infrastructure using the best available and affordable technologies and to improve and extend services to areas yet served; and to foster fair competition in the telecommunications industry and to bring benefits of efficient VoIP technology.

In examining the present regulatory measures imposed by the NTC, it can be gleaned that the NTC will only regulate those companies that charge customers a fee to access the VAS, or those services whose supply is already regulated by some other government agency, and not those services freely accessible to end-users, such as Skype and Yahoo Voice.

The Compromise: Focus on the policy

Although it seemed to be hard to regulate the present market economy of telecommunications in the Philippines specially the emergence and proliferation of software such as Skype and Yahoo Voice because of the lack of teeth and definite measures to answer the present condition of VoIP in the country, there could be a solution and that is by concentrating on the policy of the state on the matter and coming up with a more efficient and viable rule in addressing the matter. Surely, the government, in representation of the people does not only stand for the consuming public but to the investing businesses and its capitalists as well, who are greatly affected by the proliferation of software offered for free. On this note, serving two masters, there could be a compromise between the two by choosing the road to balance of the interests enshrined in the state policies particularly those provided for in Section 4, Article II of Republic Act No. 7925:²²

Section 4. Declaration of National Policy. - Telecommunications is essential to the economic development, integrity and security of the Philippines, and as such shall be developed and administered as to safeguard, enrich and strength the economic, cultural, social and political fabric of the Philippines. The growth and development of telecommunications services shall be pursued in accordance with the following policies:

1. A fundamental objective of government is to develop and maintain a viable, efficient, reliable and universal telecommunication infrastructure using the best available and affordable technologies, as a vital tool to nation building and development;
2. The expansion of the telecommunications network shall give priority to improving and extending basic services to areas not yet served. For this purpose, government shall promote a fair, efficient and responsive market to stimulate the growth and development of the telecommunications facilities and services, with emphasis on the accessibility by persons to basic services in unserved and underserved areas at affordable rates (Emphasis supplied);
3. 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 party and granted to the best qualified. The government shall allocate the spectrum to service providers who will use it efficiently and effectively to meet public demand for telecommunications service and may avail of new and cost effective technologies in the use of methods for its utilization;
4. Rates and tariff charges shall be fair, just and reasonable and for this purpose, the regulatory body shall develop tariff structures based on socioeconomic factors and on financial, technical and commercial criteria as measures to ensure a fair rate of return and as a tool to ensure economic and social development;
5. Public telecommunications services shall be provided by private enterprises. The private sector shall be the engine of rapid and efficient growth in the telecommunications industry;
6. A healthy competitive environment shall be fostered, one in which telecommunications carriers are free to make business decisions and to interact with one another in providing telecommunications services, with the end in view of encouraging their financial viability while maintaining affordable rates (Emphasis supplied);
7. A fair and reasonable interconnection of facilities of authorized public network operators and other providers of telecommunications services is necessary in order to achieve a viable, efficient, reliable and universal telecommunications services;
8. The government shall give all the assistance and encouragement to Philippine international carriers in order to establish interconnection with other countries so as to provide access to international communications highways on a competitive basis;
9. For efficiency, practicability, and convenience, but with due regard to the observance of due process at all times, regulation of telecommunications entities shall rely principally on an administrative process that is stable, transparent and fair, giving due emphasis to technical, legal, economic and financial considerations;
10. No single franchise shall authorize an entity to engage in both telecommunications and broadcasting, either through the airwaves or by cable;
11. Ownership of public telecommunications entities to as wide a number of people as possible, preferably to its customers, in order to encourage efficiency and public accountability and to tap personal savings shall be encouraged;
12. The development of a domestic telecommunications manufacturing industry to meet the needs of the Philippines and to take advantage of export opportunities shall be promoted without preventing, deterring or hampering the goal of full universal service; and
13. Human resources skills and capabilities must be harnessed and improved to sustain the growth and the development of telecommunications under a fast changing telecommunications environment.

These policies considered will provide for the standards that must be taken into consideration in regulating the market economy of telecommunication, specially the proliferation of popular software allowing telephone calls over the internet such as Skype and Yahoo Voice, among others.

With this in mind, there could be a solution to the dilemma in regulating the use of the said software through the internet or in telecommunications, as a whole. Strict provisions for the acquiring of franchises and licenses for value-added services must be formulated and implemented. With strict provisions for acquiring franchises, it would entail high standards for quality and operations as well as characteristics of developed “enhanced services” that will benefit the public and encourage them to stop patronizing those software offered for free. Aside from compliance with these high standards and non-compromising to substandard ones, there must also be stipulations as to keeping granted licenses. Keeping with high criteria does not end with the grant of the said licenses, there must be benchmarks provided, as well, to be able to keep the said franchise. There must be continuous keeping up with excellent quality despite broad choices for VAS. Not only should the quality be the focus, there must also be formulated provisions in favor of the public welfare in the sense that there must be maximum acknowledgement of the needs of the public and thus, require priority. In favor of the businesses, there must be perquisites offered for providing the convenience and necessity of the community such as lower tax rates and fees, easy access to land and other grants of the government with regards to contracts and services. It must appear to the capitalists that despite cost afforded them from acquiring licenses and keeping them, it will be balanced by all other benefits that may be granted them once they enter and provide the services required by the public. There would then be a guaranteed return of capital in due time for the traders and value-added service providers.

Endnotes

1. http://www.arellanolaw.net/publish/itlj-issues3_08.html [↩]
2. http://en.wikipedia.org/wiki/Telecommunication [↩]
3. Section 3, Article 1 of Republic Act 7925 [↩]
4. IV Record of the Senate No. 73, p.870 [↩]
5. http://dynamic2.philonline.com/pisoimmages/PISO VOIP SPEECH 2003.03.01.pdf [↩]
6. Section 5, Article 3 of Republic Act 7925 [↩]
7. Section 001 (15), MC No. 8-9-95 [↩]
8. Globe Telecom, Inc. vs. The National Telecommunications commission, et al., G.R. No. 143964, July 26, 2004. [↩]
9. http://www.arellanolaw.neUpublish/itli-issue3 08 html [↩]
10. Ibid. [↩]
11. Ibid. [↩]
12. Globe Telecom, Inc. vs. The National Telecommunications commission, et al., G.R. No. 143964, July 26, 2004. [↩]
13. http://en.wikipedia.org/wiki/skype [↩]
14. http:/len.wikipedia.org/wiki/YahooVoice [↩]
15. Section 5, Article 3 of Republic Act 7925 [↩]
16. Sections 1 and 2, Memorandum Order No. 3-11-2005 [↩]
17. Section 4, Article 2 of Republic Act 7925 [↩]
18. Memorandum Circular (Draft) dated January 15, 2008 of the NTC [↩]
19. http://dynamic2.philonline.com/pisoimmages/PISO VOIP SPEECH 2003.03.01.pdf [↩]
20. Memorandum Circular (Draft) dated January 15, 2008 of the NTC [↩]
21. http://dynamic2.philonline.com/pisoimmageslPISO VOIP SPEECH 2003.03.01.pdf [↩]
22. Section 4, Article II, Republic act no. 7925. [↩]

October 25th, 2008 | Category: SY08-09a | Subscribe to comments | Leave a comment | Trackback URL