ESTABLISHING BASIC POLICIES FOR THE TELEPHONE INDUSTRY, AMENDING FOR THE PURPOSE THE PERTINENT PROVISIONS OF COMMONWEALTH ACT 146, AS AMENDED, OTHERWISE KNOWN AS THE PUBLIC SERVICE ACT, THE FRANCHISE OF THE PHILIPPINE LONG DISTANCE TELEPHONE COMPANY UNDER ACT NO. 3436, AS AMENDED, AND ALL INCONSISTENT LEGISLATIVE AND MUNICIPAL FRANCHISES INCLUDING OTHER EXISTING LAWS.

• Number: Presidential Decree No. 217
• Sections: 5

Preamble

WHEREAS, telephone service is a crucial element in the

conduct of business activity, the availability of which on a regular and

uninterrupted basis is essential for the smooth and efficient functioning of

industry;

WHEREAS, efficient telephone service contribute directly to

national development by facilitating trade and commerce;

WHEREAS, the telephone industry is one of the most highly

capital intensive industries;

WHEREAS, the telephone industry has fundamentally different

financing characteristics from other utilities in that capital requirements per

telephone unit installed increase as the number of customers serviced also

increases instead of decreasing in cost per unit as in power and water

utilities;

WHEREAS, continued reliance on the traditional sources of

capital funds through foreign and domestic borrowing and through public

ownership of common capital stock will result in a high cost of capital, heavy

cash requirements for amortization and thus eventually in higher effective cost

of telephone service to subscribers;

WHEREAS, the subscribers to telephone service tend to be

among the residents of urban areas and among the relatively higher income

segment of the population;

WHEREAS, it is in the interest of the national economy to

encourage savings and to place these savings in productive enterprises; and

WHEREAS, it is the announced policy of the Government to

encourage the spreading out of ownership in public utilities;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the

Philippines, by virtue of the powers vested in me by the Constitution as

Commander-in-Chief of all the Armed Forces of the Philippines, and pursuant to

Proclamation No. 1081, dated September 21, 1972, and General Order No. 1, dated

September 22, 1972, as amended, do hereby decree and adopt, as part of the law

of the land the following:

Section 1

SECTION 1. It is declared that in the interest of the

social, economic and general well-being of the people, the State hereby adopts

the following basic policies of the telephone industry:

The attainment of efficient telephone service for as wide an area as

possible at the lowest reasonable cost to the subscriber;

The expansion of telephone service shall be financed through an optimal

combination of domestic and foreign sources of financing and an optimal

combination of debt and equity funds so as to minimize the aggregate cost of

capital of telephone utilities;

Consistent with the declared policy of the State to attain widespread

ownership of public utilities, the capital requirements of telephone utilities

obtained from ownership funds shall be raised from a broad base of investors,

involving as large a number of individual investors as may be possible;

In line with the objective of spreading ownership among a wide base of the

people, the concept of telephone subscriber self-financing is hereby adopted

whereby a telephone subscriber finances part of the capital investments in

telephone installations through the purchase of stocks, whether common or

preferred stock, of the telephone company;

As part of any subscriber self-financing plan, when the issuance of

preferred capital stock is contemplated, it is required that the subscriber be

assured, in all cases of a fixed annual income from his investment and that

these preferred capital stocks be convertible into common shares, after a

reasonable period and under reasonable terms, at the option of the preferred

stockholder; and

In any subscriber self-financing plan, the amount of subscriber

self-financing will, in no case, exceed fifty per centum (50%) of the cost of

the installed telephone line, as may be determined from time to time by the

regulatory bodies of the State.

Section 2

SEC. 2. The Department of Public Works, Transportation and

Communications through its Board of Communications and/or appropriate agency

shall see to it that the herein declared policies for the telephone industry are

immediately implemented and for this purpose pertinent rules and regulations may

be promulgated.

Section 3

SEC. 3. The pertinent provisions of the Public Service Act,

as amended, the franchise of the Philippine Long Distance and Telephone Company

under Act 3436, as amended, all existing legislative and/or municipal franchises

and other laws, executive orders, proclamations, rules and regulations or parts

thereof, as are in conflict with the provisions of this Decree are hereby

repealed or modified accordingly.

Section 4

SEC. 4. This Decree shall take effect immediately.

Done in the City of Manila, this 16th day of June, in the year of Our Lord,

nineteen hundred and seventy-three.

(Sgd.) FERDINAND E. MARCOS

President

Republic of the Philippines

By the President:

(Sgd.) ROBERTO V. REYES

Assistant Executive Secretary