NTC orders telecommunication companies to refund text overcharge

HOW WOULD you react if you find out that you are actually entitled to a 20-centavo refund for every text message you sent for the past three years? The refund would come in handy if you are someone whose main means of communication is text messaging. Some people would say, “That’s only a few centavos!” But for text hogs, every centavo for every text message counts. Even with the onslaught of social networking sites, text messaging is still considered today’s top tool for communication.

When the National Telecommunications Commission (NTC) ordered a refund as well as a roll back of SMS rates of telecommunication providers—including the Philippine Long Distance Telephone Co. (PLDT) units, Smart Communications and Digital Mobile Phil. (Sun Cellular), and Globe Telecom—a multitude of subscribers rejoiced. While the refund affects only Off-Net SMS, a refund for 1000 text messages would still amount to a substantial rebate of PhP200.00.

Since the release of the said NTC order, there has been an urgent clamor to speed up the process of refunding the text overcharges. The NTC suggested that the refunds be in the form of bill deductions for postpaid subscribers or through sending load credits to prepaid subscribers.

How it all started

In October 2011, the NTC issued Memorandum Circular No. 02-10-2011, which lowered the SMS interconnection charge from the long-standing rate of PhP0.35 to not more than PhP0.15, thus making text messaging more affordable to the public. There was no mention of a refund in the said circular.

However, this reduction in the interconnection charges actually resulted in a PhP0.20 price cut; hence, the NTC eventually ordered for a refund of the excessive rates already imposed. Thus, this reduction in overhead cost should not just benefit the telcos, but also the consuming public.

What the telcos have to say

Naturally, telecom companies are against the refund, as they have challenged the NTC Order. But the NTC already denied Globe and PLDT’s respective motions for reconsideration. The Order remains effective, yet not a single centavo has been refunded since then.

And the more they defy the Order and prolong their compliance, the situation for both the telcos and their consumers gets worse. Each day, they rake in more fines and accumulate billions worth of consumer refunds. A day’s worth of noncompliance results to an aggregate of PhP 194,000 in fines for telcos and PhP 8 million worth of refunds required to be returned to their subscribers.

The power of the NTC to compel refunds and to dictate the price of SMS

Republic Act No. 7925(An Act to Promote and Govern the Development of Philippine Telecommunications and the Delivery of Public Telecommunications Services) is the law enumerating the responsibilities of the NTC.

Sec. 5(c) of this law states that the NTC shall “mandate a fair and reasonable interconnection of facilities of authorized public network operators and other providers of telecommunications services through appropriate modalities of interconnection.” It further provides that these charges should be “at a reasonable and fair level of charges which make provision for the cross subsidy to unprofitable local exchange service areas so as to promote telephone density and provide the most extensive access to basic telecommunications services available at affordable rates to the public.”

This provision, which mandates reasonable and fair level charges, implies that the NTC should guarantee basic telecommunications services to the public at affordable rates. This, then, must have been the reason why the NTC was lobbying to refund subscribers of the excessive charges they have been paying for text messaging in the years following its circular. It may be implied from Sec. 5(c) of R.A. No. 7925 that the NTC could, indeed, compel telcos to refund subscribers.

But is this implication enough? The good intention of the NTC merits commendation. However, it seems that from a strict legal standpoint,  there is no direct provision in the said law empowering the Commission to order a refund in cases of rollback in the interconnection charges. It cannot be inferred that when interconnection charges are lowered, the same should immediately lead to a decrease in text messaging rates.

Subscribers lauded the NTC when it ordered the telcos to return the excessive charges they obtained at their expense. However, it did not also escape the public’s eye that the telcos were valiantly resisting this order. The telcos are in unison when they questioned the NTC’s power to dictate the pricing of SMS on the ground that it is a value-added service (VAS), therefore, deregulated under the law.

Sec. 11 of R.A. No. 9725 states that “a VAS provider shall be allowed to competitively offer its services and/or expertise, x x x to provide such specialized services, in the domestic and/or international market in accordance with network compatibility.” It further states that the telcos need not apply for a franchise.

A strict reading of this provision would entail that the NTC could not compel the telcos to implement a rollback of their rates. The telcos need not have a franchise when providing VAS. It follows they can increase or decrease their prices, without need to gain the NTC’s prior approval.

What the public is in for at this rate

The hard reality is that there would be difficulty in executing the refund order in all aspects. The first reaction of the public was of course, of elation; but this was immediately crushed by the fact that the telcos would not easily give up the fight to keep the revenue they have earned in the past years. And whenever the time comes that telcos give up on their stance, there is still the problem of how to successfully and efficiently return the money to millions of their subscribers. It is in fact likely that the public could be even waiting for nothing. P



  • That an Off-Net SMS is a text message you send outside your bucket pricing plan (a.k.a. unlimited texting)?
  • That an average of 2 billion text messages are sent everyday in the Philippines alone, making us the texting capital of the world?
  • That of this number, 40 million are Off-Net SMS, which are text messages sent not using bucket-pricing or unlimited services?
  • That the retail price of off-net SMS is equivalent to the cost of the network sending the short message or text plus the cost of the network receiving the text plus the cost of the interconnection facilities?


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