PHILCOMSAT v. Alcuaz | G.R. No. 84818 | December 18, 1989 | Ponente: Regalado, J.

Nature of Case: Petition to review the order of the National Telecommunications Commission (NTC)
Petitioner: Philippine Communications Satellite Corporation
Respondent: Jose Luis A. Alcuaz (as NTC Commissioner), and NTC
*Edited Old Digest, with Jam’s permission

SUMMARY: Petitioner PHILCOMSAT was ordered by respondent to make provisional reduction of rates 15% of its authorized rates.
Petitioner argues that Order was unconstitutional because it was an exercise of an undue delegation of legislative power because it does
not provide sufficient standards for fixing rates. Moreover Pettioner argues that the order was violative of procedural and substantive due
processes. Court ruled that there was no undue delegation of legislative power because, NTC, in the exercise of its rate-fixing power, is
limited by the requirements of public safety, public interest, reasonable feasibility and reasonable rates, which conjointly more than
satisfy the requirements of a valid delegation of legislative power and therefore, Eos 196 and 546 are not unconstitutional. Court rules
however, that the assailed Order was both procedural (as the Order was issued without notice and due hearing), and substantive (as it was
unreasonable and confiscatory) due processes.

TOPIC: Doctrines of Separation and non-delegation of power

FACTS:

 This is a petition to annul and set aside an Order that was issued by respondent Commissioner of NTC,
Alcuaz directing the provisional reduction of the rates which may be charged by petitioner PHILCOMSAT for
certain specified lines of its services by fifteen percent (15%) for being violative of the constitutional prohibition
against undue delegation of legislative power and a denial of procedural, as well as substantive, due process
of law.

 PHILCOMSAT
o RA 5514 granted PHILCOMSAT with a franchise to establish, construct, maintain and operate in the
Philippines, at such places as the grantee may select, station or stations and associated equipment and
facilities for international satellite communications
o Also has the authority to construct and operate such ground facilities as needed to deliver
telecommunications services from the communications satellite system and ground terminal or
terminals
 Pursuant to its francshise, Philcomsat established:
o provisional earth station in Pinugay Rizal
o earth station standard “A” antenna (Pinugay I) to provide direct satellite communication links with the
pacific ocean region thru the pacific ocean intelstat office
o Pinugay II and III
o Etc.
 the sole signatory for the Philippines in the Agreement and the Operating Agreement relating to the
International Telecommunications Satellite Organization (INTELSAT) and Convention and the Operating
Agreement of the International Maritime Satellite Organization (INMARSAT)
 PHILCOMSAT has been leasing its satellite circuits to PLDT, Phil. Globe Communications, Eastern
Telecommunications Phils, Inc., Capitol wireless, Globe mackay
 Philcomsat provided communication services for said companies
 Under RA 5514, petitioner was exempted from the jurisdiction of the then Public Service Commission (now
NTC).
o But under EO 196, petitioner was placed under NTC’s jurisdiction, control and regulation including all
its facilities and services, as well as the fixing of rates).
 Respondents required petitioner to apply for requisite certificate of public convenience and
necessity covering its facilities and the services it renders, as well as the corresponding
authority to charge rates therefor

 Philcomsat applied for authority to continue operating its existing facilities, to render the services it was then
offering, and to charge the rates it was then charging, such provisional authority was granted by NTC, which
was subsequently extended until September 16, 1988.
 Although the NTC extended authrotiy for another 6 months, it directed Philcomsat to charge
modified reduced rates through a reduction of fifteen percent (15%) on the present authorized
rates.
 A review of the Order issued by the respondent only reveals that the respondent found “merit
in a reduction in some of the applicant’s rates,” which allegedly was reached, “after an initial
evaluation of the Rated Regulation Division of the Common Carriers Authorization Department
of the financial statements of applicant.”

 Philcomsat arguments
 o (Topic: Undue of legislative and quasi-judicial power particularly the adjudicatory powers of
NTC: EO 546 does not provide sufficient standards which may guide the respondent in fixing
rates for public service communications.
o Violation of procedural and substantive due process: petitioner avers that there is a violation of
procedural due process—because the Order was allegedly issued without prior notice and hearing)—
and substantive—because the order allegedly imposes a rate of reduction which is unjust,
unreasonable, and confiscatory
 Pets: clarification to undue delegation, the order mandating a reduction of certain rates is undue delegation not
of legislative but of quasi-judicial power to NTC, the exercise of which allegedly requires an express conferment
by the legislative body
 Long story short, petitioner is effect questioning the constitutionality of Executive Orders Nos. 546 and 196 on
the ground that the same do not fix a standard for the exercise of the power therein conferred.

ISSUES + RULING:

1. W/N EOs 196 and 546 are unconstitutional because they do not fix sufficient standard test necessary
for a valid delegation of legislative power. NO
CONCEPT
 Sufficient Standard Test
o Delegation of legislative power may be sustained only upon the ground that some standard
for its exercise is provided and that the legislature in making the delegation has prescribed
the manner of the exercise of the delegated power
In the case:
 When the administrative agency—NTC—establishes a rate, its act must both be non-confiscatory and must
have been established in the manner prescribed by the legislature; otherwise, in the absence of a fixed
standard the delegation becomes unconstitutional
o The only standard that has to be met by an administrative agency in prescribing rates for public service
communications is that the rate must be reasonable and just. The standard may be implied in the
absence of an express requirement as to reasonableness
Nature of the power delegated to NTC and the manner required by the statute for its lawful exercise
o EO 196 and 546: NTC has the power to determine and prescribe rates which necessarily includes
promulgation of rules and regulations
o Sec 15(g) EO 546 in the exercise of its rate-fixing power comply with the requirements of public safety,
public interest, reasonable feasibility and reasonable rates, which conjointly more than satisfy the
requirements of a valid delegation of legislative power.1
o Section 6(d) EO 546 provides that the national economic viability of the entire network or
components of the communications systems contemplated therein should be maintained at
reasonable rates.
Conclusion
 NTC, in the exercise of its rate-fixing power, is limited by the requirements of public safety, public interest,
reasonable feasibility and reasonable rates, which conjointly more than satisfy the requirements of a valid
delegation of legislative power.
o

2. W/N the Order issued by the respondent violates the requirements of procedural due process. YES
 Petitioner questioned order violates procedural due process because it was issued motu proprio, without notice
to petitioner and without the benefit of a hearing
o It was based merely on an initial evaluation which is a unilateral evaluation but had petitioner been
given an opportunity to present its side, the confiscatory nature of the rate reduction and the consequent
deterioration of the public service could’ve shown and demonstrated
o Since the the function involved in the rate –fixing power of NTC and adjudicatory and hence quasi-
judicial not quasi-legislative therefore notice and hearing was necessary and the absence thereof
results in a violation of due process
 NTC: even if it is adjudicatory, no hearing was needed before the order could be executed as it is only an
incident in the ongoing proceedings in the petitioner’s application for a certificate of public convenience and that
the petitioner is the only primary source of data or info since resp is currently engaged in a continuing review of
the rates charged

 Administrative agencies like NTC also exercise quasi-judicial powers and therefore notice and hearing is
necessary

1
Refer to “Notes” for an enumeration of the pertinent provisions of EOs 196 and 546 showing compliance with the sufficient
standard test.
 o Manifestations of such quasi-judicial power:
 The assailed Order is issued exclusively to petitioner and to no other.
 It is premised on a finding of fact, that there is merit in a reduction of some of the rates charged
(which is after an initial evaluation of petitioner’s financial statements) without affording the
petitioner the benefit of an explanation as to what particular aspect or aspcts of the financial
statements warranted a corresponding rate reduction
o No rationalization was offered nor were the attending contingencies discussed which prompted the
respondents to impose a 15% reduction

 Requisites that NTC must meet to satisfactorily exercise its quasi-judicial power
o Case precedents:
 Vigan Electric Light Co., Inc. vs. Public Service Commission
 “...respondent performed a function partaking of a quasi-judicial character, the valid exercise of
which demands previous notice and hearing.”
 The Central Bank of the Philippines vs. Cloribel, et al.
 “…as a general rule that notice and hearing are not essential to the validity of administrative
action where the administrative body acts in the exercise of executive, administrative, or
legislative functions; but where a public administrative body acts in a judicial or quasi-judicial
matter, and its acts are particular and immediate rather than general and prospective, the
person whose rights or property may be affected by the action is entitled to notice and hearing.”
o Legal Basis:
 Section 16(c) of the Public Service Act:

“Section 16. Proceedings of the Commission, upon notice and hearing the Commission
shall have power, upon proper notice and hearing in accordance with the rules and provisions
of this Act, subject to the limitations and exceptions mentioned and saving provisions to the
contrary:

xxx xxx xxx

(c) To fix and determine individual or joint rates, ... which shall be imposed, observed
and followed thereafter by any public service; ...

 Application of the requisites to the case at bar

o Respondent failed in affording petitioner due notice and hearing before issuing the assailed Order
 Pursuant to Section 16(c) of the Public Service Act, respondent, with regard to rate-fixing, has no
authority to make such order without first giving petitioner a hearing, whether the order be temporary
or permanent, and it is immaterial whether the same is made upon a complaint, a summary
investigation, or upon the commission's own motion as in the present case
 It is premised on a finding of fact, that there is merit in a reduction of some of the rates charged
(which is after an initial evaluation of petitioner’s financial statements) without affording the
petitioner the benefit of an explanation as to what particular aspect or aspects of the financial
statements warranted a corresponding rate reduction
 No rationalization was offered nor were the attending contingencies discussed which prompted the
respondents to impose a 15% reduction
 Since the petitioners have a better position to rationalize its rates vis-à-vis its business requirements
because of the extensive study they conduct, the court gave greater credence to petitioner’s
ratiocination that an immediate reduction in the rates would adversely affect the operations and the
quality of the service considering the maintenance requirements
 It did not afford the petitioner with the opportunity to cross-examine the inspector who issued the
report on which respondent NTC based its questioned order.
 Anent the incidental argument of respondents: Even if the rate-fixing order is only temporary, as
what the respondent alleges it to be, it is not exempt from the statutory procedural requirements of
notice and hearing, as well as the requirement of reasonableness; it may not exercise such power
in an arbitrary and confiscatory manner.
 Categorizing such an order as temporary foes not perforce entail the applicability of a different rule
of statutory procedure than would otherwise be applied to any other order on the same matter
unless otherwise provided by the applicable law (SEC 16 applies to NTC absent the provisions to
the contrary in the EOS)
 THEREFORE, IT IS CLEAR THAT NTC HAS NO AUTHORITY TO MAKE A RATE-FIXING ORDER
WITHOUT FIRST GIVING PETITIONER A HEARING, WHETHER THE ORDER BE TEMPORARY OR
PERMANENT AND IT IS IMMATERIAL WHETHER THE SAME IS ADE UPON A COMPLAINT, A
SUMMARY INVESTIGATION OR UPON THE COMMISSION’S OWN MOTION.
  Also NTC case 87-94 provides the condition that the rate reductions is subject to hearing and final
consideration of the merit of the applicationxxx

3. W/N the Order issued by the respondent violates the requirements of substantive due process. YES
 Petitioner: the rate reduction is confiscatory in that its implementation would virtually result in a cessation of its
operation and eventual closure of its business
 Reps: since petitioner is operating its comms satellite facilities through a legislative franchise, as such grantee
it has no vested right therein—It is a merely a privilege or license which may be revoked at will by the state
without necessarily violating vested property right of the petitioner
 Legal Bases:
o A12S11 of the 1987 Philippine Constitution (non-verbatim): A legislative franchise of public utility is
subject to amendment, alteration, or repeal by Congress, but cannot be unilaterally revoked absent a
showing that the termination of the operation of said utility is required by the common good.
o State’s power of regulating public utilities:
 The power to regulate is not the power to destroy useful and harmless enterprises, but is the power
to protect, foster, promote, preserve, and control with due regard for the interest, first and foremost,
of the 1public, then of the 2utility and of its 3patrons.
 Any regulation which operates as an effective confiscation of private property or constitutes an
arbitrary or unreasonable infringement of property rights is void, because it is repugnant to the
constitutional guaranties of due process and equal protection..
o State’s power of regulating rates charged by public utilities requirement: REASONABLENESS
 Rates fixed should be reasonable and just. Reasonableness in rates assumes that the same is
fair to both the public utility and the consumer.
 This basic requirement of reasonableness comprehends such rates which must not be so low as
to be confiscatory, or too high as to be oppressive.
 Determination of what is reasonable is a, not a question of formula, but of sound business judgment
based upon evidence
 It is question of fact calling for the exercise of discretion good sense and a fair enlightened and
independent judgment
 A method employed in determining reasonableness fair return upon the value of the property to
the public utility

 Application of the legal bases to the case at bar:

o Respondent failed in giving a reasonable explanation on how it arrived at the prescribed rates.
 It just perfunctorily declared that based on on the financial statements, there is merit for a rate
reduction without any elucidation on what implications and conclusions were necessarily inferred
by it from said statements.
 IT said it was based also on other sources but did not divulge on what those sources were

 Nor did it deign to explain how the data reflected in the financial statements influenced its decision
to impose a rate reduction.

 Probable effect of reduced rates (imposed unreasonably) to petitioner

o Petitioner would likely suffer from a drawback should the rates imposed by the respondent proved to
unreasonable and improvident.
 The business in which petitioner is engaged is unique in that its machinery and equipment have
always to be taken in relation to the equipment on the other end of the transmission arrangement.
 An inability on the part of petitioner to meet the variegations demanded be technology could result
in a deterioration or total failure of the service of satellite communications.

DISPOSITION:
 Respondents are ordered to proceed with the hearing and determination of the petitioner’s pending application
for a certificate of public convenience and necessity.
 Order issued by respondent is set aside.

 Gutierrez, Jr., J. (Concurring Opinion):

o Concurs with the ponencia, but has reservations on the non-requirement of notice and hearing for bodies
exercising quasi-legislative power, such as administrative bodies.
 Believes that just as Congress never passes legislation without holding public hearings, administrative
officials (who, Justice Gutierrez believes, are usually appointed not on the basis of competence and
qualifications, but on political or personal considerations), must also do so.