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Smart's statement on NTC memorandum circular 11-24-2011

Smart Communications, Inc. (Smart) will seek a reconsideration of the decision of the National Telecommunications Commission (NTC) finding that mobile operators have failed to comply with the provisions of memorandum circular (MC) 11-24-2011 lowering interconnection rates and requiring mobile operators to refund subscribers for the alleged excess charge for text messages. More details after the jump.

First, our position is there is no basis for finding that Smart has violated the NTC memorandum circular and overcharged its subscribers.

The said circular, which was issued on October 24, 2011, required mobile phone operators to reduce interconnection charges from P0.35 to P0.15 per SMS.

These interconnection charges pertain to rates that mobile phone operators charge each other in order to deliver text messages from other networks to their own subscribers. Smart has already complied with this circular.

The said circular DID NOT order mobile phone operators to reduce retail rates that are charged to customers.

Second, under the law and existing NTC regulations, SMS is a deregulated service. The rate-fixing power of the NTC is residual in nature and may be exercised only under specific circumstances.

Republic Act No. 7925 states that such residual powers can be exercised only when ruinous competition results or when a monopoly or a cartel or combination in restraint of free competition exists and the rates or tariffs are distorted or unable to function freely and the public is adversely affected.

None of these conditions exists. In fact, the Public Telecommunications Policy Act (Republic Act No. 7925) clearly states that the NTC "shall exempt any specific telecommunications service from its rate or tariff regulations if the service has sufficient competition to ensure fair and reasonable rates or tariffs."

Competition in the Philippine telecommunications industry remains very keen. Mobile operators are offering a wide range of competing service offers -- including bucket and unlimited packages -- in their drive to attract and retain subscribers. As a result, Filipino consumers are enjoying SMS services that are among the most affordable in the world.

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