Philippine Communications Satellite Corporation Vs.

Alcaraz
G.R. No. 84818
December 18, 1989

Facts:
Petitioner, Philippine Communications Satellite Corporation, or PHILCOMSAT
is a public utility service provider that is the only one of its kind operating in the
Philippines, and seeks to annul and set aside an Order Issued by respondent, Jose
Luis Alcuaz, of the National Telecommunications Commission, or NTC,
dated September 2, 1988.
The Order in question here directs the provisional reduction of the rates which may
be charged by the petitioner for certain specified lines of its services by 15% with
the reservation to make further reductions later, and is alleged to be violative
of the constitutional prohibition against undue delegation of legislative power and a
denial of procedural, as well as substantial, due process of law.
By virtue of RA No. 5514, PHILCOMSAT was granted 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. Under such franchise, petitioner was like
wise granted the authority to "construct and operate such ground facilities as
needed to deliver telecommunications services from the communications satellite
systems and ground terminal or terminals."
Thus, in 1967, the petitioner established its provisional Earth station in Pinugay,
Rizal. In 1968, Pinugay 1 (for the Pacific Region), the first earth station satellite was
established, followed by Pinugay 2( for the Indian Ocean Region) , with Pinugay 3
established to take over the operations of the first two Pinugays while both were
being refurbished. Petitioner also established a television receive-only antenna at
Clark Air Field which provided the US military bases a 24-hour television service.
Pinugay 4 was then established to take over the functions of Pinugay 1 due to the
latter being incapable of modern functions and is obsolete in essence. Petitioner has
then provided its services for several companies by leasing its satellite circuits.
Section 5 of RA 5514 exempted Petitioner from the jurisdiction of the Public
Service Commission (Which is now NTC in this case). However, pursuant to EO no.
196 which was issued on June 17, 1987, Petitioner was again placed under the
jurisdiction of the NTC.
The Implementing Order No.196 of the respondents then required the petitioner to
apply for the requisite certificate of public convenience and necessity covering its

facilities and the services it renders, as well as the corresponding authority to

charge rates thereof. Under the date of September 9, 1987, Petitioner then filed an
application to continue rendering the said services which it has been doing since
1967. Which was granted by the NTC with a provisional authority to do so until
September 16 , 1988, but directed to reduce their current rates by 15%, saying that
the merit in reduction, subject to further reductions should the commission find in
its evaluations in favor of such, was based on an initial evaluation by their Rates
Regulation Division of the Common Carriers Authorization Department.
PHILCOMSAT assails the above mentioned order for the following reasons:
1.) EO 546 does not provide the necessary standards constitutionally required,
hence an undue delegation of legislative power, particularly the adjudication powers
of NTC.
2.)The questioned order violates procedural due process for having been issued
without due process and hearing, and that the rate it imposes is unjust,
unreasonable, and confiscatory.

Issues:
(1) W/N there was an undue delegation of legislative power?
(2) W/N there was a violation of procedural due process?
(3) W/N there was a violation of substantial due process?

Held:
(1) No, there was no undue delegation of legislative power.
- In the delegation of Legislative power, there must be some standard for its
exercise, and must comply with the standard prescribed by the legislature. The rule
in the delegation of rate-fixing power is that the rate be reasonable and just and
that the rate-fixing power is limited by the requirements of public safety, public
interest, reasonable feasibility and rates; which is more than satisfied.
(2) Yes, there was a violation of procedural due process.
-NTC exercised quasi-judicial powers and not quasi-legislative powers due to
the supposed "finding fact" function which was supposedly done in the issuance of
merit for rate reduction in the questioned order(defined in the case of Vigan
Electric Light Co., Inc. vs. Public Service Commission). Thus the requirement

of Notice and hearing must stand (the order was issued Motu Impromptu and
deprived the Petitioners of such procedural requirement).
Such procedure was further stressed in The Central Bank of The
Philippines vs. Cloribel, et al. where a public administrative body acts in a
judicial or quasi-judicial manner, the person whose rights or property may be
affected by the action is entitled to notice and hearing, which also expressed in
Section 16(c) of the Public Service Act.
Respondents, however, insisted that the assailed order was merely incidental
to the entire proceeding and therefore temporary in nature. This postulate is bereft
of merit. Even though temporary, it is not exempt from the statutory procedural
requirements of notice and hearing, as well as reasonableness.
(3) Yes, there was a violation of the substantive due process.
- The power of the State to regulate the conduct and business of
public utilities 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 public,
then the utility and of its patrons. It is also limited by the consideration that the
State is not the owner of the property of the utility, or clothed with the general
power of management incident to ownership, since the private right of ownership
still remains.
A commission has no power to fix rates which are unreasonable and unjust. It
is not a question of formula but of sound business judgement based upon evidence.
A cursory perusal of the order in question reveals that the rate reduction
is solely and primarily based on the initial evaluation made on the
financial statements of the petitioner, contrary to NTC's allegation that it has
several other sources of information without, however, divulging such.
We must also consider that the Petitioner's nature of business requires it to
constantly maintain, refurbish, and even replace its equipment, as to be able to
perform its essential functions due to the constant change in technology and
upgrades that the other satellites and receivers abroad. A change in one receiving
end must be matched with a change in the other to maintain function. Thus, its
current rates are fixed to supply the essential resources needed to comply with the
above mentioned requirements. Petitioner also expresses that it has future and ongoing projects that are supported by the current rate that it has imposed. To reduce
such would be to impair its ability to answer to the needs of its on-going and future
projects and may practically lead to a cessation of its business.

Gutierrez, JR., J., Concurring Opinion

"I concur in the ponencia of Justice Regalado and join him in the erudite and
thorough discussion of the respondent's authority. However, I have reservations
about our continuing to abide by the dictum that in the exercise of quasi-legislative
power, notice and hearing are not required. I believe that this doctrine is ripe for reexamination.
Congress never really passes truly important legislation without holding public
hearings. Yet, administrative officials who are not directly attuned to the public
pulse see no need for hearings. I believe that in the exercise of quasi-legislative
powers, administrative agencies, much, much more than Congress, should hold
hearings and should be given guidelines as to when notices and hearings are
essential in quasi-legislation."