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 SERV…

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. 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:

1. The attainment of efficient telephone service for as wide an area as
   possible at the lowest reasonable cost to the subscriber;
2. 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;
3. 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;
4. 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;
5. 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
6. 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.

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.

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.

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