Telcos ordered P7.04B-refund for overcharged SMS rates

MANILA, Philippines – The National Telecommunications Commission (NTC) has ordered telecommunications companies (telcos) to refund their subscribers a total of P7.04 billion in overcharged text messages.

Engineer Edgardo Cabarios, NTC director for the Common Carriers Authorization Department, told reporters on Thursday, May 8, that the telcos would have 30 days to comply with the order dated May 7.

In separate orders, the NTC denied the motions for reconsideration of Smart Communications Incorporated, Digitel Mobile Philippines Incorporated or Sun Cellular, and Globe filed in December of 2012, seeking to reverse NTC’s December 2011 order to roll back short messaging system (SMS) rates to P0.80 from P1.

In explaining how the NTC arrived at the refund amount, Cabarios explained that about 10% or 200 million of the two billion text messages sent by subscribers of Smart, and Digitel or Sun Cellular, and Globe are charged the regular rate of P1 per text.

He said 20% or 40 million of the 200 million text messages charged the regular rate of P1 per text are off-net, or sent from one network to another.

Of the 40 million text messages charged P1 – a total of P40 million – the companies would have to refund P0.20 per text message or P8 million per day since the NTC issued Memorandum Circular 02-10-2011 or the “Interconnection Charge for SMS”  effective December 2011.

P8M/per day for 880 days

All in all, Cabarios said telco providers would have to refund at least P8 million per day for 880 days, for a total cost of P7.04 billion.

The NTC circular that took effect in December 2011 was to have reduced the SMS or text interconnection charge to P0.15 from P0.35, to make text messaging more affordable to the public pursuant to the directive of the Office of the President.

This should have lowered the rate to P0.80 per text message instead of P1 as early as December 1, 2013. 

In that 2011 circular, companies were directed to refund or reimburse their subscribers the excess charge of P0.20 per off-net SMS or text messages sent from one network to another network from the effectivity of the circular, until fully settled.

In coming up with the refund amount, the NTC computed that the retail price of off-net SMS consists of the network cost in sending the text, plus the cost of the network receiving the text, added to the cost of the interconnection facilities as emphasized in its circular.

 The NTC said that the savings incurred from the reduced interconnection charge on SMS sent to other networks (off-net SMS) was intended to be passed on to subscribers, and not to solely benefit the telcos.

It added that, while SMS is in the nature of Value Added Service (VAS), the NTC is not prevented from lowering the cost of communication to better serve the public interest.

After failing to comply with the 2011 circular, the NTC issued another decision in November of 2012 directing Smart, Sun Cellular, and Globe to reduce its regular SMS retail price to other networks to not more than P0.80 per SMS  and reimburse its subscribers the excess charge of P0.20 per off-net SMS, from the effectivity of the circular.

The companies were also directed to pay a fine of P200 per day for every day of delay in the implementation of the order since December 2011 and to submit documents and records pertaining to SMS sent to other networks of all its subscribers charged P1 per text message.

The NTC official also said that the telcos would have each  pay P160,000 for failing to comply with the order.

Latest data showed that the Philippine Long Distance Company (PLDT) Group’s cellular subscriber base reached 70.5 million consisting of Smart with 25.9 million followed by Talk ‘N Text with 29.5 million, and Sun Cellular with 15.1 million as of end-March this year.

Globe’s mobile subscribers stood at 38.1 million as of end-2013. – Rappler.com