G.R. No. L-18841 January 27, 1969
REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, defendant-appellant.

FACTS

The Republic of the Philippines, through the Bureau of Telecommunications (Butel), and the Philippine Long Distance Telephone Company (PLDT) are both engaged in providing telephone services. Butel, created under Executive Order No. 94, operates a Government Telephone System (GTS) serving both government offices and the general public. It rented trunk lines from PLDT to interconnect its system with PLDT’s network, enabling calls between their respective subscribers. PLDT holds a non-exclusive legislative franchise. Butel also entered into an agreement with RCA Communications, Inc. for joint overseas telephone service. On April 12, 1958, PLDT disconnected the trunk lines leased to Butel, alleging that Butel was using them to serve the general public in commercial competition, violating the lease conditions and PLDT’s rules. This disconnection isolated the Philippines from overseas telephone services except to the United States. The Republic filed a complaint to compel PLDT to execute an interconnection contract and to restore the connections. The trial court issued a preliminary mandatory injunction for reconnection, and after trial, dismissed both the complaint and PLDT’s counterclaims but made the injunction permanent. Both parties appealed.

ISSUE

The primary issue is whether PLDT can be compelled to enter into an interconnection agreement with the Republic (through Butel) and allow the use of its telephone facilities.

RULING

Yes. The Supreme Court modified the trial court’s decision. It affirmed the permanent injunction but reversed the dismissal of the Republic’s petition. The Court ruled that PLDT, as a public utility holding a non-exclusive franchise and enjoying a monopoly over telephone service, has a duty to serve the public. This duty includes allowing interconnection with Butel’s system, as Butel is also engaged in public service and PLDT cannot meet the total public demand for telephone service alone. The Court held that the trial court has the authority and duty to determine the just terms and compensation for such interconnection, including a reasonable rate for calls passing through PLDT’s lines. The case was remanded to the trial court for further proceedings to fix these terms and compensation. The Court rejected PLDT’s claim of parasitic competition, noting Butel’s legal authority to serve the public and the non-exclusive nature of PLDT’s franchise.