Why VAS Providers and DTIPs Must Secure Their Own Authority to Operate
With the enactment of the Republic Act No. 12235 (Konektadong Pinoy Act) and its Implementing Rules and Regulations (IRR), the regulatory landscape for telecommunications and data transmission providers has significantly evolved.
Under the new framework, many Value-Added Service (VAS) providers — particularly those offering Internet Access Services — are now classified as Data Transmission Industry Participants (DTIPs) and are subject to expanded registration, eligibility, and compliance requirements.
However, one principle remains unchanged:
❗ The “umbrella system” — where a registered VAS or DTIP allows another operator to use its permit — remains prohibited.
What Is an Umbrella System?
An “umbrella system” refers to arrangements where:
- A VAS permit holder or DTIP allows another entity
- To operate telecommunications or internet services
- Using the original holder’s Certificate of Registration (COR) or authority
This typically happens when smaller or aspiring operators attempt to avoid the registration process by “riding” under an existing permit.
Under both previous VAS regulations and the new DTIP framework, this practice is not allowed.
Express Prohibition Under NTC Memorandum Circular No. 002-02-2026
The prohibition against the “umbrella system” is not merely implied — it is expressly reinforced under Section 12 of NTC Memorandum Circular No. 002-02-2026
Section 12 clearly provides that the authority, registration, or authorization granted by the Commission is non-transferable and cannot be assigned, leased, or otherwise conveyed to another entity without prior approval of the Commission. This provision ensures that regulatory authority remains entity-specific and that accountability cannot be shifted to unregistered operators.
This means:
- A registered DTIP or VAS provider cannot allow another company to operate under its authority.
- Registration cannot be “shared,” “sublet,” or used as a regulatory shield for another operator.
- Each entity must independently qualify and obtain its own authorization.
The language of Section 12 strengthens the policy that regulatory approval is granted based on the financial capacity, technical qualifications, ownership structure, and compliance undertakings of the applicant itself — not of third parties operating behind it.
Application to VAS Providers Now Classified as DTIPs
With VAS providers (particularly Internet Access Service providers) now deemed covered under the DTIP framework pursuant to the Konektadong Pinoy Act and its implementing regulations, Section 12 applies with equal force.
Even if a company previously operated under a VAS Certificate of Registration, once classified as a DTIP:
- It must comply independently with DTIP eligibility standards.
- It must meet financial, technical, reporting, and cybersecurity obligations on its own.
- It cannot allow another operator to use its registration as an “umbrella.”
The combination of:
- Individual registration requirements,
- Expanded compliance obligations under the DTIP regime, and
- The express non-transferability rule under Section 12
makes it clear that umbrella systems remain prohibited under the current regulatory framework.
Legal and Regulatory Basis
1. Individual Registration Requirement
NTC Memorandum Orders consistently state:
No entity shall provide value-added services without a valid Certificate of Registration issued by the Commission.
Under the DTIP regime, this expands further:
- Registration must be made by the applicant itself
- Applications must be filed by the entity or its duly authorized representative
- Eligibility is evaluated based on the applicant’s own qualifications
This clearly means regulatory authority is entity-specific and non-transferable.
2. Accountability and Consumer Protection
Under the DTIP rules, each registrant must:
- Maintain a functional website
- Operate a compliant billing system
- Submit quarterly and annual reports
- Pay Supervision and Regulation Fees (SRF) and Spectrum User Fees (SUF), when applicable
- Maintain at least two complaint channels
- Implement cybersecurity safeguards
- Submit Annual Financial Statements
If another operator is operating under your permit:
- Who submits the reports?
- Whose financial statements reflect the operations?
- Who is liable for consumer complaints?
- Who is accountable for cybersecurity breaches?
The umbrella system creates regulatory confusion and weakens consumer protection — precisely what the Konektadong Pinoy Act seeks to strengthen.
Expanded Compliance Under DTIP Rules
Because VAS providers offering Internet Access Services are now considered DTIPs, the compliance burden is even stricter:
✔ Financial capacity requirements
✔ Technical capability requirements
✔ Engineering documentation
✔ Network diagrams and system disclosures
✔ Books of accounts and audited financial statements
✔ Ongoing regulatory reporting
These requirements are assessed per entity — not per “group,” not per “umbrella,” and not per shared certificate.
Risks of Engaging in an Umbrella Arrangement
Allowing another entity to operate under your VAS or DTIP registration may expose you to:
- Suspension or cancellation of registration
- Administrative penalties
- Regulatory enforcement actions
- Cease and desist directives
- Liability for violations committed by the unregistered operator
For aspiring operators, relying on someone else’s permit may result in sudden shutdown once discovered.
The Proper Way to Operate Under the New Framework
If you intend to offer Internet Access or other covered services under the DTIP classification:
- Register your own entity.
- Secure your own DTIP registration.
- Comply independently with financial, technical, and operational requirements.
- Maintain proper reporting and fee payments.
There is no shortcut.
The Konektadong Pinoy Act aims to expand connectivity — but it also strengthens regulatory oversight. Compliance is not optional.
Final Reminder to Aspiring Operators
The regulatory environment is now stricter, more structured, and more transparent. While the law encourages broader participation in the data transmission industry, it does not permit informal or proxy operations.
If you are currently operating under another entity’s permit — or planning to — it is strongly advisable to reassess your compliance position immediately.
Each DTIP must stand on its own authority.
For guidance on compliance, registration, or regulatory strategy, Apsay Law Office stands ready to assist.
Visit www.apsaylaw.com or message us to learn more.