ABS-CBN franchise hearings, so far

Published July 3, 2020, 5:03 PM

by Rj Nieto


RJ Nieto

Let’s stop deluding ourselves into thinking that the loss of a TV franchise is tantamount to the loss of Free Speech because if it were, then 99.9 percent of Filipinos – who never had a TV franchise – never had right to free expression. And we know that isn’t true.

TV frequencies, limited in number and collectively owned by the Filipino people, should be granted to entities that are in the best position to improve the lives of Filipinos, and the Constitution bestows upon Congress the right to determine who these entities are.

I have been following the congressional hearings on the ABS-CBN franchise for quite some time now, and judging from what I’ve seen, I’ve seen several issues that may make things difficult for the media giant.

On foreign ownership and control

ABS-CBN argues that Philippine Depositary Receipts, essentially white-labeled ABS-CBN shares, confer neither ownership nor control on foreign PDR holders. However, the fact that ABS-CBN gets a financial lifeline from the PDR issuances means foreigners with significant PDR holdings can use these assets to influence ABS-CBN’s operations.

The Constitution expressly prohibits any form of foreign ownership and control of mass media. What if a foreign PDR holder hates a policy and threatens to dump his holdings to depress PDR prices? Would ABS-CBN executives ignore him, or will they accommodate his demands, in a bid to preserve the company’s financial prospects?

On the usufructuary agreement

ABS-CBN’s and AMCARA’s respective franchises prohibit usufructuary agreements without prior congressional approval, with the Supreme Court in Moralidad v. Spouses Pernes describing “usufruct” as essentially “nothing else but simply allowing one to enjoy another’s property.”

Representatives Crispin Remulla, Michael Defensor, Rodante Marcoleta, Elpidio Barzaga, and many others allege the existence of a usufructuary agreement between AMCARA Broadcasting and ABS-CBN. 
ABS-CBN denies this, saying it’s merely a block time arrangement, a common practice in the TV industry.

However, the hearings show ABS-CBN uses virtually all of AMCARA’s airtime, and even uses ABS-CBN transmitters for broadcasts. That is, it appears that minus rent collection, Channel 43 is ABS-CBN itself. That is, AMCARA seems to have allowed ABS-CBN to enjoy the use of AMCARA’s franchise, which sounds a lot like a usufructuary.

On ABS-CBN’s defiance of the NTC

ABS-CBN’s franchise terms require the network to “secure from the National Telecommunications Commission (NTC) the appropriate permits and licenses… and shall not use any frequency… without [NTC authorization],” and the hearings show ABS-CBN defied NTC.

Despite a 29 April 2015 NTC cease-and-desist order, ABS-CBN charged each viewer P2,500 for the 03 May 2015 pay-per-view Pacquiao-Mayweather Match.

Rep. Marcoleta asked ABS-CBN CEO Karlo Katigbak why they defied NTC, and Katigbak said, they “have already sold the service to countless people prior to the receipt of the letter” and they “had a commitment to the public who had already paid for the service, that’s why [they] decided to pursue it.”

ABS-CBN could’ve notified its subscribers of NTC order and issued refunds, so why didn’t they? Is ABS-CBN more interested in the money or in saving its face than actually complying with the law?

Some argue that Congress shouldn’t penalize ABS-CBN’s future-forwardness. However, while innovation is a good thing, the fact remains that the government owns the free-to-air frequency, so it has the final say on how it is used.

On ABS-CBN’s taxes

ABS-CBN claims tax-compliance, but the real question is whether it has always been that way.  

Court records show ABS-CBN and its subsidiaries have settled through compromise agreements four tax cases with the Bureau of Internal Revenue, and Star Cinema is still battling one. If ABS-CBN believes that it has always complied with tax laws, then why would it bother to enter into such compromise agreements? Should Congress grant a privilege to a company that causes financial headaches?

House hearings also revealed that ABS-CBN pays fewer taxes compared to much smaller rival GMA Network. In 2017 ABS-CBN paid P421 million against GMA’s P1 billion. In 2018, GMA paid P928 million against ABS-CBN’s measly P84 million.

On social media, GMA’s Annette Gozon even jested in Taglish, “Oh, maybe GMA can copy this too to avoid paying taxes, haha!”

Tax avoidance is not illegal, but it is still detrimental to a government that badly needs revenue, especially at a time when COVID-19 drastically slowed the economy. Should the government allow tax avoiders to use government assets like TV frequencies, or should these frequencies be lent to those who pay more taxes? If Congress grants ABS-CBN a new franchise despite the latter’s alleged tax avoidance schemes, will that encourage other TV and radio networks to pay fewer taxes, and if so, what happens to the public coffers as a result? 

Most importantly, will lending to ABS-CBN a scarce government-owned asset be the most beneficial course of action for the Filipino people as a whole, or would lending it to someone else do more good?

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