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FINDINGS AND RECOMMENDATIONS
The Supreme Court declared that a franchise is a privilege, not a right: A franchise started out as a "royal privilege or (a) branch of the King's prerogative, subsisting in the hands of a subject."… Today, a franchise, being merely a privilege emanating from the sovereign power of the state and owing its existence to a grant , is subject to regulation by the state itself by virtue of its police power through its administrative agencies.^1 In Divinagracia vs. Consolidated Broadcasting Systems, Inc. , the Supreme Court explained that the need for regulation for broadcast media in particular is justified due to the scarcity of airwaves, otherwise known as the Scarcity Doctrine.^2 It further acknowledged the government’s duty to impose regulations to see to it that broadcasters promote the public good deemed important by the State and withdraw that privilege from those who fall short: It is through that role that it becomes legally viable for the government to impose its own values and goals through a regulatory regime that extends beyond the assignation of frequencies, notwithstanding the free expression guarantees enjoyed by broadcasters. As the government is put in a position to determine who should be worthy to be accorded the privilege to broadcast from a finite and limited spectrum, it may impose regulations to see to it that broadcasters promote the public good deemed important by the State, and to withdraw that privilege from those who fall short of the standards set in favor of other worthy applicants. The Supreme Court also recognized in Del Mar vs. PAGCOR, et. al.^3 the legislature’s power and duty to regulate public morals in its grant of a franchise “affected with public interest”: Lest the idea gets lost in the shoals of our subconsciousness, let us not forget that PAGCOR is engaged in business affected with public interest. The phrase "affected with public interest" means that an industry is subject to control for the public good ; it has been considered as the equivalent of "subject to the exercise of the police power." Perforce, a legislative franchise to operate jai-alai is imbued with public interest and involves an exercise of police power. The familiar rule is that laws which grant the right to exercise a part of the police power of the state are to be construed strictly and any doubt must be resolved against the grant. The legislature is regarded as the guardian of society, and therefore is not presumed to disable itself or (^1) Radio Communications of the Philippines, Inc. vs. National Telecommunications Commission and Kayumanggi Radio 2 Network Incorporated, G.R. No. LSantiago C. Divinagracia vs. Consolidated Bro-68729, May 29, 1987.adcasting System, Inc. and People’s Broadcasting Service, Inc., G.R. No. 3 162272, April 7, 2009.G.R. Nos. 138298 & 138982, August 24, 2001.
abandon the discharge of its duty. Thus, courts do not assume that the legislature intended to part away with its power to regulate public morals. The presumption is influenced by constitutional considerations. Constitutions are widely understood to withhold from legislatures any authority to bargain away their police power for the power to protect the public interest is beyond abnegation. This Committee now discusses the results of its extensive hearings on the franchise application of ABS-CBN and determines if ABS-CBN is worthy to be granted the privilege to operate a business affected with public interest.
I. AMERICAN CITIZENSHIP OF EUGENIO LOPEZ III Records show that Mr. Lopez was born in Boston, Massachusetts in the United States of America on 13 August 1952 to Eugenio Lopez, Jr. and Conchita La’O.^4 According to Mr. Lopez, his father was at the time taking up his post-graduate studies at Harvard University in Massachusetts, while his mother accompanied his father.^5 He argues that as a legitimate child of Filipino parents, he is a natural-born citizen of the Philippines under the 1935 Constitution, the law in force at the time of his birth, following the principle of just sanguinis. However, because he was born in the United States, which follows the principle of jus soli , he is also considered an American citizen under US laws.^6 Thus, he is purportedly a dual citizen.^7 In 2001, he applied for recognition of his Philippine citizenship with the Bureau of Immigration.^8 He claims in his affidavit that he has not renounced his Filipino citizenship and neither has he committed any act which could be considered as renunciation of the same.^9 As proof that he is a Filipino citizen, he submitted to this Committee Department of Justice (DOJ) certifications purportedly recognizing his Filipino citizenship as well as copies of both his US and Philippine passports. As to the issue of ownership and management of a mass media entity, Mr. Lopez argues that the 1987 Constitution does not distinguish between Filipino citizens and dual citizens.^10 Hence, he is allowed to own mass media businesses and he and ABS-CBN Broadcasting Corporation (ABS-CBN) didn’t violate the Constitution when he served as its Director, Chairman of the Board of Directors, President, and Chief Executive Officer. The 1987 Constitution prohibits non-Filipinos from owning and managing mass media. The foreign equity restriction in Section 11 (1), Article XVI of the 1987 Constitution provides:
45 Certified Copy of Record ofTSN of the 03 June 2020 hearing Birth, at IV in Office of the City Registrar dated 13 August 1971.-1. 67 TSN of the 03 June 2020TSN of the 03 June 2020 hearinghearing, at II, at II--3.3. 89 TSN of the 03 June 2020Affidavit of Eugenio Gabriel hearing La’O, at I Lopez III dated 29 February 2000.-12. 10 TSN of the 03 June 2020 hearing, at III-4.
In the sponsorship speech of the Transitory Provisions of the Constitution, under which the provision on mass media falls under, Commissioner Rosario Braid acknowledged that “the media have such a powerful socializing effect that they could tell audiences how to think and behave. They have a tremendous influence in shaping opinions and attitudes and could lead to cultural alienation and social uniformity.” The constitutional provisions on communication and information are meant to “truly serve the economic, political, social and cultural development of the nation. The provisions note the significant impact of the media of communication on Filipino values and culture. These concerns are expressed in support of an earlier provision on Filipinization of ownership of the mass media .”^13 Because Mr. Lopez is a dual citizen possessing both Philippine and US citizenships, this Committee believes that he is barred from owning and managing ABS-CBN, a mass media entity which the constitution restricts to Filipino citizens only. The fact of foreign citizenship disqualifies him from owning and managing a mass media entity. Mr. Lopez became the Director, Chairman of the Board of Directors, President and Chief Executive Officer of ABS-CBN before he was recognized as Filipino. Mr. Lopez became the Chairman Emeritus of ABS-CBN on 19 April 2018. Prior to this, in 1992, he became a Director of the corporation and was elected as the Chairman of the Board of Directors in 1997. He was Chief Executive Officer of ABS-CBN since May 26, 1993 to January 1, 2013, and was President from May 26, 1993 to May 26, 1997 and then from March 16, 2006 to March 3, 2008.^14 He applied for recognition of his Philippine citizenship only in 2001, and this recognition was granted by the Bureau of Immigration and DOJ in 2002, when Mr. Lopez was already fifty (50) years old. Clearly, Mr. Lopez became Director, Chairman of the Board of Directors, President, and Chief Executive Officer of ABS-CBN before he was recognized as Filipino. It must be noted from the Travel Records of Mr. Lopez submitted by the DOJ and the Bureau of Immigration that his first recorded arrival in Manila (from the US) was in 15 July 1986 using US Passport 051136203 (issued 19MAR1986). There is no prior record of Mr. Lopez’ arrival/departure earlier than July 1986. Based on the same official records, Mr. Lopez solely used a US passport, i.e. travelled as US citizen from 15 July 1986 to 13 July 2004. He only started using both Philippine and US passports on 19 July 2004 (arrival in Manila).^15
(^13) Record of the Constitutional Commission No.092, 25 September 1986. (^1415) Facts from ABS-CBN website. https://www.abs-cbn.com/who-we-are/our-leadership Submission of the Bureau of Immigration.
There is a cloud of doubt on Mr. Lopez’s Filipino citizenship and allegiance to the Philippines. Mr. Lopez hinges his Filipino citizenship on the fact that both his parents are Filipino citizens at the time of his birth. A closer examination of the records from the DOJ and the Bureau of Immigration, however, reveals that there is no clear and convincing proof that Mr. Lopez’s parents were Filipino citizens at the time of his birth, which is the operative fact that would be the basis for his Filipino citizenship. Apart from a sworn affidavit of his mother, which for all legal purposes is considered self- serving, no other evidence was adduced to prove that Mr. Lopez’s mother, Conchita La’O Lopez, was a Filipino citizen at the time of Mr. Lopez’s birth. In fact, Mr. Lopez was not able to produce the authenticated birth certificates of his parents when he applied for recognition of his Filipino citizenship or during the hearings by this Committee. Neither were the Philippine passports of his parents presented to this Committee. Mr. Lopez himself does not have a Philippine government issued birth certificate, which could have served as conclusive proof that he is a Filipino citizen. As pointed out during the proceedings, Mr. Lopez has not submitted his Philippine birth certificate, i.e. his Philippine Report of Birth as authenticated by the Philippine Statistics Authority. His parents were required under Philippine regulations to immediately report his birth at the nearest Philippine Embassy/Consulate to document his Filipino citizenship, but they failed to do so.^16 His parents, including Mr. Lopez himself, could have applied for delayed registration of birth, but they likewise failed to do so. Mr. Lopez’ US Birth Certificate does not state that his parents are Filipino citizens. It merely states that they are of “Brown” colour and that their place of birth is “Manila”. Further, Mr. Lopez never submitted to the Bureau of Immigration/ DOJ or even to this Committee the Philippine passport of his father Eugenio Lopez Jr. to prove that his father was still Filipino at the time of Mr. Lopez’ birth in 1952. Mr. Lopez submitted to the Bureau of Immigration a copy of a Philippine passport of his mother Conchita, but said passport was only issued in 1998, 46 years after Mr. Lopez’s birth in 1952. Verily, the lack of proof of Filipino citizenship of Mr. Lopez’ parents at the time of his birth was apparent in the Bureau of Immigration official’s handwritten notation/comments dated 27 March 2001 stating that “ there is no proof of Filipino citizenship of his mother at the time of his (applicant’s) birth on 13 Aug. 1952. Allegedly his mother is also deceased! ”^17 His parents’ Filipino citizenship at the time of Mr. Lopez’s birth is a specific and crucial fact not present in the records of the Bureau of Immigration in order to dispel the possibility that his parents could have been naturalized as American citizens, i.e. that they had categorically renounced Filipino citizenship before Mr. Lopez was born in 1952. If his parents were already American citizens at the time of his birth, it was impossible for them to transmit Filipino citizenship to Mr. Lopez through jus sanguinis.
(^1617) TSN of the 08 June 2020 hearing, at II-10. Submission of the Bureau of Immigration; emphasis supplied.
- When ABS-CBN Holdings applied for registration of its PDRs with the SEC and listing with the Philippine Stocks Exchange, it had fully disclosed that the PDRs can be sold to anyone regardless of nationality. ABS-CBN issued PDRs to foreigners. The Securities Regulations Code’s Implementing Rules and Regulations define “beneficial owner or beneficial ownership” as “any person who, directly or indirectly, through any contract , arrangement , understanding, relationship or otherwise, has or shares voting power (which includes the power to vote or direct the voting of such security) and/ or investment returns or power (which includes the power to dispose of, or direct the disposition of such security).”^21 ABS-CBN Holdings Corp. issued over 298 million PDRs valued at PHP 46 per PDR. It admits that only 111 million PDRs (37.4% of the total) with a value of about PHP 5 Billion were issued to Filipinos. The bulk of said PDRs, about 187 million (62.6% of the total) amounting to about PHP 8.6 Billion were issued to foreigners/non-Filipinos. While ABS-CBN claimed that these PDRs were approved by SEC, SEC clarified that it had no control as to the buyers of these PDRs. REP. M. T. DEFENSOR. Pero kung sino pong bibili nun, kung saan ibebenta, hindi niyo po alam iyon, hindi niyo po ina- approve iyon. Bahala na po sila. MR. AMATONG. That is correct, Your Honor. That was the point I was trying to make kanina, that in the actual buying and selling, that’s not reported to the SEC. It’s really our self- regulatory organizations, the PSE and the PDEC that are aware of the actual transfers. REP. M. T. DEFENSOR. Thank you po. Thank you, Mr. Chairman.^22 Further, SEC’s grant or approval of the permit to sell PDRs as securities pertained only to an authority to sell the same but not to the validity and constitutionality of the terms thereof and qualifications of the actual PDR holder.^23 It was thus shown that ABS-CBN’s PDRs entitles the non-Filipino holder thereof to adjust the terms of the instrument and modify their own rights, and these adjustments or modifications happen after the fact of registration with the SEC. PDRs of ABS-CBN contains limitations on its ownership rights in favor of foreigners.
(^2122) Section 1(A), Rule 3, IRR of the Securities Regulation Code; emphasis supplied. 23 TSN of the 11 June 2020 hearing, at IXTSN of the 11 June 2020 hearing, at IX--19.19.
The unique feature of the subject PDRs is that ABS-CBN Holdings bound itself not to alter, modify, or otherwise changed its Articles of Incorporation or By-Laws or take any other action that would prejudice the right of the PDR holders.^24 By this token, there is an iota of foreign control over the Articles of Incorporation and the By-Laws of ABS-CBN Holdings which in turn is a principal stockholder owning 34.67% shares of ABS-CBN.^25 Similarly, because of the pledge securing the PDRs, even if the foreigners are not indicated in the actual shares of stock of ABS-CBN owned by ABS-CBN Holdings, still, ABS-CBN Holdings’ right is obviously restricted because it cannot dispose the underlying shares covered by the Pledge Agreement in favor of PDR holders.^26 Further, ABS-CBN Holdings does not have the full benefits of ownership over the shares of stocks underlying the PDRs because it is not in the legal possession of the shares and not entitled to the fruits thereof. 27 Under the Civil Code, full beneficial ownership means that the owner has the benefits of the rights to enjoy, possess, and dispose of the fruits. “To the owner belongs x x x the civil fruits,”^28 but obviously this is not the case with the PDRs of ABS-CBN. The PDRs appear to have been utilized to allow foreign ownership in ABS-CBN which could have violated the 1987 Constitution. The mere designation by the parties in contracts they enter into between themselves should not stop Congress from looking further. Indeed, Congress must work not only at a superficial examination of nominal compliance, but to discern avenues of circumvention. To this Committee, the mechanism of corporate layering employed by ABS-CBN and ABS- CBN Holdings effectively makes the PDR holders the indirect owners of the underlying shares of stock of ABS-CBN. Indeed, while ABS-CBN Holdings is the nominal owner of the shares of stocks, it cannot exercise the full rights of ownership because it entered into a contract of pledge over the shares of stock with the Philippine Central Depository, Inc., to hold on behalf of the PDR holders the shares as security for certain obligations of ABS-CBN Holdings Corp. Because of the pledge securing the PDRs, both ABS-CBN and ABS-CBN Holdings cannot dispose the underlying shares covered by the pledge agreement in favor of PDR holders. Similarly, the holding company is neither in legal possession of the shares nor entitled to the fruits (cash dividends given to stockholders of ABS-CBN). The cash dividends, less the operating expenses and taxes of ABS-CBN Holdings, belong to the PDR holders. The impression given by the issuance of PDRs is that it was resorted to creatively allow the participation of foreigners to fully-nationalized and partially-nationalized activities. The foreign holders of PDRs practically own 187 million underlying shares of ABS-CBN Corporation which is already 62% of the total, and nothing restricts ABS-CBN from issuing shares of stock to ABS-CBN Holdings Corp. and the latter from selling more PDRs representing all of its shares in ABS-CBN Corporation. (^2425) Section 12.2 of the PDR instrument; TSN of the 08 June 2020 hearing, at IX-1. 26 Submission of ABSSubmission of ABS--CBNCBN, principal stockholders of ABS, Pledge Document and PDR Instrument.-CBN. (^2728) Submission of ABS-CBN, principal stockholders of ABS-CBN. Art. 441, Civil Code.
The rationale for the issuance of PDRs already ceased, but ABS-CBN’s issuance of PDRs continued. It is said that the PDRs were brought about to address the 1997 Asian financial crisis to raise funds as a remedy for ailing companies.^30 Said rationale already ceased when the world economy recovered from the downturn. More than two decades had already passed since the crisis and ABS-CBN no longer suffers from the plunge it took as evidenced by the billions of income it has been earning over the past years. What then is the current underlying motive for the issuance of PDRs in favor of foreigners? Given that the network is a mass media entity required to be 100% Filipino owned and managed, and noting its stature and influence in Philippine society and public policy, ABS- CBN should have been circumspect to avoid any doubt or suspicion of impropriety from its scheme of allowing foreigners to hold PDRs corresponding to shareholdings in ABS-CBN.
III. ON THE 50-YEAR LIMIT ON FRANCHISES The facts elicited in the hearings show that ABS-CBN has been in operation since 1967. On 24 February 1957, Eugenio H. Lopez, Sr., owner of the Chronicle Broadcasting Network (CBN), acquired Alto Broadcasting System (ABS). On 1 February 1967, CBN and ABS merged into the now mass media giant. 31 The issue presented before this Committee is whether the grant of a new franchise in favor of ABS CBN would violate Section 11, Article XII of the 1987 Constitution: SECTION 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years…^32 ABS-CBN stated that the fifty-year limit appears as exactly worded in the 1935 and 1973 Constitutions and is clear on its face, claiming that the fifty-year does not prohibit the grant of a new franchise to the same entity upon the expiry of a previous franchise. This Committee agrees with the position of ABS-CBN. While it is true that the Supreme Court has not yet squarely ruled on the fifty-year limit on legislative franchises, and that the record of deliberations of the 1986 Constitutional Commission is wanting on insight on the matter, this Committee believes that the ordinary and straightforward meaning of the provision refers to the maximum period of fifty years vis-à-vis a particular grant of legislative franchise, certificate or authorization. This has been the practice of all seventeen Congresses before this (^30) TSN of the 11 June 2020 hearing, at IV-2. (^3132) TSN of the 15 June 2020 hearing, at VII-6. Emphasis supplied.
18 th^ Congress, and this Committee is not prepared to deviate from such sound practice based on reason and practical considerations.
IV. RETURN OF ABS-CBN TO THE LOPEZ FAMILY AFTER MARTIAL LAW On 17 April 1986, the Lopez family, through counsel, former Senator Lorenzo Tañada, requested President Aquino to order the return of TV Stations 2 and 4. On 13 June 1986, the Lopez family made a written request to the Presidential Commission on Good Government (PCGG) for the return of TV Station Channel 2. 33 On 18 June 1986, the PCGG allegedly approved the return of the TV Station Channel 2 to the Lopez family. Acting upon the request, the Executive Secretary, by authority of the President, entered into an "Agreement to Arbitrate" with ABS-CBN Broadcasting Corporation, represented by its President, Eugenio Lopez, Jr., pursuant to which an Arbitration Committee was created, composed of Atty. Catalino Macaraig, Jr., for the Republic of the Philippines, Atty. Pastor del Rosario, for ABS-CBN, and retired Justice Vicente Abad Santos, as Chairman.^34 On 16 October 1986, the said Agreement to Arbitrate was upheld by the Supreme Court^35 after being assailed by a group led by Jose Luis Martin C. Gascon. The gradual return of the properties and broadcast equipment to the Lopez Family began on 18 October 1986 while the arbitration proceedings were being conducted.^36 It appears that the prescribed process for the return of the subject assets and equipment was not followed. Pursuant to Executive Order No. 5 (1986)^37 and Proclamation No. 50, the Committee on Privatization and the Asset Privatization Trust^38 were created. Section 22 and 23 of the said Proclamation provide: SECTION 22. TRANSFER OF ASSETS. The Committee shall: (1) Arrange for the transfer to, and eventual disposition by, the National Government of certain non-performing assets of government financial institutions, as may be determined under terms mutually acceptable to all the parties concerned, and (2) Arrange for the disposition of certain government-owned or controlled corporations which have been approved for divestment by the President of the Philippines; Provided, that (^3334) TSN of the 15 June 2020 hearing, at VIII-4; submission of ABS-CBN, letter dated 17 April 1986 of Atty. Tañada. 35 Submission of ABSIn the Matter of Arbitration of Claims between Republic of the Philippines and ABS-CBN, Agreement to Arbitrate. -CBN Broadcasting Corporation Case 36 File.Submission of ABS-CBN, Affidavit of Atty. Augusto Almeda-Lopez acknowledged before a Notary Public on 8 August 37 1994.Executive Order No. 5 (1986) https://www.officialgazette.gov.ph/1986/03/12/executive-order-no- 5 - s-1986/ (^38) Proclamation No. 50 https://www.pmo.gov.ph/p50.pdf
PCGG COMMISSIONER AGBAYANI. Based po sa records namin, hindi ho narecord ‘yung proseso na ‘yan. Bigla nalang nawala. Wala hong record sa amin na ‘yan ay binenta at ang proceeds ay binigay sa amin. Hindi po dumaan sa regular procedure.^39 It is curious why the arbitration proceedings between the Cory Aquino Administration and ABS-CBN immediately presupposed ABS-CBN’s ownership over its properties purportedly sequestered during Martial Law, and merely focused on the compensation purportedly due to ABS-CBN. More curious still is the apparent haste of the Cory Government to give due course to the request of ABS-CBN’s immediate return of its properties without observing the regular procedure prescribed by the Presidential Commission on Good Government which governs the return of sequestered properties. Under the required procedure, ABS-CBN had the burden to prove that it is absolute owner of the properties sought to be returned to it by the government. ABS-CBN’s submission of a copy of its Transfer Certificate of Title covering its Mother Ignacia property where its main broadcast station and transmitter are located only raised more questions. During the interpellations, it was pointed out that said TCT has no actual record in the Register of Deeds: REP. MARCOLETA. Mr. Chair, ganito po, dahil sa kagustuhan kong makakita man lang kahit isa, ang ginawa ko po ay kumuha ako ng certified electronic copy sa…sa opisina po ng Register of Deeds ng Quezon City ngayong umaga, Mr. Chair. Nagtaka po ako bakit ang naibigay po sa akin ay owner’s duplicate certificate. Ang inaasahan ko po kasi, Mr. Chair, ang makukuha ko ay isang original copy which is written on the left side of the title itself. Hindi po ganun ang nangyari. Ang ibig pong sabihin nito, iyong titulong ipinadala sa atin, iyong 125702, does not appear in the registry file of the Register of Deeds. It is not extant. Meaning to say, it’s not there. Kasi po kung iyon ay nandoon, ang nakuha ko po sana is an original copy, hindi po owner’s duplicate copy na kagaya po ng nakuha at binigay na sa atin. Pangalawa po, Mr. Chair, mayroon pong nakalagay ritong parang Provisional Registration 9690. Ang nakakapagtaka po rito, Mr. Chair, if we are guided by the date of this title which was submitted to us before by ABS-CBN, ito po ay dated December 26, 1967. Kung talaga pong ito ay for reconstitution, Mr. Chair, bakit hindi po naka-annotate iyong facts of a pending reconstitution? Kung talagang totoo, dapat naka-annotate dito sa pahina ng titulo. Wala po iyon, Mr. Chair. At the very least, kung makikita po natin na pending reconstitution ang title, nakalagay po iyong, let’s say, iyong court number, iyong file number and other facts associated by this. Wala po.
(^39) TSN of the 17 June 2020 hearing.
Pangatlo, Mr. Chair, ito pong pinagmulan na titulo na ibinigay sa atin ng ABSCBN, iyong xerox copy, ang nakalagay po ay TCT No. 110731. Kumuha po ako ng certified true copy rin nito. Nagtaka po ako. Itong pinagmulan na titulo na 127…125702 ay nasa ibang lugar at ang nakapagtataka po, 42 square meters lang, hindi 44,000 plus square meters. Bakit po ganito, Mr. Chair?^40 This Committee is moreover perplexed why, despite the supposed conduct of said arbitration proceedings, there was no records of said proceedings submitted to the Committee despite request by its members. No resource person from ABS-CBN or the PCGG was able to explain why there was just a Compromise Agreement between the parties, as approved by the Regional Trial Court of Makati, and no record whatsoever of the proceedings leading to such Compromise Agreement.
V. ABS-CBN TV PLUS BOX AND KBO PAY-PER-VIEW Section 4 of R.A. No. 7966, the legislative franchise of ABS-CBN, provides that before any frequency in the TV or radio spectrum is used, authority from the National Telecommunications Commission must be secured: Sec. 3. Prior Approval of the National Telecommunications Commission. — The grantee shall secure from the National Telecommunications Commission the appropriate permits and licenses for its station and shall not use any frequency in the television or radio spectrum without having been authorized by the Commission. The Commission, however, shall not unreasonably withhold or delay the grant of any such authority.^41 On 10 February 2015, NTC granted ABS-CBN Demonstration Permit No. BSD- 0010 - 2015 to test its Digital Channel 43 until 30 June 2015. ABS-CBN sold TV Plus Boxes to access its encrypted multiple channels. Upon receipt of said permit, ABS-CBN proceeded to use the frequency to generate multiple channels/programs to be included in its TV Plus Box. This continued even beyond the expiration of said demonstration permit. 42 There is no NTC authorization on record allowing ABS-CBN to produce the TV Plus Box containing multiple channels, much less to sell it for profit. Initially, NTC said that the sale of set-up boxes like TV Plus Boxes is allowed as being akin to a sale of appliance to access digital channels, thus the NTC said it does not regulate the sale of such boxes.^43 However, when asked if this was specifically allowed under NTC’s regulations,
(^4041) TSN of the 29 June 2020 hearing, at IX-18. 42 Emphasis supplied.TSN of the 29 June 2020 hearing, at V-16. (^43) TSN of the 29 June 2020 hearing, at III-15.
NTC confirmed that it directed ABS-CBN to wait for NTC’s guidelines prior to offering such pay-per-view services.^49 ABS-CBN disregarded the directive of NTC when it continued to air the Pacquiao-Mayweather fight. ABS-CBN, contrary to the terms of its franchise, operated its pay-per-view (PPV) channel, otherwise known as the Kapamilya Box Office, without a valid permit from the NTC. As per NTC documents , the KBO PPV promo is a value added service authorized for ABS-CBN Convergence, Inc. which is registered as a value-added service provider for Telecommunications Carrier.^50 ABS-CBN Convergence, Inc. is not a legislative franchise holder for broadcasting operations. ABS-CBN Convergence, Inc. is not authorized to use ABS-CBN’s digital frequency/ channels assigned by the State or even ABS-CBN’s TV Plus Box. However, in almost all promo mechanics of ABS-CBN Convergence, Inc., it required that subscribers also have the TV Plus Box in order to watch the KBO shows.^51 To repeat, neither ABS-CBN nor ABS-CBN Convergence was authorized by the NTC or by a legislative franchise to operate the TV Plus Box, or even charge subscribers for the KBO service therein. ABS-CBN TV Plus Box system is akin to Cable TV operations requiring a separate legislative franchise. ABS-CBN’s legislative franchise is for Radio and Television broadcasting using the free-to-air frequency granted by the State. However, its TV Plus Box, the encrypted channels therein, and the KBO PPV service all pertain to the delivery of video and audio signals for a fee through technological means including transmission via wired or wireless means. ABS-CBN cites DOJ Opinion dated 11 June 2018 addressed to NTC to justify that it was allowed to “commercialize” the digital channel 43 assigned to it by NTC.^52 However, the DOJ Opinion expressly cautioned NTC to ensure that said “commercial activities” of TV broadcasters should not amount to cable TV operations: To summarize, it is our opinion that TV broadcasters may be allowed to engage in Conditional Access (CA) or Conditional Access System (CAS), more specifically to offer TV pay-per-view services, provided that it does not amount to CATV service, which shall only be considered as such if it is ‘for purposes of providing multiple channel CATV service’. 53 Precisely, the Federation of International Cable TV Associations of the Philippines (FICTAP), in opposing the franchise application of ABS-CBN, said that the TV Plus Box, the multiple
(^4950) TSN of the 29 June 2020 hearing, at V-15. 51 Submission of ABSSubmission of ABS--CBN, copies ofCBN, copies of^ NTC Letters addressed to ABSNTC Letters addressed to ABS--CBN Convergence, Inc.CBN Convergence, Inc. (^5253) Submission of ABS-CBN, copy DOJ Opinion dated 11 June 2018. Submission of ABS-CBN, copy DOJ Opinion dated 11 June 2018; emphasis supplied.
encrypted channels therein and the KBO PPV of ABS-CBN are “killing ” the cable industry which depends on monthly based subscriptions of its public clientele.^54 There is merit in FICTAP’s claim that ABS-CBN’s TV Plus Box, the multiple encrypted channels therein and its KBO PPV service fall under Sec. 3 (b) of R.A. 10515, or the Anti- Cable Television and Cable Internet Tapping Act of 2013, which speaks of Cable Television Service: (b) ‘ Cable Television (CATV) Service ’ — refers to the transmission or delivery of video and audio signals and programming for a fee through fiber optics, coaxial cable, and other technological means which shall include, but not limited to, transmission via wired or wireless means, including microwave, radio signal or frequencies for purposes of providing multiple channel CATV service. The term shall also include electronic equipment such as digital or analog receiver-decoder boxes , set-top and converter boxes as well as, but not limited to, master antenna television, satellite master antenna television, direct broadcast satellite/direct to home, multi-point distribution service, a television receive-only satellite program distributor and other providers of video and audio programming, whatever the technology ; x x x^55 In turn, Section 1 of Executive Order No. 436 requires that operation of cable television systems be maintained separate from broadcast television: Section 1. The operation of cable television systems , as a subscriber service undertaking with a unique technology, shall be maintained separate and distinct from telecommunications or broadcast television. Moreover, the Cable TV Operator needs a distinct permit from NTC to be able to operate a cable television system as provided for by Section 4 of Executive Order No. 436: Section 4. Local exchange operators and/or broadcasters, as well as operators of direct broadcast satellite service, multi-point distribution service, television receive-only satellite program distribution service and other systems of providers of video programming utilizing whatever technology, shall not operate cable television systems or any form of service involving the delivery [of] television programs and signals, by wire or cable or through the airwaves and other wireless video signal transmission systems without specific permits, licenses and/or authority to operate a cable television system as provided hereunder and under applicable laws and rules and regulations, which permits, licenses and/or authority shall be issued in accordance with the provisions of this Executive Order.^56
(^5455) TSN of the 29 June 2020 hearing, at II-10 to 15, testimony of Ms. Estrellita Juliano-Tamano, National Chair, FICTAP. 56 Emphasis supplied.Emphasis supplied.
any person, firm, company, corporation or other commercial or legal entity, nor shall the controlling interest in the grantee be transferred to any such private person, firm, company, corporation or entity without the prior approval of the Congress of the Philippines. Any person or entity to which this franchise is sold, transferred or assigned, shall be subject to all the same conditions, terms, restrictions, and limitations of this Act.^62 AMCARA’s franchise allowed it to maintain and operate channel 23, then called Studio 23 which was rebranded to ABS-CBN Sports+Action in 2014. However, for the past 23 years, it maintained an agreement with ABS-CBN, which it calls a “block-time” agreement, to allow ABS-CBN to broadcast its programs over Studio 23/ABS-CBN Sports+Action.^63 Further, the block-time agreement between ABS-CBN and AMCARA allows ABS-CBN to use AMCARA’s Channel 23 for almost the whole day, at 21 hours, every day. This means that ABS-CBN has continuous control over AMCARA’s channel, and such control only rests when the signal is turned off the air for only three hours every day.^64 There is reason to believe that ABS-CBN controls AMCARA in its entirety and not only its frequency. For 23 years, ABS-CBN owned 49% of AMCARA, until ABS-CBN supposedly sold its shares in 2019 back to AMCARA’s original owners for PHP 40 Million.^65 For the past 23 years, AMCARA exclusively broadcast ABS-CBN programs and content in Studio 23/ABS-CBN Sports+Action for 21 hours per day, 7 days a week, for 365 days of the year. It appears that AMCARA had no broadcast equipment and TV towers of its own. 66 ABS-CBN thoroughly took over the broadcast of AMCARA so much so that AMCARA itself was never in the public consciousness. And in addition to Studio 23/ABS-CBN Sports+Action, towards the expiration of ABS- CBN’s own legislative franchise on May 5, 2020, ABS-CBN was able to assign digital channel 43 to AMCARA and again entered into another block-time agreement for ABS-CBN to continue broadcasting through digital channel 43 its TV Plus Box multiple channels.^67 Notwithstanding the purported assignment of digital channel 43, NTC declared that AMCARA itself has no digital TV transmission equipment, nor was it issued any digital broadcasting permit. NTC further declared that AMCARA’s purported digital signal was actually originating from ABS-CBN’s own tower inside the ABS-CBN Compound in Quezon City. 68 All these even after the May 5, 2020 Cease and Desist Order issued by NTC against ABS-CBN. Significantly, it was revealed during the proceedings that ABS-CBN reporter Jeff
(^6263) Emphasis supplied. 64 Submission of ABSSubmission of ABS--CBN, BlockCBN, Block--Time Agreement between ABSTime Agreement between ABS--CBN and AMCARA.CBN and AMCARA. (^6566) TSN of the 29 June 2020 hearing, at III-4 to 6. 67 TSN of the 29 June 2020 hearing, at IIITSN of the 29 June 2020 hearing, at VI--4 to 6.3. (^68) TSN of the 02 July 2020 hearing, at III-6 to 8.
Canoy featured one of ABS-CBN's engineers (not AMCARA’s) as the engineer who turned off the digital signal transmission for the TV Plus Box.^69 AMCARA itself admits that it has been using ABS-CBN’s digital TV transmitters under the supposed deed of assignment. However, it admits that this deed of assignment has never been submitted to the NTC. AMCARA has not paid the consideration of PHP 40 Million for the 49% stake that ABS-CBN supposedly divested in January 2019.^70 AMCARA’s officials are likewise shown to be interlocked with ABS-CBN. AMCARA’s President, Atty. Jose Antonio Veloso, was former legal counsel of ABS-CBN. Mr. Federico “Freddie” Garcia, former executive of AMCARA, was also the former Executive Vice President of ABS-CBN: REP. MARCOLETA. Mr. Freddie Garcia. Hindi po ba ‘yan dating Direktor ng ABS-CBN? MR. VELOSO. I’m not… Wala na po ako nung ano, I don’t know what his position, Your Honor. REP. MARCOLETA. Executive Vice President ng ABS- CBN. MR. VELOSO. Yes, once…once upon a time , Your Honor. REP. MARCOLETA. Ganito po kasi ‘yung nakikita namin, Atty. Veloso. Counsel din po ba kayo dati ng ABS-CBN? MR. VELOSO. Long time ago, Your Honor. I was already in ABS, GMA, MTRCB. So, ’90s…’90s pa po.^71 The above-mentioned circumstances lead us to conclude that ABS-CBN itself is in charge of the actual act of broadcasting rather than AMCARA. ABS-CBN, in doing the actual broadcasting using the franchise of AMCARA, thus obtained exclusive use and control of AMCARA’s legislative franchise without the consent of Congress. This is not just a mere usufruct allowing ABS-CBN to enjoy the fruits of AMCARA’s franchise, but a fraudulent machination which allowed ABS-CBN to exclusively and totally control the legislative franchise granted to AMCARA. This is an outright violation of AMCARA’s legislative franchise which in effect illegally extended ABS-CBN’s broadcast services beyond the expiration of its own franchise. For the past 23 years, ABS-CBN effectively operated and maintained another broadcast frequency through AMCARA. And now that ABS-CBN’s own legislative franchise has expired, it is able to use AMCARA to continue broadcasting. Then and now, AMCARA existed solely for and because of ABS-CBN. There is thus sufficient reason for this Committee to believe that AMCARA is a mere dummy of ABS-CBN which should warrant the piercing of the veil of corporate fiction.
(^6970) TSN of the 02 July 2020 hearing, at III-11. 71 TSN of the 02 July 2020 hearing, at IVTSN of the 02 July 2020 hearing, at IV--2. 10.
