HOUSE PANEL: Reasons why ABS-CBN franchise application was denied

The House of Representatives’ Committee on Legislative Franchises on Friday denied the application of media giant ABS-CBN Corp. for a new 25-year franchise.

The panel, chaired by Palawan Rep. Franz Alvarez, approved the resolution denying the franchise application of ABS-CBN Corp. to construct, install, establish, operate, and maintain radio and broadcasting stations in the Philippines.

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Cebu Rep. Pablo John Garcia said the technical working group (TWG) that drafted the resolution has determined that the "likely consensus" among the panel members was to disapprove the application of ABS-CBN for another franchise.

The previous House hearings have exhaustively discussed the network’s franchise issues, including the citizenship of ABS-CBN chair emeritus Gabby Lopez; the possible violation of the constitutional limits on foreign ownership; reported labor, and tax violations; and other violations of the terms of its legislative franchise.

The TWG noted in its report on findings and recommendations that the network’s franchise application is not a press freedom issue.

“It is what it is – a denial of a privilege granted by the State because the applicant was seen as undeserving of the grant of a legislative franchise,” it said.

Lopez’s dual citizenship 

According to the TWG report, there is a cloud of doubt on Lopez's Filipino citizenship and allegiance to the Philippines.

Lopez is a dual citizen, both a natural-born Filipino and an American citizen.

It cited a constitutional provision stating that “dual allegiance of citizens is inimical to the national interest and shall be dealt with by law”.

It further referred to the constitutional requirement that mass media companies should be 100-percent owned and managed by Filipinos.

“Mr. Lopez’s birth as a Filipino was never registered. It took him 50 years to apply for recognition as a Filipino citizen, presenting no clear and convincing evidence that his parents were Filipino citizens at the time of his birth,” it said. “From birth even to the present, he continues to use his US passport.”

Issuance of PDRs 

The report also noted that the issuance of Philippine depositary receipts (PDR) to foreigners has allowed foreign ownership in ABS-CBN, which could have violated the 1987 Constitution.

It said 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.

It highlighted that the foreign holders of PDRs practically own 187 million underlying shares of ABS-CBN Corp., which is already 62 percent of the total.

“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,” it said.

ABS-CBN TV Plus Box, KBO pay-per-view

The report said the ABS-CBN used frequency Channel 43 to generate multiple channels or programs to be included in its digital television service, TV Plus Box, which continued even beyond the expiration of the demonstration permit in June 2015.

It said there is no authorization from the National Telecommunications Commission (NTC) on record allowing ABS-CBN to produce the TV Plus Box containing multiple channels, much less to sell it for profit.

According to the NTC, ABS-CBN had no authority to encrypt or lock from the non-paying public its TV Plus Boxes, which are clearly only “free-to-air” under its legislative franchise.

“It was shown that ABS-CBN violated the terms of its legislative franchise by encrypting its various digital sub-channels, which led the public to purchase ABS-CBN’s TV Plus Boxes,” the TWG report read.

Furthermore, it was also learned that ABS-CBN did not secure any prior permission to charge the viewers of its Kapamilya Box Office (KBO) pay-per-view channel.

Failure to regularize employees 

The TWG report cited the Department of Labor and Employment’s official statement on July 1 declaring that its labor inspectors found violations of laws and labor standards by ABS-CBN and that there are 67 pending cases against the company in the National Labor Relations Commission (NLRC) and various courts.

It noted that former employees who have previously filed cases against ABS-CBN testified that they were illegally dismissed because they formed unions.

These former employees also declared that they were made to sign employment contracts containing a waiver of the right to regularization.

Those who refused to sign an employment contract containing a waiver of regularization were downgraded to project employees and later dismissed.

ABS-CBN argued that its reason for failing to regularize many of its employees was the “uniqueness” of their industry, claiming that many of these employees are hired for specific programs, which mostly only last for a period of time.

The TWG highlighted that only 25 percent or 2,661 of the total 11,701 workers of ABS-CBN are regular employees.

“While ABS-CBN gives its non-regular employees various company-initiated benefits, it can’t give the benefit most important and advantageous to them – security of tenure. It is unfortunate that a multi-billion company like ABS-CBN has not regularized its independent contractors, talents, contractuals, project, and seasonal workers who perform the functions of regular employees,” it said.

Tax issues 

ABS-CBN claimed it is paying proper taxes, which is allegedly proven by the Tax Clearance issued by the Bureau of Internal Revenue.

ABS-CBN has also maintained that it did not violate the terms and conditions of its legislative franchise by availing of tax incentives offered by the government.

However, the panel said a tax clearance does not absolve a taxpayer of tax liabilities and delinquencies, nor from acts of fraud or tax evasion.

It also argued that the continuous practice of ABS-CBN in navigating through the loopholes of the system and tax laws appeared to have reached the extent of depriving the government of the taxes due.

“If we focus on the harm of tax avoidance to society, rather than how it is legally defined, then we can see that it contributes to growing inequality, increases tax burdens on resident taxpayers and undermines state legitimacy,” it said. “Although legal, the employment of tax avoidance schemes could undermine the integrity of a tax system.”

Biased reporting, meddling in politics 

The committee has refrained from giving a finding on the alleged biased reporting of the network, alleged meddling in politics, as well as the content of its programs.

“The principles of press freedom, fair comment, and self-regulation of media militate against any attempt at such ruling,” it said.

However, it encouraged ABS-CBN to carefully examine itself and understand where all the “persistent complaints” about biased reporting, inappropriate program content, and political meddling are coming from.

“Perhaps, by listening to the complaints and assessing itself, ABS-CBN will come to some realizations, which hopefully will make it a better media entity, employer, and corporate citizen,” it said.

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