House committee rejects franchise for ABS-CBN

(4th UPDATE) ABS-CBN, the Philippines’ largest media network will stay off-air after lawmakers rejected its franchise application.

On Friday, July 10, an overwhelming majority of the House committee on legislative franchises adopted the recommendation of its technical working group to reject the bills seeking to grant the network a fresh franchise.

The committee members (regular and ex-officio) who were present, physically or through video call, cast the following votes: 70 to adopt the rejection, 11 to dismiss the rejection, 2 to inhibit, and 1 to abstain.

But committee secretariat Portia Silang later clarified to Rappler that 3 lawmakers inhibited and no one abstained from the vote. Committee chairperson Franz Alvarez, who presided over the hearing, also did not cast his vote. Committee chairs usually do not vote unless they need to break a tie.

Following the rules of the House, only the members of the committee on legislative franchises voted on the bills that would have allowed ABS-CBN to go back on air, although it jointly conducted 13 hearings on the franchise bills with the committee on good government and accountability.

The committee ultimately decided against ABS-CBN due to the network’s alleged “numerous violations” of the terms of its old franchise, which already lapsed last May 4.

“This committee finds that the foregoing, taken collectively, weighs heavily against the grant of legislative franchise to ABS-CBN,” the lawmakers said.

ABS-CBN can appeal the decision within the next 24 hours, according to House legislative franchises panel chair and Palawan 1st District Representative Alvarez. If the network files a motion for reconsideration, the House committee will have to hold another hearing before ruling on the appeal.

Only a lawmaker who voted with the majority can file an appeal on behalf of the network.

'Killed'

After the vote, Bulacan 1st District Representative Jose Antonio Sy-Alvarado asked the committee what it meant by “laid on the table,” referring to the action to be taken.

“Parang ano, sir, killed,” replied the committee secretary. (Sir, it’s like, killed.)

“Ibig sabihin, ito pong usapin patungkol sa pagre-renew ng application ng ABS-CBN ay hindi lang po isinantabi, ito po ay tinapos ngayong araw na ‘to,” said Sy-Alvarado, who chairs the committee on good government, which jointly heard with the franchises committee the issues against the network.

(This means, the issue regarding the renewal of ABS-CBN’s franchise is not merely being set aside, it is being closed today.)

Anak Kalusugan Representative Michael Defensor, vice chairman of the House good government committee, reiterated that a “no” vote “for a franchise application, the effect would be to kill the application of the franchise.”

The network had enjoyed a 25-year franchise valid until May 4 of this year. A day after the franchise lapsed, the National Telecommunications Commission (NTC) ordered ABS-CBN to cease its television and radio operations. The network continued broadcasting its shows via alternative platforms, prompting the House to look into its alleged "dummy" operations.

Roughly a month after ABS-CBN's shutdown, the NTC also ordered the closure of ABS-CBN's Sky Direct, and TV Plus channels.

The last time ABS-CBN was shut down by the government was in 1972, the beginning of the 21-year martial rule under the late dictator Ferdinand Marcos. It would reopen only in 1986, when the strongman was ousted by the EDSA People Power Revolution. (READ: Enrile echoes ABS-CBN: Lopezes did not lose ownership during Martial Law takeover)

Press freedom issue

Journalists and various media groups have long argued that the ABS-CBN's shutdown is an attack on press freedom, which has long been under siege since Duterte took office in 2016. (READ: TIMELINE: Duterte against ABS-CBN’s franchise renewal)

The House committee on legislative franchises, however, insisted their decision against ABS-CBN "is in no way related to the freedom of the press."

"It is what is – a denial of a privilege granted by the State because the applicant was seen as undeserving of the grant of a legislative franchise. By no means can this franchise application be related to press freedom," the lawmakers said in the committee resolution.

"If it were so, then all applicants for legislative franchises covering mass media could simply claim such freedom and force the hand of this committee each time. Such a scenario is totally inconsistent with the nature of legislative franchises as a mere privilege and never a matter of right," added the committee members.

House Deputy Minority Leader Carlos Zarate, who was among the 11 members who voted in favor of ABS-CBN, said the the network's franchise hearings were the longest ever heard in Congress. It took the House just mere days to approve the franchises of other major broadcasting companies in the past.

'Immoral' tax shields, 'usufruct' with Amcara

The issues on tax avoidance, unjust labor conditions, and supposed foreign ownership placed ABS-CBN in peril.

The panel members took issue with the network’s “questionable and unjust, if not immoral,” practice of using its subsidiaries like Big Dipper Digital Content and Design Inc and the Lingkod Kapamilya Foundation Inc as tax shields – an accusation the network has denied.

While tax avoidance is not illegal, the legislators believe a broadcasting company resorting to it is detrimental to the government.

“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. Although legal, the employment of tax avoidance schemes could undermine the integrity of a tax system,” the lawmakers said.

The committee members also stood by the previous accusation that Amcara Broadcasting Network, with whom ABS-CBN had a block-time deal, is the latter’s “dummy.”

ABS-CBN has a block-time arrangement with Amcara, which owns Channel 43. Using Amcara's frequency, the agreement allowed ABS-CBN to broadcast on several channels through ABS-CBN TV Plus. These include TeleRadyo, Jeepney TV, Yey!, Asianovela Channel, CineMo, and KBO.

ABS-CBN used to have a 49% stake with Amcara, but the media giant divested its shares in January 2019.

But the House committee pointed out Amcara’s top executives have ties with ABS-CBN: Amcara president Jose Antonio Veloso was former legal counsel for the media giant, while a former Amcara executive, Federico Garcia, used to be executive vice president of ABS-CBN.

“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,” said the lawmakers.

They argued the ABS-CBN-Amcara deal violated the latter’s legislative franchise while in effect “illegally extended” ABS-CBN’s broadcast services.

The House committee on legislative franchises also found ABS-CBN's labor practices "less than exemplary" since only 25% or 2,661 out of the total 11,701 workers have been regularized by the network.

Alleged foreign ownership

The House committee also argued ABS-CBN may have violated the constitutional rule that media companies should be 100% Filipino-owned.

The dual citizenship of ABS-CBN chairman emeritus Eugenio “Gabby" Lopez III took centerstage. No less than the Department of Justice asserted Lopez is a natural born Filipino because he was born to Filipino parents. But he is also American, as he was born in the United States.

But the committee on legislative franchises disagreed and said dual citizens – even if they are Filipinos – cannot own media companies.

“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,” said the lawmakers.

“The fact of foreign citizenship disqualifies him from owning and managing a mass media entity,” they added.

The committee then turned its attention to the Philippine Depository Receipts (PDRs) that ABS-CBN sold to foreign firms.

PDRs are financial instruments used by media entities to allow foreign investments without giving PDR holders the power to own or manage the nework.

Commercial law experts agree that PDRs entitle holders to only dividends, and not shares of stock, therefore there is no beneficial ownership. The Court of Appeals' decision in Rappler's PDR case says the issuance of PDR per se is not illegal.

But for the House panel members, ABS-CBN’s PDRs gave the “impression” that they were used to “creatively allow the participation of foreigners to fully-nationalized and partially-nationalized activities.”

“Congress shouldn’t indirectly allow foreigners to acquire economic rights to the cash flow of mass media corporations, which is the very evil the Constitution seeks to prevent,” said the committee report.

House votes after Duterte's sustained attacks

The lawmakers’ rejection of the ABS-CBN franchise came after Duterte's sustained threats against the network. ABS-CBN earned his ire after failing to air around P6.6 million worth of political advertisements paid for by Duterte’s campaign in 2016. The network has since returned at least P4 million. ABS-CBN president and chief executive officer Carlo Katigbak told senators they were delayed in paying the remaining P2.6 million, but it was "no longer accepted" by Duterte. (READ: TIMELINE: Duterte against ABS-CBN’s franchise renewal)

Duterte was also displeased after ABS-CBN aired an advertisement during the campaign period showing clips of him cursing, delivering his controversial rape remarks, and saying he is ready to kill. The anti-Duterte ad was paid for by former opposition senator Antonio Trillanes IV. ABS-CBN would later explain to senators that it was “duty-bound to air a legitimate ad.”

Yet Duterte’s spokesperson Harry Roque insisted the President is “completely neutral” on ABS-CBN’s franchise and wanted legislators to vote according to their conscience.

House Speaker Alan Peter Cayetano – Duterte’s running mate in the 2016 polls – had also accused the network of biased coverage, saying ABS-CBN of favored other candidates during the past elections.

Lawmakers threshed out these alleged issues on “biased” reporting for hours on Monday, July 6. But ABS-CBN Integrated News and Current Affairs chief Regina "Ging" Reyes defended her reporters, telling lawmakers that ABS-CBN journalists keep their biases in check and correct mistakes as needed.

The Speaker – who had insisted ABS-CBN's closure was not an issue of press freedom – told his colleagues to exercise a conscience vote when handing down their verdict.

In the past month, lawmakers had grilled ABS-CBN’s executives and lawyers over the network’s supposed violations of the terms of its franchise – from alleged foreign ownership by way of Philippine Depositary Receipts and possible breaches of labor laws, to the network’s supposed use of its subsidiaries as tax shields. The network denied and explained all these.

The House panels also questioned the dual citizenship of ABS-CBN chairman emeritus Eugenio “Gabby” Lopez III. The Department of Justice clarified that Lopez is Filipino since birth as he was born to Filipino parents, and is also American because he was born in the United States. – Rappler.com

Mara Cepeda

Mara Cepeda writes about politics and women’s rights for Rappler. She covers the House of Representatives and the Office of the Vice President. Got tips? Send her an email at mara.cepeda@rappler.com or shoot her a tweet @maracepeda.

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