ABS-CBN: Competition regulator’s options

posted January 14, 2020 at 12:10 am by Rudy Romero

"The Philippine Competition Commission can either speak out, or be quiet."

All the discussions thus far regarding franchise of ABS-CBN Broadcasting Corporation – more specifically, the franchise’s approaching expiry on March 20, 2020 – have revolved around the political and legal aspects of the franchise that the network obtained almost 25 years ago. Hardly anything has been said about the economic aspect of the matter.

The political aspect of the renewal or non-renewal of ABS-CBN’s franchise can be summed up in three words: President Rodrigo Duterte. The Chief Executive of this country has stated in no uncertain terms that he will veto any bill granting a renewal of the franchise. Mr. Duterte has been forthright about his disdain for ABS-CBN. The network allegedly failed to air, during the 2016 campaign period, advertisements for which he made payment. If Mr. Duterte’s claim is true – and the Chief Executive passionately says that it is – that 2016 decision will prove to be the greatest miscalculation committed by ABS-CBN in its history. Payback time is here.

The legal aspect of the renewal or non-renewal of ABS-CBN’s franchise revolves around the Constitutional provision governing public utilities. ABS-CBN falls within the Public Service Act’s definition of a public utility. Whatever the legal requirement for ABS-CBN’s being able to operate beyond March 20, 2020 – whether or not Congressional action is required – there is no getting away from the fact that the President of the Philippines can disapprove or reverse a favorable action taken by any department or agency on ABS-CBN’s quest for franchise renewal. Nor is judicial action the solution; the courts cannot compel the President of the Philippines to perform an act involving Presidential discretion.

As stated above, the economic aspect of the coming expiry – and renewal or non-renewal of ABS-CBN’s franchise has undergone less public discussion than it’s political and legal aspects. Yet it is likewise an important aspect.

Anyone knowledgeable about the structure of the Philippine broadcast industry knows that a key element of the resolution of the ABS-CBN issue is the competitive situation within the industry. This is not an unimportant aspect of the issue: in fact, the desire to eliminate monopolistic or oligopolistic conditions, and to level the playing field, in this country’s industries that Congress passed the Philippine Competition Act several years ago.

Because of its highly capital-intensive nature, the broadcast industry is a comparatively small industry. In this country the broadcasting industry is composed of five companies, to wit, ABS-CBN, GMA Network, Intercontinental Broadcasting Corporation (IBC-13), ABC-5 Corporation and government-owned PTV-4. However, the bulk of the industry’s revenues are accounted for by ABS-CBN, GMA and IBC only, a state of affairs shown by the fact that surveys of audience size are generally undertaken only for those companies. It is not incorrect to speak of the Philippine broadcasting industry in terms of a duopoly.

Under the leadership of economist Arsenio Balisacan, PCC (Philippine Competition Commission) has tried hard to fulfill its mandate, constantly looking our for threats to competition and striking down arrangements and practices that are inimical to the letter and spirit of fair competition. PCC has made its existence felt whenever unfair competition has reared its ugly head.

The possible non-renewal of ABS-CBN’s franchise will raise the issue of competition in the Philippine broadcasting industry. Whether or not ABS-CBN is the industry’s No. 1 – that depends on which rating company is doing the rating – the fact is that the cessation of operations of ABS-CBN will give rise to monopolistic conditions in the industry, with GMA effectively becoming a monopoly. That is hardly a situation that Dr. Balisacan and his colleagues will want. That is precisely the kind of situation that the authors of the Philippine Competition Act sought to prevent.

Thus far PCC has not been heard from, but sooner or later it will have to weigh in on the ABS-CBN franchise issue. It will not be able to pretend that the issue does not exist and that there will be no corresponding impact on competitive conditions in the broadcasting industry.

Given President Duterte’s resolve to not approve an extension of ABS-CBN’s franchise, PCC, being a part of the Executive Department, will not prevail. But its views on the matter will have to be heard.

PCC has two options. One option is to speak out against the non-renewal of ABS-CBN’s franchise and thereby incur the ire of President Duterte, with all the dire consequences of that. The other option is to keep quiet about the matter and pretend that no competition-related problem exists.

The two options are equally bad for PCC.