weeuoweeue a. oe: oe) oes ee’ t wuuw DPPC eee Pee ETS LT er TEE Pree SUPREME COURT © = FRORECERE | U-s& wsoxeeaer, Republic of the Philippines U20FEB 0 AN 946 Supreme Court Manila REPUBLIC OF THE PHILIPPINES, represented by SOLICITOR GENERAL JOSE Cc, CALIDA, Petitioner, ~ versus ~ G.R. No. 251358 For: Quo Warranto ABS-CBN CORPORATION (FORMERLY ABS-CBN BROADCASTING CORPORATION) and ABS-CBN WITH CD FILED CONVERGENCE, INC. (FORMERLY MULTI-MEDIA TELEPHONY, INC.) Respondents, eee wo nnnnnn nnn x PETITION Petitioner Republic of the Phili pines, represented by Solicitor General Jose C. Calida, resp. ectfully states: PRELIMINARY STATEMENT 1. In view of its nature asa legislative franchise is not a right that Can be exercised at will and pleasure, Rather, it is a Privilege subject to regulation under such conditions as the government ma) grant from the State, a regardless of the grantee’s identity and influence, 2. For decades now, Respondents ABS-CBN Corporation and ABS-CBN Convergence - grantees of legislative franchises - have been at the forefront of Philippine mainstream media Purportedly “in the service of the Filipino people.” Ironically, Respondents are charging the public for such service which, however, should be free.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR. No. xe 3. In this quo warranto petition, the State will show that Respondent ABS-CBN Corporation has been broadcasting contents for a fee 5eyond the scope of its legislative franchise. Likewise, the State will establish that respondent ABS-CBN Corporation, hiding behind an elaborately crafted corpcrate veil, has been allcwing foreign investments to partake in the ownership of the mass media giant in violation of the Constitution. 4. Appropriately, the State seeks to revoke the respondents’ respective franchises because they have been abusing and misusing their special privileges. The hour of reckoning may have been delayed, but it has now come. NATURE AND TIMELINESS OF THE PETITION 5. This is a petition for quo warranto under Section 5(1), Article VIII of the Constitution in relation to Rule 66 of the Rules of Court, seeking to revoke tne legislative franchises of ABS-CBN Corporation and ABS-CBN Convergence, Inc. for operating in gross violation of their legislative franchises under R. A. No. 7966 and R. A. No. 8332, respectively. 6. As will be explained below, this is a case of first impression and is unprecedented, involving as it does one of the biggest and most influential media and broadcasting companies in the country. The suit is being filed with the Court as an. exception to the application of the doctrine of hierarchy of courts because the issues raised are of transcendental importance.! Ineluctably, it is only the Court that can properly and expeditiously resolve the transcendental issues raised in the instant petition. 7. Equally important is the certitude that the present petition is based on facts established no less by documents issued by Respondents and submitted to government offices. The facts are supported and corroborated by official government acts, historical events, matters of public knowledge, and the admissions of Respondents and their ' The Diocese of Bacolod vs. Commission on Elections, G.R. No. 205728, January 21, 2015.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc, Petition for Quo Warranto GR.No, x representatives and officers. Simply put, the petition does not raise factual issues. 8. This petition is timely filed in as much as the Republic has an imprescriptible right to institute such action. 9. The Republic is exempt from the payment of filing fees pursuant to Section 22, Rule 141 of the Rules of Court. THE PARTIES 10. Petitioner Republic of the Philippines is a sovereign entity with capacity to sue and be sued. It has the authority to commence a quo warranto proceeding under Article VIII, Section 5(1) of the Ccnstitution and Section 1, Rule 66 of the Rules of Court. The Resublic is represented in this Petition by the Solicitor Generai who has the mandate to “represent the Government of the Philippines, its agencies and instrumentalities, and its officials and agents in any litigation, proceedings, investigation, or matter requiring the services of a lawyer.” The Solicitor General’s authority to institute a quo warranto petition on behalf of the Republic is provided under Section 2, Rule 66 of the Rules of Court. 11. The Solicitor General may receive the writs, orders, resolutions and processes of the Honorable Court at 134 Amorsolo Street, Legaspi Village, Makati City. 12. Respondent ABS-CBN Corporation, forrrerly ABS-CBN Broadcasting Corporation is a domestic corporation Primarily engaged in the business of television and radio network broadcasting within or without the Philippines with principal office address at ABS-CBN Broadcasting Center, Sgt. Esguerra Avenue corner Mother Ignacia St., Quezon City.? Pursuant to Section 11, Rule 14 of the Rules of Ccurt, Respondent may be served with this Honorable Court's writs, orders, and processes through its President or Corporate Secretary. ? Annex “A,” Articles of Incorpcration ABS-CEN Corporation.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto G.R.No. 13. Respondent ABS-CBN- Convergence, Inc., formerly the Multimedia Telephony, Inc., is a domestic corporation that acts as the telecommunications subsidiary of Respondent ABS-CBN Corporation, with principal office address at ABS-CBN Broadcasting Center, Sgt. Esguerra Avenue corner Mother Ignacia St., Quezon City. Pursuant to Section 11, Rule 14 of the Rules of Court, it may be served with this Honorable Court’s writs, orders, and processes, through its President or Corporate Secretary. THE SUBSTANTIVE FACTS Origin of the franchises of ABS- CBN Corporation and ABS-CBN Convergence, Inc. 14. Bolinao Electronics Corporation (BEC) was established in 1946 as an assembler of radio transmitting equipment. On June 14, 1950, Congress passed R.A. No. 511 granting Bolinao Electronics Corporation a temporary permit to construct, maintain, and operate stations for international telecommunication and stations fer television ir the Philippines. 15, In 1952, Bolinao Electronics Corporation adopted the business name Alto Broadcasting System (ABS). ABS eventually launched the country’s first Also known as “An act granting the Bolinao Electronics Corporation a temporary permit to construct, ‘maintain and operate stations “or intemational telecommunication and stations for television in the Philippines.” Also known as “An Aot granting the Manila Chronicle a permit to construct, maintain and operate redio broadcasting stations and stations for television in the Philippines.”Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR.No. operations of ABS and CBN were integrated, and the corporate name was changed to ABS-CBN Broadcasting Corporation. In 2010, the corporate name was changed again, this time to ABS-CBN Corporation. 18. On June 21, 1969, Congress approved R.A. No. 5730 granting ABS-CBN Broadcasting Corporation 4 franchise to construct, maintain, and operate stations for international telecommunications and stations for television in the Philippines for a period of fifty years.* 19. On June 21, 1969, Congress enacted R. A. No. 5731 granting ABS-CBN Broadcasting Network a franchise to construct, maintain and operate radio broadcasting stations and stations for television in the Philippines for a period of fifty years.® 20. In 1995, Congress passed R. A. No. 7966 granting ABS-CBN its legislative franchise with a term of twenty-five years, the nature and scope of which state: Section 1. Nature and Scope of Franchise. — Subject to the provisions of the Const'tution and applicable laws, rules and regulations, the ABS-CBN Broadcasting Corporation, hereunder referred to as the grantee, its successors or assigns, is hereby granted a franchise to construct, operate and maintain, for commercial, purposes and in the public interest, television and radio broadcasting stations in and throughout the “hilippines, through microwave, satellite or whatever means including the use of any new tectihologies in television and radio systems, the corresponding technological auxiliaries or faci special broadcast and other broadcast distribution services and relay stations. 7 5 Also known as “An Act Amendirg the Title and Certain Sections of Republic Act Numbered Five Eundred Eleven, Entitled “An Act Grantiag the Bolinao Electronics Corporation a Temporary Permit to Construct, Maintain and Operate Stations for Intemational Telecommanication and Stations for Televison in the Philippines”. * Also known as “An Act Amencing the Title and Certain Secticas of Republic Act Numbered Thirteen Hundred and Forty-Three, entitled “An Act Granting the Manila Chronicle a Permit to Construct, Maintain and Operate Radio Broadcasting Stations and Stations for Television in the Philippines.” 7 Annex “B," copy of R.A. No. 7966, also known as “An act granting the ABS-CBN Broadcasting Corporation a franchise to corstract, install, operate and maintain television and radio broadcasting stations in the Philippines, and for other purposes.”Republic rep. by Solicitor General Calida vs, ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto Acquisition of Multi-Media Telephony, Inc. and Amcara Broadcasting Network, Incorporated by Respondents ABS-CBN Convergence, Inc. and ABS-CBN Corporation. 21. Multi-Media Telephony, Inc. was incorporated on September 20, 1993. It sought a franchise to construct, establish, operate and maintain wireless communication paging system throughout the Philippines considering the public's need for wireless communication paging systems for business and personal use and the necessity to improve the technology and capabilities of the 2aging industry. Multi- Media Telephony, Inc. was the fourth player in the grcwing Paging industry after Easycall, Pocketbell, and Beeper 150.8 22. On February 23, 1995, Corgress enacted R.A. No. 7908 which granted Multi-Media Telephony, Inc. the franchise to construct, establish, operate, and maintain radio paging system in the Philippines.? 23. Subsequently, on June 30, 1997, Congress passed R.A. No. 8332, which expanded the scope of Multi-Media Telephony's franchise to include the operation of mobile, cellular, wired or wireless telecommunications services throughout the Philippines and between the Philippines and other countries and territories. *° 24. After securing its legislative franchise, Multi-Media Telephony, Inc. obtained the following Certificate of Public Convenience and Necessity (CPCN) and _ Provisional Authorities from the National Telecommunication Commission (NTC) to operate their telecommunication systems, to wit: § See Explanatory Noté of House Bill No. 13755 (R.A. No. 7908). ° Annex "C," copy of R.A. Nc. 79¢8, also known as “An act granting the Multi-Media Teleshony Incorporated, a franchise to construct, establish, operate and maintair. radio paging system in the Phil:ppines, and for other purposes.” '° Annex "D," R.A. No. 8332, also known as “An Act Amending Republic Act No, 7908, Entitled, “An Act Granting the Multi-Media Teleshony, Incorporated, a Franchise to Construct, Establish, Operate and Maintain Radio Paging System in -he Philippines, and for Other Puzposes”,Republic rep. by Solicitor General Calida vs, ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR.No. a. CPCN to procure, install and maintain Internet Protocol (IP) Access Node in NTC Case No. 98-212" issued on April 23, 20€2; b. Provisional Authority to procure, install, operate and maintain a nationwide internet network in NTC Case No. 98-146%2 issued on February 8, 1999; c. Provisional Authority to construct, install, operate and maintain Local Exchange Service (LEC) in NTC Case No. 99-206} issued on April 23, 2002; and d. Provisional Authority =o install, operate and maintain a nationwide broadband network in NTC Case No. 98-1034 issued on February 1, 2001. 25. On October 15, 2010, ABS-CBN Corporation acquired from PCCI Equities, Inc. its subscription rights over the 250,000 shares in Sapientis Holding Corporation. Sapientis thus became a wholly-owned subsidiary of ABS- CBN. 26. On December 29, 2011, Sapientis acquired Columbus Technology, Inc. (CTI), which owned 95% of Multi- Media Telephony, Inc. CTI sought the approval of the SEC for the increase in its authorized capital stock to accommodate the subscription of Sapientis. Thus, Sapientis was able to acquire 70% interest in CTI through the conversion of the deposits into common stock. This acquisition indirectly included the acquisition of Multi-Med’a Telephony which as stated was a 95%-owned subsidiary of CTI. . 27. On March 5, 2015, ABS-CBN Corporation entered into a merger with its wholly-owned subsidiaries, which 1 Attached as Annex “EK, " Atached as Annex “F.” Awached as Annex “G.” “* Attached as Annex SH.”Republic rep. by Solicitor General Calida vs, ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR.No. x included Sapientis. As a result of the merger, ABS-CBN Corporation became the surviving corporation of Sapientis.*5 28. In the meantime, ABS-CBN Convergence, Inc. signed a five-year network sharing agreement with Globe Telecom in 2013, in which ABS-CBN Convergence created a new mobile telephone brand, the ABS-CBN Mobile.'* The ABS- CBN Mobile had its own prepaid and postpaid voice, SMS, and mobile broadband services. The network sharing deal was approved by the NTC on June 7, 2013.17 29. On March 2, 2015, the Securities and Exchange Commission issued a Certificate of Filing of Amended Articles of Incorporation in favor of ABS-CBN Convergence.!® ABS- CBN Convergence uses Multi-Media Telephony's franchise without congressional approval. To this date, ABS-CBN Convergence has not publicly offerec any of its outstanding capital stock to any securities exchange within the Philippines. !9 30. Similarly, ABS-CBN Corporation acquired and used Amcara’s legislative franchise under 2.A. No. 8135. Amcara was incorporated on April 11, 1994 and was granted a legislative franchise which lapsed into law on July 16, 1995.2 The franchise will expire on July 16, 2920. Amcara started its broadcasts using Channel 23. Channel 23 was, however, renamed Studio 23 in 2010 and was rebranded as ABS-CBN Sports and Action in 2014. 31, In its Amended Annual Report for 2012 submitted to the SEC,?* ABS-CBN Corporation disclosed that it had 8 Annex “1,” ABS-CBN Corporation's Quarterly Report, SEC Forre 17-0 for fiscal year ended on September 30, 2016. ‘6 https://business. inquirer.net/124117/abs-cbn-forays-into-telco-business (last accessed on January 1¢, 2020). “hutps:/www.philstar.com/business/2013/06/08/95 1358/ntc-okays-globe-abs-cbn-network-sharing- agreement (last accessed on January 10, 2020); htips://www.raanilatimes.net/2013/06/07/businass/nte- approves-abs-c-globe-network-sharing/773 / (last accessed on January 10, 2020). “Annex “J,” Amended Articles of Inccrporation in favor of ABS-CBN Convergence, Inc.: https://edge.pse.com.ph/companyDirectory/forr:.do (last accessed January 15, 2020). ach ® See Explanatory Note in Heuse Bill No. 3297 *' Annex “K,” ABS-CBN Corpcration’s 2012 Amended Annual Report pursuant to Section 17 of the SRC and Section 141 of Corporation Code of the Philippines, SEC Form 17-A.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR. No. invested or advanced 49% of equity interest or ownership in Amcara, which ABS-CBN Corporation considers as one of its subsidiaries. It also revealed that the remaining cerrying value of investments in Amcara amounted to P41 millicn as of December 31, 2012 and 2011.72 Operation of Kapamilya Box Office is without the necessary permit from NTC. 32. After the expiration of the agreement between ABS-CBN Convergence and Globe Telecom, the former severed network sharing ties with tre latter since ABS-CBN Convergence deemed its mobile business model financially unviable.?3 33. In 2015, ABS-CBN Corporation officially introduced and launched a digital broadcasting cusiness called the ABS- CBN TV Plus, which distributes digital set-top boxes with premium and free-to-air digital channels (such as the ABS- CBN Kapamilya Network, and pay-per-view services} to selected areas in the Philippines.** Thereafter, in March 2016, ABS-CBN Corporation launched a pay-per-view channel in ABS-CBN TVplus, the Kapamilya Bcx Office (KBO).?5 The Kapamilya Box Office is a Pay-Per-View service in which Filipinos may choose to access premium content from their television sets that can be currently activated through SMS for a fee of P30.00 to P99.00,76 34. ABS-CBN Corporation is using the free-to-air frequency granted to it by the State for its operations of a Conditional Access System (CAS), particularly its KBO Channel. CAS is defined as a technology used in digital TV 2 Id, p. 60. 2 hps://ousinessmirror.com.ph/2018/07/ 6/abs-cbn-convergence-globe-end-5-years-of-network-sharing/ (last accessed on January 10, 2020). 2 Annex “L,” ABS-CBN Corporation Information Statement datzd March 14, 2019, SEC Form 20-1S, p. 37; Annex “M,” ABS-CBN Corporation’s Quarterly Report for June 30, 2015; hups://www philstar.com/entertainment/2015/02/15/1423784/abs-ctn-launches-digital-tv (last accessed on January 10, 2020). Shtips://entertainment.abs-cbn.com/tv/updates/1231916-abs-cbn-typlus-launches-kapamilya-box-office- channel-with-one-month-free-screening-of-star-cinema-blockbuste-s (last accessed on 17 January 2020). 26 https://tvplus.abs-cbn.comv/kbc (last accessed on January 15, 2029).Republic rep. by Solicitor General Calida vs, ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GRNo, — systems that involves satisfying qualified criteria prior to granting access to content.2? 35. On April 1, 2015, ABS-CBN Corporation wrote a letter to NTC informing the latter of ‘ts plan to offer free-to- air viewers and those who will purchase the ABS-CBN TV Plus the option to watch the Pacquiao-Mayweather Match live through pay-per-view on Digital Terrestrial TV (DTT) for P2,500.00.78 Under Section 3 of R.A. No. 7966, Respondent is required to secure prior authority from NTC before it uses any frequency in the television or radio spectrum. 36. Ina letter dated April 29, 2015, NTC directed ABS- CBN Corporation “to refrain from offering any pay television service in [its] DTT trials until such time that the Commission has come up with appropriate guidelires for the same.”29 NTC iterated the directive in its Order dated May 14, 2019.39 37. Without NTC issuing any guidelines and ABS-CBN Corporation securing any permit, on April 18, 2016, ABS-CBN offered live viewing of “The Time Has Come: Donaire v. Bedak” for #199.00.3 On September 21, 2016 and July 4, 2017, ABS-CBN offered pay-per-view boxing of “Pinoy ?ride 38: Philippines vs Mexico” and “Pinoy Pride 41: Magsayo vs Diaz” through KBO for P99.00.3? On April 13, 2017, ABS-CBN advertised its KBO Holy Week Special for P99.00.2? On September 14, 2019, the red carpet coverage of “The 2019 ABS-CBN Ball” was aired live on KBO for P30.00.%* On November 30, 2019, “Listen: The Big Shot Concert” of the TNT Boys was aired live on the same channel P30.00.35 Last February 24, 2020, the homecoming concert of Miss Universe 7 Annex “N,” p. 5, Framework of the Digital Terrestrial Television Broadcasting (DTTB) Migration Plan, 2 Annex “O”, Letter dated April 1, 2015, » Annex “P”, Letter dated April 29, 2015. % Annex “Q,” NTC Order dated May 14, 2019. 31 https://tvplus.abs-cbn.com/news/details/pi¢-1460975 143476/weekend-knockout-bakbakan-sa-abs-cbn- \wplus/ (last accessed on January 15, 2020). % _htips:/tvplus.abs-cbn.conv/news/details/pid-147444 1676940/pinoy-pride-38-philippines-vs-mexizo-sa- Wwplus-mo/; hitps://tvplus.abs-cbr.convnews/details/pid-1499137334492/pinoy-pride-41-magsayo-7s-diaz- sa-superkbo/ (last accessed on January 14, 2020), * hps://tvplus.abs-cbn.com/news/Cetails/pid-1492058839696/kbo-holy-week-special’ (last accessed on January 15, 2020), https://www.abs-cbn.com/newsroom/news-releases/2019/9/13/abs-cbn-ball-2019-airs-live-on- Kbo?lang=en (last accessed on January 17, 2020). ° _https://www.abs-cbn.com/newsroon/news-releases/2018/1 1/28’highly-awaited-int-boys-major-concert- airs-live-on?lang-en (last accessed on January 17, 2020),Republic rep. by Solicitor General Calida vs, ABS-CBN Comp. and ABS-CBN Convergence Inc. Petition for Quo Warrant GR. No, x 2018 Catriona Grey was also aired live on KBO.26 Recently, ABS-CBN launched KBO99 Promo where a payee may enjoy eight movies for four weeks for P90.C0.37 38. As of February 2019, despite the absence of any permit from NTC and guidelines on conditional access, the KBO Channel inveigled 1.2 million unique TV Plus consumers to register in the service.3® Use of Philippine Deposit Receipts by ABS-CBN Holdings Corporation 39. On March 306, 1999, Worldtech Holdings Corporation was incorporated for the primary purpose of investing, purchasing, and holding real and personal property including but not limited to shares of stock, bonds, debentures, notes, evidence of indebtedness or other securities for obligations. On September 16, 1999, the SEC approved the change in the Company’s corporate name to ABS-CBN Holdings Corporation.39 40. On September 29, 1999, ABS-CBN Holdings issued Philippine Deposit Receipts (PDRs). The PDRs were then listed in the Philippine Stock Exchange on October 7, 1999, which PDRs may be exercised at any time from said date. Any cash dividend or other cash distributions distributed in respect of ABS-CBN Corporation shares received by the ABS-CBN Holdings (or the Security Agent on its behalf) shall be applied towards the operating expenses due from the company (including but not limited to applicable taxes, fees and maintenance costs charged by the Philippine Stock Exchange shown as “Operating Expenses” in the statements of income) for the current and preceding years. Any further amount equal to the Operating Expenses in the preceding year (the “Operating Fund”) shall be set aside to meet operatine or other expenses for the succeeding years. Any amount in 2 https://www sunstar.com.ph/article/i 793798 (last accessed on January 17, 2020). » hups://tvplus.abs-cbn.comy (last accessed on January 15, 2020). 3 _hups://werw.abs-cbn.com/newsroon/news-releases/20 19/2/2C/abs-cbn-tvplus-sells-7m-units-since-its- launch-in?lang=en (last accessed on January 10, 2020). * Annex “R,” ABS-CBN Holdings Corporation Notes to Financizi Statements, 2019 3° Quarterly Report pursuant to Section 17 of the Securities Regulation Code and SRC Rule 17(2)(B).Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR.No. x excess of the aggregate of the Operating Expenses paid and the Operating Fund for such period (referred to as “Interest”) shall be distributed to Holders pro-ra=a on the day after such cash dividends are received by the ABS-CBN Holdings.*° 41. Upon exercise of the PDRs, an exercise price of 0.10 per share is paid by the PDR holders. This exercise price is shown as “Exercise fees” account in the statements of comprehensive income.** 42. Immediately prior to the clesing of the PDR offering described above, Lopez, Inc., to which ABS-CBN Holdings is affiliated, transferred 132,000,000 ABS-CBN Corporation shares to the latter company for PDRs that were issued.4? The number one PDR holder holding 186,635,072 or 60.42%, >CD Nominee Corp, is a non-Filipino.43 43. In addition, on October 16, 2019, Prudential Singapore Holdings Pte. Limited, a Singaporean corporation with business address in Singapore, was deemed a substantial holder of 15,656,570 PDRs issued by ABS-CBN Holdings. The PDRs were held in various funds managed by its subsidiary Eastspring Investment Singapore Limized, also a Singaporean corporation.*+ 44. The obligation of ABS-CBN Holdings to deliver the ABS-CBN Corporation shares on the exercise of the right contained in the PDRs is secured by the Pledge of Shares in favor of the Security Agent acting on behalf of each holder of a PDR over these shares. At any time after the initial offering, a shareholder may, at his option and from time to time, deliver shares to the ABS Holdings in exchange for an equal number of PDRs. The exchange is based on prevailing traded values of ABS-CBN Corporation shares at the time of transaction with the corresponding PDR option price.*® 1d, “1a, 1a, ® Annex “S,” ABS Holdings’ 2018 Information Statement, SEC Form 20-IS, with a list of the Top 20 PDR holders of ABS Holdings as of December 20, 2019. “ Annex “S-1,” ABS Holdings’ Beneficial Ownership Disclosure dated October 28, 2019, SEC Forrs 18- A Sd,Republic rep. by Solicitor General Calida vs, ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto G.R. No. x 45. For as long as the PDRs are outstanding, ABS Holdings will not engage in activities other than in connection with the issuance of the PDRs, the performance of obligations under the PDRs, and the acquisition and holding of she7es of ABS-CBN Corporation in respect cf which the PDRs are issued .*¢ 46. The PDRs unlocked the share value of ABS-CBN Corporation, allowing foreigners to participate in a rredia enterprise whose ownership is constitutionally limited to Filipinos. With foreigners allowed to buy PDRs, ABS-CBN Corporation shares, which have long been undervalued, can now play catch-up with regional media counterparts.*” 47. Parenthetically, as of 2018, aside from ABS Holdings, ABS-CBN Corporation alsc owns and controls at least seven other holding companies, including the ABS-CBN Global Ltd. incorporated in the Cayman Islands, a wholly- owned and controlled subsidiary of ABS-CBN Corporaticn, to wit: Company Incorporation Principal Activity Currency ABS-CBN Global Ltd Cayman “slands Holding Company USD ABS-CBN Global Hungary Budapest Hungary Holding Company USD Rosetta Holdings Corp —_Philippines Holding Company PHP Sapientis Holdings Corp Philippines Holding Company PHP Columbus Technologies In Philippines Hoiding Company PHP SkyVision Corp Philippines Hiding Company PHP. Sun Cable Holdings Philippines Hoiding Company PHP 48. The flowchart*® below illustrates the map of relationships of ABS-CBN Corporation’s subsidiaries: 61a, Td. “8 See Annex “L," particularly 20/8 Audited Financial Statement, >p. 7-9. Td, p. 265.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR.No. x—— can convonanion ann sunning ‘Wert ne GROUP Desenber 32018 sTeANATIONAL SUBS OLARES GROUNDS RELIED UPON IN SUPPORT OF THE PETITION I. Procedural Arguments A. Quo Warranto is the proper remedy to forfeit the franchises of Respondents ABS-CBN Corporation and ABS-CBN Convergence, Inc. for gross violation of their franchises. B. Direct resort to the Honorable Court is justified as this case is of transcendental importance and of first impression. II. Substantive Arguments A. Respondent ABS-CBN Corporation violated its legislative franchise when it operated a Pay-per-view channel through free-to-air signals. B. Respondent ABS-CBN Convergence, Inc. violated its franchise under R.A. No. 7908, as amended by R.A. No. 8332.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto a. Respondent ABS-CBN Convergence, Inc. violated R.A. No. 7908, as amended by R.A. No. 8332, when the transfer of the subject legislative franchise was made without pricr approval from the Congress. b. Respondent ABS-CBN Convergence, Inc. violated Section 16 of R.A. No. 7908, as amended by R.A. No. 8332, in relation to Section 21 of R.A. No. 7925, when it failed to publicly offer any of its outstanding capital stock to any securities exchange in the Philippines. Ir. Respondent ABS-CBN Corporation’s issuance of Philippine Deposit Receipts through ABS- CBN Holdings Corporation violates the foreign ownership restriction of mass media under Section 11, Article XVI of the Constitution. DISCUSSION I. Procedural a. Quo Warranto is the proper remedy to forfeit the franchises of respondents ABS-CBN Corporation and ABS-CBN Convergence, Inc. for gross violation of their franchises. 49. Under Section 1 of Rule 66 of the Rules of Court, "an action for the usurpation of a public office, position or franchise may be brought in the name of the Republic of the Philippines against a person who usurps, intrudes into, or unlawfully holds or exercises public office, position or franchise."°° The special civil action of quo warranto is a prerogative writ by which the Government can call upon any * Rules of Court, Sec. 1.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR No. Xe person to show by what warrant he holds a public office or exercises a public franchise.>* 50. Even as the action is maintained in the name of the Republic, the Solicitor General is obliged to commence such action upon complaint, and upon good reason to believe that any case specified under Section 1 of Rule 66 can be established by proof.5* The Solicitor General is duty bound to advocate a uniform and consistent compliance with the Constitution, the laws, and regulations of the State.5? 51. The franchises of ABS-CBN Corporation and ABS- CBN Convergence have to be revoked for the gross violations they have committed. A forfeiture of a franchise will have to be declared in a direct proceeding for the purpose brought by the State because a franchise is granted by law and its unlawful exercise is primarily a concern of the Government.54 Quo warranto is specifically available as a remedy if it is thought that a corporation has offended against its corpo-ate charter or misused its franchise.5> 52. Respondents are guilty of unlawful exercise of their franchises under Section 1(a), Rule 66 of the Rules of Court, viz: Section 1. Action by Government against individuals. — An action for the usurpation of a public office, position or franchise may be commenced by a verified petition breught in the name of the Republic of the Philippines against: (a) A person who usurps, intrudes into, or unlawfully holds or exercises a public office, positicn or franchise; .. 53. In Divinagracia vs CBS Inc.,>* the Court recogrized that “[t]here is in fact a more appropriate, more narrowly- “ Divinagracia vs. Consolidated Broadcasting System, Inc.,G.R. No. 162272, April 7, 2009 citing O. Herrera, Il Remedial Law (1999 ed.), at 295; citing Newman v. U.S., 238 U.S. 537, 545, 56 L.Ed. 513, and Moran, Comments on the Rules of Court, Vol. 3, 1970 ed, * Divinagracia vs. Consolidated Broadcasting System, Inc., G.R, No. 162272, April 7, 2009 citing Rules of Court, Sec, 1. 5 Republic vs. Sereno, G.R. No. 237428, May 11, 2018 PLDT vs, NTC, G.R. No. 88404, 18 October 7990, 190 SCRA 717, 730-731. 3 See Divinagracia vs. Consolidated Broadcasting System Inc., et al., supra. GR. No. 162272, 7 April 2009.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR. No. x tailored and least restrictive remedy ... ” to call upon any person to show by what warrant he exercises a public franchise - the resort to a quo warranto proceedings under Rule 66 of the Rules of Court. 54. Divinagracia cited PLDT v. NTC and Cellcom Inc.,5” in which the Court had declared that quo warranto is the proper procedure to question a franchise, thus: The determination of the right to the exercise of a franchise, or whether the right to enjoy such privilege has been forfeited by non-user, is more properly the subject of the prerogative writ of quo warranto, the right to assert which, as a rule, belongs to the State "upon complaint or otherwise" (Sections 1, 2 and 3, Rule 66, Rules of Court}, the reason being that the abuse of a franchise is a public wrong and not a private injury. A forfeiture of a franchise will have to be declared in a direct proceeding for the purpose brought by the State because a franchise is granted by law and its unlawful exercise is primarily a concern of Government.°° 55. It is beyond cavil that a “franchise” is a “special privilege.”*° As a grant of the government, not only is a franchise a “special” privilege; it is also a privilege of “public concern.”©° As a public concern, a frarchise has likewise been held to be “reserved for public control and administration” either by the government directly, or through state agents, subject to rules and regulations attached with the exercise of the powers of the franchise.®* 56. Thus, the Government, represented by the Solicitor General, may file this petition for quo warranto to obtain a judicial declaration that Respondents committed an unlawful exercise of their franchises, and should therefore forfeit them. 57 G.R. No. 88404, October 18, 1990. 5 Emphasis supplied, # Del Mar vs. PAGCOR, et. al., G.R. No. 138268, November 29, 2000, Td. Old. ® Rule 66 of the Rules of Court, See. 2.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto b. Direct resort to the Honorable Court is justified as this case is of transcendental importance and = of first impression. 57. The invocation of the Court's jurisdiction over a petition for quo warranto is warrantec under Section 5, Article VIII of the 1987 Constitution: Section 5. The Supreme Court shall have the following powers: (1) Exercise original jurisdiction over cases affecting ambassadors, other public ministers and consuls, and over petitions for certiorari, prohibition, mandamus, quo warranto, and habeas corpus. 58. Accordingly, Section 7, Rule 66 of the Rules of Court provides that a petition for quo warranto may be filed before the Court, thus: Section 7. Venue. — An action under the preceding six sections can be brought only in the Supreme Court, the Court of Appeatis, or in the Regional Trial Court exercising jurisdiction over the territorial area where the respondent or any of the respondents resides, but when the Solicitor General commences the action, it may be brought in a Regional Trial Court in the City of Manila, in the Court of Appeals, or in the Supreme Court. 59. To be sure, the doctrine of hierarchy of courts precludes direct resort to the Court as it is a court of last resort.© The rule, however, admits of exceptions. 60. The Court in Ang Nars Party-List vs. Executive Secretary discussed the doctrine of hierarchy of courts, in this wise: The doctrine on the hierarchy of courts states that petitions for certiorari and prohibition, which shall fall under © Dy vs. Bibat-Palamos, G.R. No. 196200, September 11, 2013. GR. No, 215746, October 8, 2019.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto G No. the concurrent jurisdiction of the regional trial courts, the higher courts, and this Court, must first be brought to the lowest court with jurisdiction.® In Rayos v. City of Manila,®* the Court held: Indeed, this Court, the Court of Appeals and the Regional Trial Courts exercise concurrent jurisdiction to issue writs of certiorari, prohibition, mandamus, quo warranto, habeas. corpus and ‘njunction. However, such concurrence in jurisdiction does not give petitioners unbridled freedom of choice of court forum. In Heirs of Bertuldo Hinog ve Melicor, citing People v. Cuaresma, the Court held: This Court's original jurisdiction to issue writs of certiorari not exclusive. It is shared by this Court with Regional Trial Courts and with the Court of Appeals. This concurrence of jurisdiction is rot, however, to be taken as according to parties seeking any of the writs an absolute, unrestrained freedom of choice of the court to which application therefor will be directed. There is after all a hierarchy of courts. That hierarchy is determinative of the venue of appeals, and also se-ves as a general determinant of che appropriate forum for petitions for the extraorcinary writs. A becoming regard for that judicial hierarchy most certainly indicates that petitions for the issuance of extraordinary writs against first level (“inferior”) courts should be filed with the Regional Trial Court, and those against the latter, with the Court of Aopeals. A direct invocation of the Supreme Court's original jurisdiction to issue these writs should be allowed only when there are special and important reasons therefor, clearly and specifically set out in the petition. This is [an] established policy. It is a policy necessary to prevent inordinate demands upon the Court's time and attention which are better devoted to those matters within its exclusive jurisdiction, and to prevent further over-crowding of the Court's docket. © Association of Medicat Clinics for Overseas Workers Inc. (AMCOW) vs. GCC Approved Medical Centers Association Inc., G.R. No. 207132, December 6. 2016. © GR. No. 196063, December 14, 2011.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence inc. Petition for Quo Warranto GR.N wee 0, This rule, however, is subject to exceptions. In the Diocese of Bacolod v. Commission on Elections,®7 the Court said: Thus, the doctrine of hiererchy of courts is not an iron-clad rule. This court has "full discretionary power to take cognizance and assume jurisdiction [over] special civil actions for certiorari ... filed directly with it for exceptionally compelling reasons or if warranted by the nature of the issues clearly and specifically raised in the petiticn." XXX A second exception is when the issues involved are of trenscendental importance. In these cases, the imminence and clarity of the threat to fundamental constitutional rights outweigh the necessity for prudence. The doctrine relating to constitutional issues of transcendental importance prevents cour-s from the paralysis of procedural niceties when clearly faced with the need for substantial protection. XXX Under the principle of hierarchy of courts, direct recourse to this Court is improper because the Supreme Court is a court of last resort and must remain to be so in order for it to satisfactorily perform its constitutional functions, thereby allowing it tc devote its time and attention to matters within its exclusive jurisdiction and preventing the overcrowding of its docket.® Nonetheless, the invocation of this Court's original jurisdiction zo issue writs of certiorerihas been allowed in certain instances on the ground cf special and important reasons clearly statec in the petition, such as, (1) when dictated by the public welfare and the advancement of public policy; (2) when demanded by the broader interest of justice; (3) when the challenged orders were patent nullities; or (4) when analogous exceptional and °GR.No, 205728, January 21,2015, 20Republic rep. by Solicitor Genera: Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Ine. Petition for Quo Warranto GRIN x compelling circumstances called for and justified the immediate and direct handling of the case.6* 61. The present petition involves a matter of transcendental importance and is a case of first impression, which are some of the exceptions to the doctrine of hiererchy of courts cited above. 62. This case is of transcendental importance because ABS-CBN’s franchise mandates it to serve the public by its broadcast operations. ABS-CBN Corporation in fact earned the distinction of being the largest media conglomerate in the country, reaching millions of viewers in all corners of the country. As the biggest broadcasting entity, it is able to shape the public’s opinion on a variety of issues, apart from providing entertainment. However, its size and function does not exempt it from complying with, and upholding the laws of the land, including the terms of its very existence—its franchise. 63. As discussed, the determination of the right to the exercise of a franchise, or whether the enjoyment of such privilege has been forfeited by non-use, is more properly the subject of the prerogative writ of quo warranto, to which the right to assert, as a rule, belongs to the State upon complaint or otherwise, the reason being that the abuse of a franchise is a public wrong_and not a private injury.® The issue of abuse of franchise is a matter of public concern that calls for an action by the State that granted the franchise. 64. Aside from these considerazions, this is case is of first impression. There is no jurisprudence yet on the revocation of a franchise of a television or radio company. This case presents issues that the Court can resolve to serve as precedent. It is an opportunity that the Court must seize to draw the line in future cases. 65. The presence of these compelling circumstances warrants the application of the excertion to the doctrine of * Dy vs. Judge Bibat-Palamos, GR. No. 196200, September 11, 2C13. ® Divinagracia vs. Consolidated Broadcasting System, Inc., G.R. No. 162272, April 7, 2009. 21Republic rep. by Solicitor Generai Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto No. hierarchy of courts. Therefore, a direct and immediate resort to the Court is justified. II. Substantive A. Respondent ABS-CBN Corporation violated its legislative franchise when it operated a pay-per-view channel through free-to-air signals. 66. In February 2015, ABS-CBN Corporation launched the country’s first digital terrestrial set-top box with free and Premium digital TV channels called ABS-CBN TV plus.” Thereafter, in March 2016, ABS-CBN launched a Pay-per-view channel in ABS-CBN TV plus, the Kapamilya Box O*fice (KBO).7 67. Under R.A. No. 7966, ABS-CBN is requirec to secure prior authority from NTC before it uses any frequency in the television or radio spectrum. Section 3 of the law states in irrefutable terms: Sec. 3. Prior Approval of the Nationa! Telecommunications Commission. — The grantee shal secure from the National Telecommunications Commissior the appropriate permits and licenses for its station and shal Not_use any frequency in the television or radio spectrum without having 2¢en authorized by the Commission. The Commission, however, shall not unreasonably withhold or delay the grant of any such authority.72 68. Thus, on April 1, 2015, ABS-CBN wrote a letter to NTC informing the latter of its plan to offer free-to-air viewers and those who will purchase the ABS-CBN TV plus the cption to watch the Pacquiao-Mayweather Match live through pay- per-view on Digital Terrestrial TV (DTT) for P2,500.09.73 “See Annex “L,” p. 89. “thitps:/fentertainment.abs-cbn.com/tv/updates/123 19 16-abs-cbn-tvplus-launches-kapamilye-box-cffice- channel-with-one-month-free-screening-of-star-cinema-blockbusters (last accessed on 17 January 2C29), ? Underlining supplied. ® See Annex “O,” Letter dated April 1, 2015.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto However, in a letter dated April 29, 2015, NTC directed ABS- CBN “to refrain from offering any pay television service in [its] DTT trials until such time that the Ccemmission has come up with appropriate guidelines for the same.”7* 69. In its Order dated May 14, 2019, NTC iterated the directive to ABS-CBN Corporation. In the NTC Order, the Broadcast Service Division (BSD) made a finding or recommendation that “No Encryption nor Conditional Access of programming content shall be allowed.” Furthermore, in granting Provisional Authcrity to ABS-CBN Corporation to convert DWWS television station from Analog TV service to DTT using Channel 2 in Metro Manila, NTC imposed the following conditions:’> 4, The use of Conditional Access System (CAS) on DTTB service shal be subject to such Conditional Access guidelines that the Commission or any other relevant government agency may hereafter issue; ... 10. It_shall_ secure, with this Commission permits and licenses for the equipment, facilities and operations and shall have at all times valid permits and licenses to cover its equipment, facilities and operation; ... 19, It shali abide with all laws, rules and regulations of the land. ... 23. Finally, this P.A. shall be valid unt!l the effectivity of its Congressional Franchise under R.A. 7966, from date hereof, and may be subject to amendment, alteration, suspension, revocation or cancellation when public welfare, morals or national security so requires or when grantee operates beyond its authcrization granted ...76 70. NTC did not authorize ABS-CBN Corporation to operate a Conditional Access System (CAS) when it granted a Provisional Authority to the latter. Under the Framework of the Digital Terrestrial Television Broadcasting (DTTB) Migration Plan prepared by the Department of Information and Communications Technology (DICT Framework), CAS is defined as a technology used in digital TV systems that ™ See Annex “P”, Letter dated April 29, 2015. * See Annex “Q,” NIC Order dated May 14, 2019. % Underlining supplied. 23Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR.No. involves satisfying qualified criteria prior to granting access to content.”” In its operations of the KBO Channel, the criteria imposed by ABS-CBN Corporation is the purchase of ABS-CBN TV plus and the payment of the subscription fee. 71. It bears stressing that NTC found BSD’s report that “No Encryption nor Conditional Access of programming content shall be allowed” to be in order. Accordingly, the NTC imposed a condition on ABS-CBN Corporation that “[t]he use of Conditional Access System (CAS) cn DTTB service shall be subject to such Conditional Access Guidelines that the Commission or any other relevant government agency may hereafter issue.” At present, there are no Conditional Access Guidelines yet issued by NTC or any other government agency. In the absence of any permit from NTC and guidelines on conditional access, ABS-CBN Corporation has no authority to offer the KBO Channel. 72. Moreover, under the DICT Framework (which was crafted after DICT’s consultation with public and private broadcasters, equipment manufacturers, content producers and key TV industry stakeholders), the operation of CAS is subject to prior approval or authorization by the government: ubject to stakeholders’ consultation and issuance of the corresponding rules end regulations, the government may allow operati f Conditional Access System for DTTB. The NTC is in the process of consultation with the stakeholders. This supplementary service may be permissible subject to prevailing decrees, acts and laws, as well as rules and regulations set and promulgated by the NTC. As Pay TV will be a valuable resource stream for broadcasters and a mechanism to provide premium content to consumers, the stand of the government is to make more available free broadcast content to the people, However, the policy and rules and requlations for the introduction of Pay TV services for DTTB has yet to be formulated, developed and issued should the regulator allow such operation. If implemented, it is ideal to have a common CAS by all broadcasters so that a single STB may be able to access *7 See Annex “N,” Framework of the DITB Migration Plan, p. 5. 24Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR. No. premium contents from all broadcasters assuming a common ground can be struck among stakeholders.78 73. Besides, the Framework also states: Subject_to_additional_rules_and regulations to_be issued, the government may allow realization of new services that_can_ be méde_availabie by DTTB such_as Conditional Access System (CAS), Mobile TV, among others. These may include Pay TV as a means of delivering premiurr content implemented through Video on Demand, as contrast to free mobile over-the-air broadcast I'ke One-Seg. In terms of copyright protection, the government shall issue appropriate guidelines, rules and regulations. As measure for example, watermarking can be used to prevent unauthorized copying and viewers are unable to receive or record Digital TV streams unless device permission has beer granted.79 74, The operations of CAS are thus subject to prior approval by the government. In the DICT Framework, broadcasting organizations are recuired to secure an authority from the NTC to operate a CAS: The Philippine market is a very cost sensitive market. Analog only TV’s are an important segment of the TV market in the Philippines. Many consumers will use their TV sets for non-Terrestrial TV related activities such as gaming, watching movies, as well as portals for Satellite and Cable Tv. However, if terrestrial broadcasters will be allowed to encrypt additional contents for Pay TV applications, ar authority from __the _National___Telecommunications Commission must be obtained pendinc the deliberation anc creation of an Implementing Rules and requlation with the stakeholders and Congress for the Pey TV franchise. This will make the digital tuners in many TVs redundant, as consumers will need to purchase broadcaster STBs to watch. encrypted content regardless if an integrated DTTB receiver has already been purchased by the viewer.8° 75. ABS-CBN Corporation cannot deny that it has no permit or authority from the government, specifically NTC, before it launched its KBO Channel. Despite being aware of the absence of such a permit or authority, ABS-CBN remains 71d. at 20. 791d, at 30; Underlining supplied. 87d, at 39; Underlining supplied. 25Republic rep. by Solicitor General Calida vs. AES-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto undeterred and continuously operates the KBO Channel in violation of its franchise, the NTC directive and Order, and the DICT Framework, 76. At the same time, ABS-CBN Corporation is not only operating a CAS without the required authority from NTC; it also illegally exacts money from the Filipino people. KBO is a pay-per-view channel where Filipinos may choose to access premium content from their television sets.®! To be able to watch the movies and other contents shown in the KBO, one must first register and pay P30.00 cr P99.00 through the country’s mobile networks (ABS-CBN Mobile, Globe, TM, Smart, TNT and Sun).8* As advertised by ABS-CBN Corporation:® PRICE ON WEEKEND KBO30 Weekend (Saturday 10AM to Sunday 10PM) 30.00 = 5 movies (3 local titles and 2 foreign titles) = MMK = Myx SUPER KBO99 Weekend (Saturday 19am to Sunday 10pm) P99.00 = 1 premium movie or marquee title (fresh from theatrical) = 5 movies (3 local titles and 2 foreign titles) = Myx 77. From time to time, ABS-CBN Corporation offers promotions to entice the viewing public to subscribe to the KBO channel. On April 18, 2016, ABS-CBN Corporation offered live viewing of “The Time Has Come: Donaire v. Bedak” for P199.00.® Similarly, on September 21, 2016 and July 4, 2017, ABS-CBN Corporation offered pay-per-view boxing of “Pinoy Pride 38: Philippines vs Mexico” and “Pinoy © Supra note 26. * hups://tvplus.abs-cbn.com/kbo (last accessed on January 15, 2020). ®hups:/tvplus.abs-cbn.com/news’éetails/pid-14€312882378 7/kaparnilya-box-office-frequently-asked- questions! (last accessed on January 15, 2020). 5 https://tvplus.abs-cbn.com/newsidetails/pid-1460975 143476/weekend-knockout-bakbakan-sa-abs-cbn- wplus/ (last accessed on January 15, 2020). 26Republic rep. by Solicitor General Calida vs, ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto Pride 41: Magsayo vs Diaz” through KBO for P99.00.85 On April 13, 2017, ABS-CBN Corporation advertised its KBO Holy Week Special for P99.00.® On September 14, 2019, the red carpet coverage of “The 2019 ABS-CBN Ball” was aired live on KBO for ®30.00.8” Similarly, on November 30, 2019, “Listen: The Big Shot Concert” of the TNT Boys was aired live on the same channel ®30.00.% Last February 24, 2020, the homecoming concert of Miss Universe 2018 Catriona Grey was also aired live on KBO.® Recently, ABS-CBN Corporation launched KBO99 Promo in which a payee may enjoy eight movies for four weeks for P90.00.2° 78. Section 202.7 of the Intellectual Property Code defines broadcasting as ‘the transmission by wireless means for the public reception of sounds or of images or of representations thereof; such transmission by satellite is also ‘broadcasting' where the means for decrypting are provided to the public by the broadcasting organization or with its consent.’ Section 202.7 of the IP Code, thus, provides two instances in which there is broadcasting, to wit: (1) the transmission by wireless means for the public reception of sounds or of images or of representations thereof; and (2) the transmission by satellite for the public reception of sounds or of images or of representations thereof in which the means for decrypting are provided to the public by the broadcasting organization or with its consent. 79. Furthermore, NTC in its Rules and Regulations for Digital Terrestrial Television (DTT) Brcadcast Service, defines Data Broadcasting as “a method of delivering Rich Text and graphics on the screen including the details and instructions from Emergency Warning Broadcast of an ISDB-T service." 8 _httpsi//tvplus.abs-cbn.conv/news’details/pid-147444 1676940/pinoy-pride-38-philippines-vs-mexico-sa- tvplus-mo/; htps:/tvplus.abs-cba.com/news/details/pid-1499137334492/pinoy-pride-d |-magsayo-vs-diaz- sa-superkbo/ (last accessed on January 14, 2020). % https:/ityplus.abs-cbn.com/news/details/pid-1492058839696/kbc-holy-week-special/ (last accessed on January 15, 2020). Mhttps://www.abs-cbn,com/newsroom/news-releases/2019/9/13/abs-cbn-ball-2019-airs-live-on- Kbo?lang=en (last accessed on January 17, 2020). 3 _hitps://www.abs-cbn.com/newsroom/news-releases/2018/1 1/28-highly-awaited-tnt-boys-major-concert- airs-live-on?lang=en (lest accessed on January 17, 2020). ® https://www.sunstar.com,phiarticlé/1793798 (last accessed on January 17, 2020). >» https:/tvplus.abs-cbn.cony (last accessed on January 15, 2020). > Annex “T,” NTC Memorandum Cireular No, 97-12-2014. 21Republic rep. by Solicitor Genera: Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Ine: Petition for Quo Warranto GR.No, 80. When it offers the KBO Chennel in its ABS-CBN TV ?lus, ABS-CBN Corporation is engaged in broadcasting. In doing so, ABS-CBN is using the free-to-air frequency grented by the State. 81. In ABS-CBN Broadcasting Corporation v. Philippine Multi-Media System, Inc., et al.,°? the Court discussed the nature of broadcasting: Aptly, it is imperative to discern the nature of broadcasting. When a broadcaster trarsmits, the signals are scattered or dispersed _in the air. Anybody may pick-up these signals. There is no restriction as to its number, type or class of recipients. To receive the signals, one is not required to subscribe or to pay any “ee. One only has to have a receiver, and in case of televisicn signals, a television set, and to tune-in to the right channel/frequency. The definition of broadcasting, wherein it is required that the transmission is wireless, all the more supports this discussion. Appa-ently, the undiscriminating dispersal of signals in the air is possible only through wireless means. The use of wire in transmitting signals, such as cable television, limits the recipients to those who are connected. Unlike wireless transmissions, in wire-based transmissions, it is not enough that one wants to be connected and possesses the equipment. The service provider, such as cable television companies may choose its subscribers.9> 82. In the same case, the Court added: Anyone in the country who owns a television set and antenna _ci ceive ABS-CBN's signals for free. Other broadcasting organizations with free-to-air signals such as GMA-7, RPN-9, ABC-! IBC-13 can likewise be accessec for free. No payment is required to view the saic channels because these broadcasting networks do not generate revenue from subscription from their viewers but from_airtime revenue _from_contracts with _commercia. advertisers and Droducers, as well as from direct sales. In contrast, cable and DTH television earn revenues from viewer subscription. In the case of PMSI, it offers its customers premium paid channels from content providers like Star Movies, Star World, Jack TV, and AXN, among ® GR. No. 175769-70, January 19, 2009. ® Underlining supplied. 28Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc Petition for Quo Warranto GR.No. x others, thus allowing its customers to go beyond the limits of ‘Free TV and Cable TV.' It does not advertise itself as a focal channel carr'er because these local channels can be viewed with or without DTH television.%4 83. In the DICT Framework, free-to-air is defined as TV and radio broadcast services in clear and unencrypted form requiring no subscription, other than on-going cost or reception free. 84. The preceding facts show that the general public should not be made to pay to receive the free-to-air signals transmitted by broadcasting organizations. Broadcasting organizations are only allowed to yield income from their contracts with commercial advertisers and producers and direct sales. Otherwise stated, ABS-CBN Corporation is prohibited from using the free-to-air signals to profit from the public, except to comply with its contractual obligations under contracts with commercial advertisers and producers. Therefore, ABS-CBN Corporation has no lawful authority to utilize the free-to-air signals to collect fees from the viewing public for its operations of the KBO channel. 85. Verily, radio and_ television broadcasting companies, which are given franchises, do not own the airwaves and frequencies through which they transmit broadcast signals and images. They are merely given the temporary privilege of using them.°> 86. Indeed, television is a business; however, the welfare of the people must not be saccificed in the pursuit of Drofit.%° Although ABS-CBN Corporation was granted by the State the special privilege of using a portion of its national patrimony -the free-to-air digital frequency - for free, ABS~- CBN Corporation abuses the privilege to unlawfully derive profit from the people. This warrants “he revocation of ABS- CBN Corporation’s legislative franchise. “4 Underlining supplied; Citations om:tted. * Telecom. & Broadcast Attys. of the Phils., Inc. vs. COMELEC, 352 Phil. 153 (1998). % ABS-CBN Corporation vs. Philippine Multi-Media System, Inc., G.R. No. 175769-70, January 19, 2009, citing Telecom. & Broadcast Attys. of the Phils., Inc vs. COMELEC, 352 Phil. 153, 173 (1998). 29Republic rep. by Solicitor General Calida vs, ABS-CBN Comp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR.No. x B. Respondent ABS-CBN Convergence, Inc. violated its franchise under R.A. No. 7908, as amended by R.A. No. 8332. a. Respondent ABS-CBN Convergence, Inc. violated R.A. No. 7908, as amended by R.A. No. 8332, when the transfer of the subject legislative franchise was made without prior approval from the Congress. 87. ABS-CBN Convergence violated Section 15 of R.A. No. 7908, as amended by R.A. No. 8332, which states: Sec. 15. Sale, Lease, Transfer, Usufruct, etc.— The grantee shall not lease, transfer, grant the usufruct of, sell nor assign this franchise or the rights and privileges acquired thereunder to any person, firm, company, corporation or other commercial or legal entity, nor merge with any corporation or entity, nor shall the controlling interest in the grantee be transferred, whether as a whole or in parts and whether simultaneously or contemporaneously, to any such person, firm, company, corporation or entity with appr of the Congr of the Philippines. Any person or entity to which this franchise is sold, transferred or assigned, shall be subject to the same conditions, terms, restrictions, and limitations of this Act.9” 88. The preceding provision states that a congress‘onal approval is required by the subject legislative franchise before it can be transferred, whether as a whole or in parts and whether simultaneously or contemporaneously to another corporation. 89. The requirement to seek congressional approval for the operation of legislative franchises and the transfer thereof by the grantee to another corporation emanate from the provisions of the fundamental law of the land. Section 11, Article: XII of the Constitution gave Congress not only the ©” Emphasis supplied. 30