NECESSITY NEGATIVE SPEECH

Opening: "Come now, let us reason together"

Incase the first speaker spoke loudly: say "A handwritten note by Theodore roosevelt said, If the
argument is weak, you speak louder"
Good Morning ladies and gentlemen, I am the first speaker for the negative side and I am
here to establish why revocation of ABS-CBN franchise is unnecessary as opposed to what was
contended by the affirmative side.
Thus, we submit the following arguments:
I. ABS-CBN committed no violation because issuing PDRs does not mean granting foreign
ownership
II. Pay-per-view is not illegal
III. Revocation of Franchise is not the proper penalty
For our first submission, issuing PDRs does not mean foreign ownership. The Philippine
Stock Exchange, defines PDRs as financial instruments "devised to allow foreigners to invest in
nationalized companies”. PDRs, in terms of capital, partakes the form of a "hedge fund", while,
in terms of investment, it partakes, the form of a "credit", which are only available to limited
number of accredited investors.
Investopedia defines a “hedge fund” as an alternative investment vehicles that employ a
variety of strategies to generate profit for their accredited investor. It does not form part of the
capital stock of a company, but serves as supplementary. As by nature a hedge fund, PDRs are
designed to provide profits to holders without granting them ownership of the company.
As by nature a credit, the investor of a PDR, does not exercise control over how a company
run its business. One needs not to be an accountant or business mogul to understand that in a
creditor-debtor relation, the creditor does not dictate how the debtor use the money he loaned
so long as the latter is able to pay it back and with interests.
Further, the PSE has clearly distinguished a PDR from common and preferred shares where
it said:
A common share entitles a holder to participation in the profits, control of ownership
and management of the company, and voting rights. A preferred share, on the other hand,
entitles holders to receive dividends, to the extent agreed upon, before any dividends are paid
to the holders of common stocks without grant of control of ownership, management or voting
rights.
Under the PSE, PDR holders are bereft of above rights because they are "not evidences or
statements nor certificates of ownership of a corporation." By investing, PDR holders get a
share in the profits of the company but they have “no control” in the day-to-day operations, no
representation in the board, nor can they decide on policy.
The case of ABS-CBN should not be likened to Rappler’s as SEC chairperson Teresita
Herbosa has distinguished the PDRs Rappler issued to Omidyar and those of GMA and ABS-CBN.
The Supreme Court case Gamboa vs Teves that said the foreign restriction is only on
effective control of the company. Effective control, the Supreme Court said, comes with the
grant of power to elect the Board of Directors and the right to full beneficial ownership of the
shares.
 PDR holders’ rights are not equivalent to the full beneficial ownership rights of the
shareholders of ABS-CBN. For example, a shareholder has the right to vote on certain matters
but a PDR holder does not.
The PDRs did not grant ownership or management rights to foreigners. Mainly, they
conferred only the rights (1) to receive dividends of the underlying shares (less administrative
expenses) and (2) to convert them to shares of stock provided those who convert are Filipinos.
The 100-percent Filipino company that owns the underlying shares unqualifiedly controls and
votes the shares
To borrow the words of ACCRA Corporate lawyer Francis Lim, PDRs give their holders “the
right to own a share, but that right is subjected to law.” “If you are a foreigner, you cannot
convert it into a share for example into a share of ABS-CBN Corporation because you’re
disqualified from owning shares of ABS-CBN Corporation”. It only vests “the right to receive
dividends from the issuer.” Simply put: “[You] buy a ticket to bet on a horse. You don’t own the
horse, if that horse wins, you have a share in the winning.”
For our second submission, we argue that Pay-per-view is not illegal.
NTC said that pay-per-views are considered “highly propriety premium programs” and is a
feature of digital television that TV networks “can adopt as a new business model.” According
to Justice Secretary Guevarra, it clear enough that broadcast companies can engage in
Conditional Access or Conditional Access System, and for the same reason can offer TV pay-per-
view services.
The Justice Secretary stated that Section 1 of franchise laws the broadcast network is given
franchise: to construct, operate and maintain, for commercial purposes and in the public
interest, television and radio broadcasting stations in and throughout the Philippines, through
microwave, satellite or whatever means including the use of any new technologies in television
and radio systems, with the corresponding technological auxiliaries or facilities, special
broadcast and other broadcast distribution services and relay stations.
“There is nothing in said provisions that would give any impression that ‘commercial
purposes’ are limited only to income derived by TV broadcast companies from paid
advertisements.”
3. Revocation is not the remedy
"If there is a sick person, you don't kill the person, you kill the disease"
Why revoke when the mistake does not warrant revocation, as provided by law?
Assuming arguendo that ABS-CBN has violated the law with their pay per views, the law
simply provides fines and/or suspension and not revocation. As stated in Public Service Law, the
potential penalty would only be a fine not exceeding two hundred pesos per day for every day
during which such default or violation continues.”
Thus, it is clear that ABS-CBN’s issuance of PDRs is consistent with the provisions of the
Constitution. The grounds for revocation of the franchise were not established thus there is no
need for revocation.
Ladies and gentlemen, it has been undisputed that it is a crime to break the law. But
there is no graver crime than to use the law to punish the innocent. I now rest my case and am
ready for interpellation.
Possible questions:
1. Is it illegal for a media company to issue a PDR to a foreign company?
2. Does a PDR equate to control?