Commercials on cable TV

Time was when people subscribed to cable television to have more choices in their viewing fare and to avoid the lengthy advertisements that often accompanied the shows of local TV networks.

The subscription fees were supposed to make up for the revenues that cable TV operators lose by not putting advertisements in their telecasts. This way, so their solicitation campaign went, subscribers can enjoy their favorite shows without any commercial interruption.

The come-on worked. Cable TV became a hit in many households, especially in areas where the transmission of local TV networks was faulty. After the customers were hooked, however, it didn’t take long before cable TV companies loaded their content with commercials whenever the opportunity presented itself.

Although minimal at the beginning, these advertisements slowly ate into the revenue stream of major TV stations.

In the wake of this development, in 2000, GMA Network Inc., the Kapisanan ng mga Brodkaster ng Pilipinas and two other broadcast networks filed a complaint with the National Telecommunications Commission (NTC) against Central CATV Inc. (now Skycable) to stop it from soliciting and showing advertisements in its system.

Amendment

The complaint was anchored on Executive Order No. 205 of then President Cory Aquino which, among others, prohibits the grantee of authority to operate a cable TV system from infringing on television and broadcast markets.

GMA claimed the phrase “television and broadcast markets” includes the commercial or advertising market. Central admitted airing commercials on its network, but argued that Executive Order No. 436 of then President Fidel Ramos expressly allowed cable TV operators to carry advertisements and other similar paid segments as long as their program providers agree to it.

Citing EO 436 as the legal basis and with Central able to show the consent of its program providers to the placements, NTC dismissed the complaint.

GMA appealed NTC’s ruling to the Court of Appeals which, in turn, affirmed it for the same reasons invoked by the broadcast regulator. Unfazed by the rebuffs, GMA elevated the case to the Supreme Court, docketed as “GMA Network Inc. vs Central CATV Inc.,” G.R. No. 176694, July 18, 2014, for final resolution.

After reviewing the facts of the case, the tribunal said the contending parties, including NTC and the appellate court, got it all wrong on the nature and effect of the executive orders in question.

Interpretation

It said EO 205 has the force and effect of law because it was issued when President Aquino still exercised legislative powers. On the other hand, EO 436 is merely an executive issuance and therefore cannot amend EO 205. Thus, the justices declared EO 205 as the legal framework upon which the case should be decided.

Earlier, NTC, acting on the authority granted to it by this EO, issued its implementing rules and regulations by way of Memorandum Circular 4-08-88. In this circular, NTC defined “television and broadcast markets” as referring to the major television markets, i.e., Naga, Legaspi, Metro Manila, Metro Cebu, Bacolod, Iloilo, Davao, Cagayan de Oro and Zamboanga.

Thus, the tribunal pointed out “the phrase ‘television market’ connotes ’audience’ or ’viewers’ in geographic areas and not the commercial or advertising market” adverted to by GMA.

On the issue of infringement on broadcast audience, the circular provides for the “must-carry rule,” meaning, cable TV operators are required to carry in full the signals of authorized TV broadcast stations, including their advertisements without alteration or deletion.

Public interest

Citing an earlier ruling involving ABS-CBN Broadcasting Co. and Philippine Multi-Media System Inc. (PMSI), the tribunal said “the must-carry rule is actually advantageous to the broadcasting networks because it provides them with increased viewership which attracts commercial advertisers and producers.

“On the other hand, the carriage of free-to-air signal imposes a burden to cable and DTH [Direct-to-Home] television providers such as PMSI. PMSI uses none of ABS-CBN’s resources or equipment and carries the signals and shoulders the costs without any recourse of charging. Moreover, such carriage of signal takes up channel space, which can otherwise be utilized for other premium paid channels.”

In the tribunal’s estimation, “these provisions sufficiently and fairly implement the intent of Section 2 of EO No. 205 to protect the broadcast television market vis-à-vis the CATV system.”

Accordingly, since the infringement prohibited by law refers only to viewers or audience market, as defined by NTC’s circular, and not to commercial advertisement market, Central can show advertisements in its shows.

The justices further stated that the primary purpose of EO 205 in regulating cable TV operations is to protect the public and promote its general welfare.

To underscore this point, they said this EO was issued to end the monopoly of Sining Makulay Inc., which was granted by then President Ferdinand Marcos, through Presidential Decree No. 1512, an exclusive franchise to operate a cable TV system anywhere within the Philippines.

By expressly repealing this decree, EO 205 aims to encourage competition in the cable TV industry and promote its growth.

Understandably, this ruling is a boon to the approximately 63 cable TV operators all over the country.

Hopefully, they do not go the way of local TV networks that load their shows with commercials that tend to exhaust their viewers’ patience.

There is a bright side though in lengthy advertisements: It gives the viewer a chance to attend to personal necessities or multi-task while waiting for the resumption of the shows.

But if the target audience is not watching, what is the value of the advertisements?

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