Should the Philippines impose a license fee like the BBC?

[WRITER’S WARNING: This post may not be suitable for readers who have lack of certain academic merits and may cause political tensions. Serious yet friendly discussion is advised. Dedicated to Jerick Ilagan, John Rodrigo Diaz Valdez, Adrian Conoza and George Boone.]

bbc-studios

The British Broadcasting Corporation (BBC) is recognizable and reputable throughout the world but for the Brits’ point of view, it’s their public broadcaster and they pay for it to sustain through an annual fixed fee.

THE BBC in the United Kingdom will impose a hike after seven years of license fee freeze from £145.50 (~₱ 8,990) to £147 (~₱ 9,080), beginning April 1. Such fees from households will be used to sustain their public broadcaster. This iteration also applies to the rest of Europe. However, can you imagine if the Filipino households hold the same when it debuts? Time to share the Turf’s thought.

Background

In Europe (except France), radio and television began in their respective countries from their state broadcaster but here in the Philippines, both means were commercial from the start. In order to sustain their broadcasters from being commercialized within their programming, some countries have to pay a separate annual fixed fee from their electric bills called a license; we did otherwise. In fact, we don’t pay to PTV 4 directly, aside from an allocated subsidy from the Presidential Communications Office (PCO), which comes from national and general taxation on which it was approved in the General Appropriations Act a.k.a. the Budget.

Did you know how much did PTV earned in 2015[1] without subsidy? P 168.919 million. Adding IBC 13’s revenue (P 88.742 million) will accrue to P 257.661 million[2].

Compared that to ABS-CBN’s consolidated revenue of P 38.278 billion[3], Visayas Avenue would really need to redouble — or arithmetically, 227 times (149 times, inclusive of IBC) — their efforts in order to attain the level. This is because of the restrictive provisions and the public’s long-standing unfavorable reputation in general. Despite the lax of revenue sources from the charter four years ago this month, the implementation and capital restricting has not yet been materialized.

Apart from subsidy and a part of revenue from other GOCCs (e.g. PCSO, GSIS, SSS, etc.), where did the other sources of revenue come from?

If you looked on to PTV alone, you obviously answer that it’s mostly on home shopping but they forget that long-time blocktimers also contributed to the revenue generation. For example, Ron de los Reyes’ Auto Review, where they air their car advertisements within their episode, they remitted a certain percentage of that proceeds to the network.

In addition, the sultan of sloth in Old Balara also gets its sources from Bro. Tagumpay Gonzales’ Tagamend, the game fowls’ feeds & essentials and promotion of artists of oldies but goodies from Steve O’Neal Productions. Last year, they added much revenue from ATC Sports, thanks to the inaugural of Universities and Colleges Basketball League (UCBL).

Nevertheless, they’re not enough to cover the operating expenses; hence, they both ended up in a constant net operating loss before inputting the subsidy.

The current operation situation

DWBR_104.3_FM2.png

While PTV and IBC 13 are not reputable like BBC due to its news partiality and programming protectionism, month-long-old FM2 104.3 — inspired by the British counterpart — was able to lend more ears.

With Light Network being the first national TV network to fully enter digital territory, it’ll be a tough challenge for PCO chief Martin Andanar to look over the two channels; PTV is still under testing stage but IBC shows no progress. Meanwhile on their radio row, the month-long-old FM2 104.3 became a successful station despite being an initial step of their staggered reorganization. Yet, it will be a big question for Andanar on how will these things sustain despite the restrictions.

What Andanar should do?

Perhaps, he should delegate his subordinates to conduct a feasibility study. Obviously, they need essential, enough yet hard data, assumptions and calculations — lots of it, ranging from the Philippine Statistics Authority (for census and economic data), National Economic and Development Authority (for economic projections) to the Commission on Population (for population projections). Aside from that, they must formulate a survey and consider the weight of the population thereafter.

A fantasy feasibility study

This segment will not be amused for readers who are allergic to data but keep in mind that the following computations don’t mean to be official and accurate.

Finding the baseline

By the end of this year, the national population will be projected at 105 million. The average household size, according to the 2015 census, is 4.4. Hence, we would have an estimate of 23.86 million households.

In the recent census, they no longer record how much TV sets were owned. The last census that tabulated that appliance was in 2010, where 14.62 million sets were accounted out of 20.17 million households or 0.7248 set/household. Take that into account for the estimated households in end-2017, we should end up with an estimate of 17.295 million sets, which we will consider it as the baseline.

Plot it up

Now that we get the baseline, we need assumptions based on projections and a graph. Obviously, zero charge will not affect the baseline but it will not earn any direct revenue. In this case, the first dot in the Cartesian graph will be in the point of origin (0, 0). Let the x-axis be the fee to be imposed and the y-axis be the revenue.

Let’s just say in this example that one peso will be charged, a thousand TV sets will forgo because a peso won’t harm us that much; in return, they earn some revenue. In the fantasy feasibility, they will earn P 17.294 million.

What if another peso is charged to pay P 2 for each household? Then, two thousand more sets will refuse to be charged but they earn even bigger revenue to P 34.584 million.

slide1

At this point, you should know the pattern. Keep adding more peso until they reach the hump of the curve — where the optimal maximum revenue resides — and then, the slope of the curve slide down to zero revenue.

slide2

For economics students, this idea might sound familiar; it is based on the Laffer curve, a visual tool of finding the tax level achieving the maximum government revenue.

If you want to find the exact amount, use a spreadsheet (such as Excel) to do some trial and error. However, the Turf suggests installing the Solver add-in; just type in the constraints and set the objective goals and voila, you will end up with P 107 with the maximum revenue of P 1.232 billion (to be precise, P 1,232,319,000).

The following years will mean different data but the process of finding the maximum fee and revenue will remain the same but we’ll not go into that.

Wrapping up

Now that we find the fantasy fee, we shall know where to place it. Perhaps, it would be better to be charged indirectly in the electric bill to avoid potential evasion since most consumers are myopic as they care on how much electricity has expended for the past month. Hence, there’ll be a fixed monthly fee of P 8.92 in the breakdown of charges.

For there is a rule, there will be exemptions. Concessions such as discounts for senior citizens and persons with disabilities (PWDs) would apply; if you’re poor, DSWD might assist you to grant conditional relief. This will not be discussed further for simplicity purposes.

Pros, cons and conclusion

Despite an unpopular measure, proponents would see this positively since the enacted budget may not be enough to cover the high operating cost of the networks as some funds were channeled to something else such as public infrastructure and, controversially, intelligence funds. In the long term, it would’ve helped IBC’s insolvency woes, lessened the dependence of home shopping and helped its privatization process a bit faster.

900 dollarydoos.jpg

Any meticulous electric bill consumer would be find the license fee shocking and would demand a complete explanation to their representatives or government officials.

However, for every positive side, there will always be the negative. When a meticulously detailed consumer looks into the electric bill, he or she will be shocked and fumed since the percentage breakdown is indirectly proportional depending on the kilowatt-hours consumed. If you’re living in a lower-middle class and below, you might not have enough money to budget necessities. When election comes, voters would regret supporting the incumbents who supported this policy as some kind of extortion, might vote out their incumbents who support this policy, and ask their successors for its repeal.

That’s just a start of an idea but would this idea work out for the good of the country? Perhaps so for the better, perhaps not because it’s zany, let me know your side and defend your case.


Notes

  • [1] The 2016 data for both GOCCs are still in audit by the Commission on Audit (COA). They will be released in their website their audit report within 2nd to 3rd quarter and the consolidated financial report within 3rd quarter.
  • [2] Their radio counterpart is under the Philippine Broadcasting Service (PBS). Unlike the two TV networks, they are treated as a division in a government agency rather than a government-owned and controlled corporation. Hence, they don’t earn significant revenue and are not disclosed in this article.
  • [3] ABS-CBN, being a publicly listed corporation, is required to disclose their recent financial statements (FY 2016) by April 17 (the last day of filing of annual income tax return).


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  • Photo courtesy of: Express.co.uk, logos.wikia.com, imgur.com and 20th Century Fox
  • Tabulation and visualization generated from PowerPoint 2016 and meta-calculator.com
  • Data sources and references from the Commission on Audit and the Philippine Statistics Authority
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2 comments

  1. TL;DR. But given with our current political and administrative culture, I am seeing that a significant chunk of the license fee will go to the pockets of the privileged few. That’s the concern I am seeing as of now.

  2. Speaking of funding public broadcasters, PTV/IBC/PBS should consider voluntary donations from the public: either to a specific station (local PTV or IBC stations, Manila-based PBS FM and AM stations, local Radyo ng Bayan stations and affiliates) or to the entities themselves, similar to what the the United States’ Public Broadcasting Service & National Public Radio are doing.

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