Culture Secretary speaks about digital radio

The House of Commons Culture, Media & Sport Committee
20 October 2009 @ 1100 in the Thatcher Room, Portcullis House

John Whittingdale MP, Chairman [JW]
Ben Bradshaw MP, Secretary of State, Department for Culture, Media & Sport [BB]

JW: You have announced very ambitious plans to deliver the Digital Radio Upgrade programme by 2015 and have most of the national stations to move off analogue to digital by then. That will require extensive investment in the digital transmission network. What estimate do you have of what it is going to cost to do that?

BB: The current estimate that we are working on is about, I think I’m right in saying, is it £10m per year to build out the DAB multiplexes? Is that the figure that you were interested in?

JW: Actually, the one I’ve heard is rather more than that. Where is that money going to come from?

BB: It will come from a mixture of sources. We expect the BBC to play a significant role in this, commercial radio, and there may be public funds as well.

JW: I think the current state of commercial radio means that their ability to invest any more is almost zero. Do you foresee, therefore, further government investment, maybe from the Licence Fee?

BB: We are not currently intending to spend …. [laughs] That’s one of the things we are not intending to spend a share of the Licence Fee on, but if there is an even bigger underspend in the Digital Switchover Programme than we are currently expecting, who knows, Mr Chairman?

JW: The Digital Switchover Programme appears to be earmarked for quite a large number of purposes.

BB: [laughs] Well, there is quite a significant underspend.

JW: But you are confident that it can be delivered. And what are you going to say to all the people that haven’t bought a new car in the last two years by 2015?

BB: We are working with the motor manufacturers, both to ensure that future new cars do [have DAB radio], but also to ensure that there is this – I can’t remember what it is called – but it is some sort of gadget that you will be able to use in your existing car to make sure that you can pick up digital radio. One of the things we say quite clearly is that we won’t go ahead with this unless, by 2013, certain conditions are reached ie: we have more than 50% digital radio ownership and that [DAB] reception on all of our main roads is not going to be a problem. So we have put conditions down but, at the same time, we felt that it was important to provide market certainty that we specified an end-date by which time this should happen.

[excerpt]

[A further meeting of the Culture, Media & Sport Committee will be held in the same room on Tue 27 October from 1030 to discuss “The future for local and regional media”. Andrew Harrison of RadioCentre, Travis Baxter of Bauer Radio and Steve Fountain of KM Radio will give evidence.]

FRANCE: Digital radio launch postponed to mid-2010

The launch of digital terrestrial radio in France has been postponed from December 2009 to mid-2010. “It will take us, I think, until the middle of next year,” said Rachid Arhab, president of the CSA [France’s broadcast regulator] digital radio working group. “I have learnt not to trust dates.” He continued: “What we had not anticipated was the impact of the credit crunch on advertising revenues, particularly in the radio sector, so the particular speeds of the different stakeholders are unknown.”
Speaking at the Siel-Satis-Radio event in Paris, Arhab switched on France’s first digital terrestrial radio transmitter and said: “The greatest difficulty is knowing if all the radio groups want to migrate to digital radio at the same speed.” “Today, I feel and I know that some of you are telling us ‘we are ready’. We are delighted. A few months ago, this was not the case.” “One must not be scared of analogue radio switch-off. Digital radio will not be a success if it has to co-exist with analogue radio for fifteen to twenty years.”
According to SatMag, at the beginning of November, there will be ‘round table’ meetings at the CSA with all the licensed digital radio operators, the set manufacturers, the transmission providers, and representatives from the Ministry of Culture & Communication and the Ministry of Finance & Industry. The CSA is awaiting two reports: one from Marc Tessier on the economic conditions for the rollout of digital radio and on competition issues; the other by Emmanuel Hamelin on the funding of community radio.
It is reported that licences have been signed, but it will take two months for the multiplex operating companies to be formalised for the launch of digital radio in the first three areas. The composition of the multiplexes has not yet been determined. The time period between which the multiplex contracts are signed and the content providers launch digital stations still needs to be fixed, probably around six months.
Elsewhere at the Paris event, SatMag reported that the issue of the T-DMB digital radio standard adopted in France was back on the table. Its report said:
“Is it right that, in France, we are using a standard that is different from the rest of Europe? Should we not be offering radio receivers that are compatible with DRM+? Alan Mear [of the CSA] says that this is not a taboo subject and will be revisited, but he also agreed with Mathhieu Quetel of SIRTI [the trade body for independent regional and local stations] that it was essential to launch digital radio and not to revisit the question of the adopted standard. Besides, Rachid Arhab agreed yesterday that the DRM+ standard was expensive and of no interest.”
“There was a big surprise from Michel Cacouault of the Bureau de la Radio which represents the main French commercial radio groups. Remember that it was they who said France had to adopt a particular digital radio standard as it was essential to transmit additional data. Today there was a complete turnaround. Michel Cacoualt reminded us that commercial radio had lost around 18% of its revenues in the credit crunch. Now, the owners want to cut their costs and are willing to choose a different standard that is less expensive. Those in the conference room familiar with this issue were amazed. Well yes! The credit crunch does makes you think. The cost of dual transmission [analogue and digital] for a single national network is estimated to be 2 to 4 million Euros [per annum], though what it will actually be we will only know when it happens.”

GERMANY: National public radio to end DAB broadcasts year-end

At the end of September 2009, the Radio Council of Germany issued a public statement in which it objected to the withdrawal of further funding for DAB radio by the KEF [the organisation that allocates funds for public radio] in July 2009 (reported here) and it made a direct appeal to the Prime Minister to create an independent digital platform for radio broadcasting. It said the rollout of DAB+ to replace DAB would now be cancelled. It argued that the phased closure of analogue radio broadcasting between 2015 and 2020 was realistic and that the government should adopt a legal framework for digital radio migration.

Now, in an interview this month with ‘Digitalmagazin’, the director of Deutschlandradio (German national public radio) Willi Steul confirmed that its two national stations will end broadcasting on the DAB platform at the end of 2009.

Digitalmagazin: ‘Deutschlandradio Kultur’ and ‘Deutschlandfunk’ will not be available on DAB radio after the end of the year. What led to this bitter decision?

Steul: We need to face up to the fact that the KEF removed funding for further DAB broadcasting, including the DAB broadcasts of our two channels. This is all the more regrettable because DAB will no longer be available for the digital distribution of our new, knowledge-based, educational station.

Digitalmagazin: To what extent does this sound the final death knell for DAB?

Steul: So far, not yet. However, DAB – although vital – is in intensive care and living a sad, hospitalised existence. A paradoxical situation!

Digitalmagazin: We are meant to be re-launching with DAB+. Is this country making the transition to the age of digital radio, or will Germany remain an ‘analogue island’?

Steul: At the moment, we are on the low road to becoming a glorious analogue island. In the medium- and long-term, there is no alternative to the age of digital radio. Let’s see when the powers will be prepared to take responsibility for media policy and offer some certainty.

Digitalmagazin: The Radio Council has criticised the KEF decision as “unacceptable interference in the broadcasting policy of the German states”. Why?

Steul: The role of the KEF is to identify the financial needs of the public service broadcasters. Its job is not to forge media policy, even when there are fiscal issues, as with DAB. This is unacceptable.

Digitalmagazin: But is it not the responsibility of the KEF, in the absence of sound arguments – and this seems to be the case with DAB – to pull the plug?

Steul: You mean ‘economically’? If you invest properly for the future, you cannot expect immediate returns on your investment. The essence of investing is that money needs to be spent on innovation and a process of transformation that will only bear fruit at a later date. The digitisation of radio is, in many ways, a lengthy process and so it is premature to pull the plug now and jeopardise the investments made to date. This is definitely not economical!

Digitalmagazin: The [KEF] budget for digital radio has not been scrapped, but assigned to new initiatives. What options are there now for digital radio?

Steul: Digital radio is already available via cable and satellite. Also, internet streaming has a great future. There will be further developments, particularly in mobile internet access. At the moment, internet ‘on the move’ – in spite of flat tariffs – is still a very expensive pastime.

[cut]

Digitalmagazin: The Radio Council considers it is realistic to propose a switch-off of analogue radio between 2015 and 2020. How will this be achieved, given the estimated 300 million FM receivers in Germany?

Steul: It will not happen without appropriate incentives for the transition from analogue to digital. Such issues are not the major responsibility of radio people. They are an issue for media policymakers and receiver manufacturers. When people are offered something of interest to them, they will give up their old FM radios. Examples from other sectors should encourage us.

NORWAY: Government commissions cost analysis of FM switch-off

In April 2009, NRK [state radio] chief Hans-Rore Bjerkaas had written to the Culture Minister asking if the government could persuade consumers to purchase DAB radios rather than analogue radios. He wrote: “In order to reduce consumer disappointment in the final stages of digital migration, a clear political signal must be given that, when choosing a radio, an FM/DAB radio should be selected rather than a pure FM radio.”

Culture Minister Trond Giske responded: “My responsibility lies with radio listeners. There are two reasons why I think we should progress more slowly than with the introduction of digital TV. It will be more costly for consumers to switch to DAB because most people have multiple radio receivers. In addition, there is no significant improvement in audio quality. When half the population has purchased a digital radio, we would be willing to discuss a specific date for switching off the FM network.” At present, 17% of the population in Norway has a DAB radio.

This month, the Culture Minister reiterated that the government will not consider switching off FM until half the population has purchased a DAB radio. Both NRK and P4 [commercial network owned by MTG] have told the minister that their existing FM networks are expensive to maintain and that they want to move to DAB as quickly as possible. NRK spends NRK120m per annum on FM radio transmission. Transmission provider Norkring [owned by Telenor] says it will need to make a major upgrade to the FM network in 2014 to keep it in service. So the government has tendered for an “independent and expert” assessment of the costs associated with switching off FM broadcasts in either 2014 or 2020. The analysis will be part of the White Paper on digital radio to be published by the government next year.

FRANCE: “Digital terrestrial radio: now!”

Last week, three trade bodies in the digital radio sector in France jointly wrote this opinion piece published in Radioactu magazine:

“Digital terrestrial radio: now!”

Digital terrestrial radio has been a reality since 27 May 2009. A reality that came about through the decisions of the CSA [France’s media regulator], decisions that had been anticipated for many years by many commercial radio stations and associations who have submitted applications across France and who have made financial investments in the meantime.

These companies and associations were well aware of the digital radio standard that was chosen [T-DMB], despite controversy surrounding this decision, were also conscious of the need to simulcast [FM and T-DMB] during the period of migration to digital and, finally, were aware of radio’s need to digitise in order to quickly take its place in the converged media world, in the face of attempts by television and mobile phones to turn it into a minor player.

However, the reality of digital terrestrial radio is primarily the benefit to listeners of a significantly expanded radio content offering at local, regional and national levels.

In the first three areas selected by the CSA to launch later this year, the number of stations will increase from 48 FM to 55 digital in Paris, from 29 to 41 in Marseille, and from 27 to 40 in Nice.

The reality is also the opportunity offered to radio stations to expand their existing broadcast coverage areas and become, if they wish, multi-city stations or multi-region stations which would make them “new market entrants”, something that the unavailability of FM spectrum had denied them until now.

The reality is the introduction of new listener features unprecedented in FM radio. Sound quality equivalent to CDs. The ability to go back and listen to a whole show that has already been broadcast. The introduction of a visual mini-display on receivers that shows data associated with the show (station logo, photos of the host and guests, the CD sleeve or book cover…). As well as the interactivity offered by digital terrestrial radio in conjunction with internet and mobile phone networks is the ability to offer transactions connected to the broadcast show (music, concert tickets), to access travel information, check share prices, the weather …

Finally, the reality is the choice to offer “podcasts” and to benefit from the radio medium’s mobility to access free and accurate information.

These are all qualities which, like digital terrestrial television before it, will allow millions of French citizens to benefit from new content offerings which will always be free-of-charge.

However, in recent weeks, we note that those who, only yesterday, did everything to frustrate the adoption of DAB and the CSA’s call for licence applicants in 2000 to digitise the Medium Wave; those who refused the good sense to choose a common digital radio standard, preferring ‘multi-standards’ to European harmonisation, the American proprietary IBOC system and, more recently, the Korean T-DMB standard, are carrying on their ‘’ballet”, making incessant demands and all kinds of attacks upon the CSA, using delaying tactics to choose a standard that is anything other than the one they themselves imposed.

The big operators still feel they have an absolute monopoly, as if the radio landscape has not changed since the ‘liberation of the airwaves’ so that the landscape remains frozen, they can reject competition from new entrants, and can maintain the natural order and their enrichment.

But, despite these large players continuing their efforts to maintain their monopoly, they are today showing their weaknesses. They seem almost unable to create new offerings and new content when they know perfectly well that competitors are on their doorstep with new formats, new stations and a new radio spirit which thinks of radio as a multimedia experience which only digital terrestrial radio can make happen. The global radio medium has been born and it is the listener who makes the rules. It is the end of media that are imposed on the listener, as consumption habits are changing quickly (with a capital ‘Q’), but do the big operators get this? Above all, do they have the ability to adapt to this inevitable evolution? Anyway, even if their concerns are legitimate, their attempts to prevent the launch of terrestrial digital radio are not.

Today, it is no longer up to them to decide the future of radio in France. It is up to the public bodies, notably the CSA, to take responsibility for finally launching digital terrestrial radio, which had been decided by a call for licence applicants in March 2008. Many radio owners have been licensed and are ready to open their stations, just as there are many who could be ready to open new stations but who have not been licensed due to lack of spectrum.

We created the Vivement la Radio Numerique organisation in 2002, the Digital Radio Francaises committee in 2003, and the Digital Radio association in 2005. The first two have merged into the third to increase their productivity and to make digital terrestrial radio happen more quickly. All three are a legacy of the Club DAB and pay tribute to its president Roland Faure who, on the subject of DAB, expressed regret “that the processes for the digitisation of radio are blocked, despite the success of the call for licence applicants in 2000”, a subject on which all three organisations have spoken out.

We note with regret that, since 1996, politics has zig-zagged. The call for DAB licence applicants in 2000. The call for Medium Wave licence applicants in 2003. The adoption of a legal framework for the launch of digital radio in 2004. In 2005, Minister of Industry Patrick Devedjian made the statement that “digital radio is a high priority”. Then CSA President Dominique Baudis stated that “the Higher Council for Broadcasting will soon launch a consultation on digital radio, which will be the starting point of its launch”.

The call for digital radio licence applicants made in March 2008 in response to the strong demand (after numerous consultations with stakeholders, public meetings and technical tests). Progress had already been a long and winding road over more than a decade when, in May 2009, the powers that be finally intervened.

Any slowdown, postponement or delay will be very damaging to all existing operators, new entrants and future players who are all awaiting the launch of digital terrestrial radio. We will not tolerate further delays. Any further delay would be seen as a de facto cancellation of the licence awards made on 26 May 2009, which we would totally reject.

We cannot accept that the law can be constantly violated by a handful of players whose positions are constantly changing to turn digital radio into an imaginary illusion at the expense of listeners, our businesses, our organisations and our economy.

Radio is the only medium that has not yet been digitised. Digital terrestrial radio has been promised since 1996. It now exists in law, it has a legal framework, it is on the statute book, and the CSA has called for licence applicants and has selected the winners, all events that are in the public domain.

Everything is now in place for digital terrestrial radio to be launched. The system has been validated by the Ministry of Culture. The first three areas have been selected and the licence awards made. The public utility announced its intention to own and operate digital radio multiplexes. The contracts were sent to multiplex operators and the agreements were returned by the content providers. Commitments have been made to the ‘have nots’. The technical standards have been published for broadcasters and set manufacturers. Broadcasters have announced an incentive scheme for content providers to create multiplex owners. Set manufacturers are announcing their product lines.

Also, neither the current economic crisis, nor the internet, nor the fragmentation of listening habits (which go back more than 20 years) can justify a delay to the launch of digital terrestrial radio.

Any delay or postponement would risk thousands of jobs at a time when France, like many European countries, is trying to exit the crisis.

In these difficult times, only innovation and creativity count, and no lasting victory can be won by not following common sense.

The time is ripe to keep one’s promises and commitments in a spirit of self-discipline, necessity, will and, above all, responsibility or it will be need to be explained officially and publicly why digital radio was not launched, to name those who seek to prevent its launch in France, and to compensate the licensees.

Public broadcasters have been at the forefront of digital radio in Britain and Germany. In our country, it is high time that the public broadcaster comes out of the woods and takes on the responsibility, for which it has rights and duties to all our citizens: the right to pre-empt analogue and digital frequencies and the certainty of having its own multiplex to broadcast all of its channels to cover 90% of the country.

We must start digital terrestrial on time next December because nothing more should stop it and the various operators are ready. Those who do not want digital terrestrial radio have the internet solution. Radio is not only about market share or decades of radio experience, but about a wish to move the medium forward.

For us, digital terrestrial radio is now or never! We need to start with those who want it and they are many.

Those who do not want it, or who have filed applications lightly or by reflex but will not start within the period required by law, must take responsibility and return their licences to the CSA, who will re-advertise them to the benefit of the many operators waiting for digital licences.

Shalak Jamil, President of the Association Digital Radio
Tarek Mami, President of Vivement la Radio Numerique
Joel Pons, President of the Digital Radio Francaises committee

[unabridged]

My post-script:

A digital radio trade show and conference takes place 20 to 22 October at Hall 7.3, VIParis, Porte de Versailles, Paris. The “Siel-Satis-Radio” event is billed as a “series of meetings dedicated to digital terrestrial radio which will take stock of the questions and viewpoints of stations and the aid promised to radio groups”.

SWEDEN: digital radio to be distributed by digital TV network, not DAB+

In December 2005, the Swedish government had announced that it would not expand the existing DAB radio transmission system that already covered 85% of the country and would not propose a consumer migration from FM to DAB radio. Instead, it suggested that the radio industry should focus on a mix of digital platforms including podcasts, mobile phones and distribution via TV.

In June 2008, Sweden’s broadcasting authority suggested to the government that the DAB+ codec should replace the country’s existing DAB system. However, the government’s IT consultant Patrick Fallstrom said that both DAB and DAB+ were an old-fashioned solution and that today’s consumers were more likely to listen to audio via the internet, mp3’s or their mobile phone.

Now, speaking at the recent ‘Radio Day of European Cultures’ event, Swedish culture minister Lena Adelsohn Liljeroth stated that there is no need for a DAB+ radio network in Sweden. Instead, she proposed that digital radio be carried on the existing DVB-T digital television network which is about to be upgraded to DVB-T2, creating 80% more space for high definition TV and radio channels. Test transmissions of DVB-T2 are scheduled to start in Stockholm and Uppsala before Christmas.

The perceived advantages are: no dual TV/radio transmission system, reduced transmission costs, the digital TV transmission network is already built, DVB-T already provides better coverage (99.8% of the population) and sound quality than the DAB network, increased energy efficiency, plenty of available spectrum, and mobile reception is supported (cars and phones). The perceived disadvantages are: the DVB-T2 system is not yet established, no radio receivers have yet been developed, and there is no lobby group for the system (as there is for DAB+).

One Swedish media commentator noted: “We do not need more transmission networks in Sweden. We must share the resources that we have. This is what I hope the government has understood. It seems as if it has. … It is clear to me that Swedish state radio should not be trying to build its own distribution mechanisms, and especially not its own transmission networks. Its money should be used as efficiently as possible to ensure that Swedish state radio programmes can be heard in as many places as possible. This would include DVB-T2, mobile phone networks, the internet, and FM for the foreseeable future.”

Per Gulbrandsen of Swedish state radio commented: “The government is providing no more money for digital broadcasting and wants the market to decide upon the digital migration of radio. But it is no secret in the industry that the Ministry of Culture dislikes the ageing DAB digital radio system, even in its newer DAB+ form.”

France: "Let's not mess up digital radio"

In France, Le Monde newspaper published an opinion piece last week written by Pierre Bellanger, founder and president of commercial radio group Skyrock, and Sylvain Anichini, former director general of state-owned Radio France:

LET’S NOT MESS UP DIGITAL RADIO

The powers that be are asking themselves a question about the transition to digital radio – if digital terrestrial television is a success, why would the transition to digital terrestrial radio not be a similar success?

In reply, experts have suggested there are differences between digital television and digital radio. Digital television is nationally operated and is being introduced nationally, whereas digital radio is being planned region-by-region with no certainty for radio operators who must apply for digital spectrum. Digital television offers three times as many free channels as analogue, whereas digital radio offers only a marginal increase over the wide choice available on analogue. Digital television was launched with a new generation of TV receivers – flat screens and high definition – and with adaptors for existing equipment. This is not the case for digital radio – digital radio receivers are as sexy as bricks and 140 million analogue radios will have to be thrown away.

Furthermore, digital television launched just when the medium was exploiting new sources of advertising revenues – once the preserve of radio – and when purchasing power was growing in line with the economy. Whereas, the transition to digital radio is being implemented just as the radio industry is reeling from the 2008 financial crisis and household spending is in decline. Finally, the television sector received significant financial help to fund its digital switchover. For digital radio, the subject of funding has been mentioned, and even said to be desirable, but there has been no promise to date. Public funding is not there to support the public will.

These facts have not stopped the powers that be, who have promised to overcome these obstacles. Driven by legislation, they have proceeded towards the launch of digital radio by involving key radio industry players in their strategy to select both a digital radio transmission standard and the most appropriate waveband to use. Applications have been submitted by radio opertaors for the first digital radio areas and there will be a selection process, just as for analogue radio, with licences awarded to the candidates of choice.

This process involves a substantial number of declarations of intent as to the magic of ‘digital’ in a concept synonymous with modernity. Perhaps we are forgetting somewhat that the CD, also digital, belongs more to the past than to the future ….

We are where we are. At the moment of truth when ‘poetry’ must give way to number-crunching and it seems that national digital radio transmission will cost at least 3 million Euros per annum, adding up to a total 50 million Euros per annum for the main radio groups. Additional transmitters are likely to need to be added to alleviate pockets of poor reception. And the absence of real competition between transmission providers offers little hope of reducing these costs. Finally, no new tangible sources of radio advertising are anticipated, and broadcasting will begin without a significant body of digital radio receivers in the market …

This kind of investment – more than 250 million Euros over seven years – might be justified if it could be amortised over two future decades that offered technological and economic stability. But we presently live in the midst of a complete revolution: the emergence of mobile internet access. This offers consumers the ability to connect anytime, anywhere, without interruption, to the internet via the airwaves.

The logic of the mobile internet is redefining the physical distribution of information and is disrupting traditional media and telecoms. The fixed internet has already changed our present, and the mobile internet is opening up the future. Radio is fully participating in this mutation, with radio distribution adapting to the internet protocol with ‘IP radio’.

The future is already in our hands: it is the iPhone. This revolutionary handheld device has allowed the internet to break into the mobile environment via existing communications networks. It provides access to thousands of radio stations, personalised music choices, and the user’s own media library.

Access is either through telecoms networks or through free Wi-Fi available at home or from millions of free wireless terminals. The multi-standard chip lets us forget about having to make a choice between network connections. We click and listen to our favourite radio station, that is all there is to do. ‘IP radio’ offers every radio station that is available via a conventional transistor radio.

The internet handset is connected to the car radio, the home hi-fi, the radio alarm clock, and chips that connect us to the internet on the move will be everywhere.

Already one and a half million iPhones have been sold in France. An entire industry, in less than two years, has caught up with touchscreen technology and IP handsets. It is true that the bandwidth, like the handsets, remain expensive, and telecoms networks must gear themselves towards new demands, but the trend is there: prices will fall. Besides, on the horizon is a converged pricing structure combining fixed broadband and mobile internet access in a package that offers unlimited usage. Therefore, how can we possibly build a viable market for digital radio receivers when the replacement cycle for radios is ten years, whilst that for (subsidised) mobile handsets is 18 months?

Unlike digital terrestrial radio, there is a business model for radio delivered by IP – it allows listeners to demand and receive advertisements specifically tailored to specific audience needs. This is internet audio. Listening is measured in real time and advertising space is traded in virtual marketplaces. IP-delivered radio has produced an unprecedented explosion of creative initiatives, supported by new economic models suited to micro-enterprises – look at the success of Radio Paradise.

What had once been little but a visionary thought is now beginning to make headway as a global standard – mobile internet is the new deal. It is the antithesis of the existing strata of broadcast networks specific to each medium (radio, television). In the future fragile economic landscape, where the concerns of preserving energy and the environment are becoming priorities, can we continue as if nothing has happened?

Careful thought by the powers that be should lead them to take account of these facts and to re-focus their administrative processes which risk becoming bogged down without public subsidy. Why not consider better use of digital networks that already exist? Digital terrestrial television which already allows radio, for example? And, whatever the case with radio, promote mobile internet access in the broader context of migration to a ‘digital’ France.

The planned migration to digital terrestrial radio was not a mistake, but a ‘future of delays’ overtaken by a technological revolution which has surprised entire industries. Recognising this does not take anything away from those who have defended their point of view. A change of course is never a mistake when it allows you to avoid hitting the reefs.

[unabridged]

Digital radio in France: cold feet, no funding, sue the regulator

On 10 September, the French secretary of state responsible for the digital economy, Nathalie Kosciusko-Morzet, organised a seminar “Digital: investing now for tomorrow’s growth”. The objective was to lay out to the 1000 attendees the costs and opportunities necessary to create an integrated digital economy.

On 16 September, Jean-Luc Hees, head of state broadcaster Radio France, addressed the National Assembly’s Committee on Finance & Cultural Affairs. He told them that the broadcaster’s advertising revenues were forecast to decline in 2009 by 20 to 30% year-on-year (advertising comprises 8% of revenue, the remainder from the state). He said that the rollout of digital radio in 2010 would require adding 2m to 3m Euros to the budget.

Hees told the National Assembly: “We now know fairly well the timing of the introduction of digital terrestrial radio, with launches in the coming months in three areas – Paris, Marseille and Nice. …. Our goal is to achieve 95% coverage of France by the end of 2013, according to the CSA’s [France’s media regulator] schedule. …. We must understand that everything has a cost, and the impact on Radio France’s finances means that this house will have to fund dual transmission [analogue and digital] for some time. Analogue transmission presently costs Radio France 80m Euros per annum. The rollout of digital radio will entail additional costs and this is one of the things that require funding in our next budget. I want to emphasise this.”

Amongst commercial radio operators, opinions on digital radio appear increasingly ambivalent. Franck Lanoux, deputy director of NextRadioTV said that digital radio “will not affect 95% of radio listening. It’s hard to identify how digital radio will develop – the receivers do not exist, yet the broadcasters are being asked to make significant investments. Consumers have nothing to listen with.”

The publication mediasactu commented this week that digital radio in France has become ensnared in a quagmire and that reservations amongst commercial broadcasters are becoming stronger:

“After putting all their weight behind persuading the government to adopt the T-DMB standard for digital terrestrial radio in December 2007, which is now nearly two years ago, radio broadcasters, particularly those that are members of GRN [France’s Digital Radio Group] and the Bureau de la Radio [France’s newly created radio trade body comprising the four largest commercial owners], are much more dubious about the real chance of succeeding with the transition to digital radio. Although they were unwavering only a few months ago, now major national radio groups, along with SIRTI [the French broadcasting trade union] and the regional stations, seem determined to thwart digital radio, or at least seriously slow down its development. Angered by the CSA’s decision to only select a handful of new markets to launch digital radio, as well as the costs that will be inherent with dual transmission for several years, not to mention the CSA’s cancellation of applications for 16 of the first 19 areas designated for digital radio, the broadcasters are now showing real reluctance.”

“The [radio] sector, already suffering from its current lack of revenues, is still waiting for the financial aid promised by the government to fund the migration to digital radio. Now, it seems clear that the total cost of the implementation of digital radio will be made greater by the choice of the T-DMB standard by the Ministry of Culture, at the request of GRN, and that the rollout will be much more expensive than it would be for the DAB+ standard. Moreover, according to our sources, the major radio groups are now putting all their weight behind challenging the decision of the CSA about the channel composition of the first multiplexes in order to delay their launch and buy extra time. According to our sources, some have already initiated legal action against the CSA.”

At the government seminar on 10 September, CSA president Michel Boyon reportedly took the opportunity to try to ‘save’ digital radio, suggesting that part of a new significant loan raised by the French government should be allocated to the rollout of digital radio. But, as mediasactu commented:

“The problem is whether public funds can be used to finance the construction of radio networks intended to broadcast commercial stations. Will the public agree to fund not only a digital transmitter network for commercial radio, but also the purchase, at great expense, of receiver hardware that offers a range of stations almost identical to what is already offered on FM?”

Interviewed in Le Figaro, RTL president Christopher Baldelli said:
“The timetable [for digital radio] will be respected if the CSA believes it is right, but migration to digital terrestrial radio is not a matter of principle. It involves a different economic issue than digital television. One impact is higher transmission costs, at approximately 3m Euros per channel, costing us 12m Euros for the whole [RTL] network (RTL, RTL2, Fun Radio, RTL-L’Équipe). The economic difficulty must be taken into account. It is a matter for the radio groups, the CSA and the government. It will take a lot of consultation.”

As mediasactu concludes in its article:
“Overtaken by the internet, mobile phones and MP3 players, does digital terrestrial radio still stand any chance of seducing the general public?”

The demand for DAB radio: where is it?

Most of the current debate on the challenges facing DAB radio seems to be focused on ‘supply side’ issues, such as upgrading existing DAB transmitters, making DAB radio receivers available in cars and the creation of another national DAB multiplex. Surprisingly little of the talk is about the ‘demand side’ issues facing the DAB platform. What are consumers demanding from DAB radio? And how great is that demand?

There are two types of consumer demand for DAB: the demand for content broadcast on the DAB platform, and the demand for DAB radio receiver hardware. The two are inextricably linked. Consumer demand for DAB hardware is largely a function of demand for DAB content. You will only want to buy a DAB radio if you believe there is something interesting enough to listen to on it. Let’s examine some of the available data on these two issues.
  
Consumer demand for DAB content
  
Nobody is going to be motivated to spend money on a DAB receiver for listening to the radio if the platform only offers the same content already available to them on analogue receivers. Therefore, it must be the exclusive digital-only content available on DAB (and other digital platforms) that will persuade consumers to both use the DAB platform and to purchase a DAB radio receiver.

So how dissatisfied are consumers by the radio content choices (the range of radio stations) available to them on existing analogue radio receivers? Ofcom research shows that 91% of adults are satisfied with the existing choice of radio stations offered to them (see chart below), a proportion that has risen in recent years. This demonstrates that dissatisfaction with existing radio provision is extremely low, making it very difficult for any new platform to attract a substantial audience by offering content that will gratify consumers’ few unsatisfied demands.

[In case you are wondering if the increasing satisfaction with radio stations might be a direct result of the exclusive digital-only stations already offered on the DAB platform, it is worth noting that only 3.9% of hours listened to radio are attributed to digital-only stations [RAJAR 2009 Q2].]

Ofcom data shows that the average consumer listens to very few radio stations. Two thirds of the population listen to only one or two different radio stations in an average week, and the majority of these two-thirds listen to only one station. So, not only are the overwhelming majority of consumers satisfied with their existing choice of radio stations, but most people listen to a very narrow menu of stations.

These phenomena are not the outcome of consumers only being offered a limited choice of radio stations on the analogue platform. Ofcom data demonstrates that, in addition to the 5 BBC radio stations and 3 commercial radio stations available nationally on analogue radio (with near universal coverage) in the UK, there are a significant number of local radio stations available to consumers in most areas of the UK. The average consumer in the UK has a choice of 8 national radio stations and 6 local radio stations.

This existing wide choice of radio stations makes the plan for migration to digital platforms very different for the radio medium than it is for the television medium. In the UK, only four (five in some areas) TV stations are available via analogue, making the wider choice available on digital platforms seem very attractive to consumers. Whereas, in radio, an average 14 stations are available to consumers on analogue, and these are already satisfying the vast majority of consumer demands. As a result, there is only a very tiny untapped consumer market for radio content not already available via analogue.

This is demonstrated by analysis of the largest UK radio market, London, in which consumer choice is at its greatest. There are 29 licensed radio stations available on the analogue platform in London (excluding community radio and out-of-area stations), but the top 3 stations account for just under a third of all radio listening in London, and the top 6 stations account for almost half of all radio listening. The radio market in London, as in most of the UK, is dominated by a tiny number of mainstream stations, whilst the remaining radio offerings comprise a ‘long tail’ that fulfils more specialist consumer needs.

 The dramatic consumer skew towards mainstream radio means that, even in a radio market as developed as London, it proves difficult for incremental, digital-only stations to draw significant amounts of listening. The most listened to exclusively digital radio station in London is BBC 1Xtra, which ranks 22nd and attracts only a 0.5% share of listening in the market [RAJAR 2009 Q2]. 1Xtra’s content (UK black music) is barely duplicated by any other legal radio station available in London, and yet its ‘success’ remains slight in a very multicultural market that is already crowded with myriad radio options for consumers. The recent decision by London station Club Asia to enter administration, combined with the closures earlier this year of South London Radio and Time 106.8, demonstrate the challenge for stations to find a ‘monetisable’ audience in London, even on the analogue platform.

It might be easy to assume that Londoners, offered the widest selection of radio stations on the analogue platform, would be more satisfied with their choice in comparison with consumers in other, less well served parts of the UK. The surprising result from Ofcom research is that Londoners are, in fact, less satisfied with their choice of radio than most other parts of the UK. The chart below (extracted directly from a recent Ofcom report) demonstrates that satisfaction with existing radio provision is almost evenly spread across the whole UK, but consumers in London and Northern Ireland are the least satisfied.

In summary, radio in the UK has been a victim of its own success. The universal availability of a range of both BBC and commercial ‘national’ stations, combined with the extensive choice of local stations available in most markets, mean that consumers are already relatively spoilt for choice on the analogue radio platform. There is very little unsatisfied demand for radio content because the UK already has such a comprehensive choice of radio content on offer. As a result, any new radio platform (DAB, satellite, online, etc) is going to find it hard to compete with the high quality and diverse choice of what is already on offer.

This was always going to make it tough for the DAB platform to entice consumers to purchase DAB receivers as anything other than a ‘replacement’ for their existing analogue radios. Unfortunately, the natural replacement cycle for radio receivers is so slow (maybe ten years or more) that it will never prove sufficient for a complete UK digital switchover to be co-ordinated for radio, as is happening in the television market. The UK has some of the best radio in the world – ironically, this has been our digital downfall.

Consumer demand for DAB radio receivers

As noted earlier, consumer demand for DAB hardware is largely a function of demand for DAB content. You will only want to buy a DAB radio if there is something interesting enough you want to listen to on the DAB platform.

Ofcom research demonstrates clearly the lack of interest amongst consumers in purchasing DAB radio receivers. In this year’s survey, only 16% of consumers (without a DAB radio) say they are likely to purchase a DAB radio within the next 12 months. Two years ago, 19% said they would be likely to purchase a DAB radio within the next 6 months. This is very bad news for manufacturers and retailers of DAB radios. Worse, this year not only do 64% of consumers say they are unlikely to purchase a DAB radio, but 20% say they don’t know – a demonstration that a DAB radio is far from being a ‘must have’ gadget on consumers’ wants lists.

The data for current levels of DAB radio receiver ownership are not very helpful in determining the demand for DAB radio receivers. The quarterly survey by RAJAR found in 2009 Q1 that 32.1% of adult respondents claimed to own a DAB radio. However, the annual Ofcom survey found in the same quarter that 41% of adult respondents claimed to have a DAB radio in their household. This disparity between the results from RAJAR and Ofcom would appear to be widening over time.

The uncertainty in the data regarding ownership levels of DAB receivers is not surprising, given the evident level of consumer confusion. Firstly, many radios on the market have the words “digital” or “digital radio” written on them, meaning that they either incorporate a digital clock (for radio alarm clocks) or that they offer ‘digital’ tuning of analogue wavebands, despite them not offering DAB reception. Secondly, the majority of ‘DAB radios’ presently on sale in the UK offer DAB reception in combination with analogue radio and/or internet radio. When DAB radio receivers were first introduced a decade ago, all the models offered were DAB-only. Nowadays, it is harder to find a DAB-only model in shops. Earlier this year, I surveyed the radio hardware on sale from UK retailers (see chart below) and found that the most common DAB consumer proposition is now an ‘FM + DAB’ radio.

In its latest consumer research on take-up of digital radio, Ofcom said that the result of its survey (see below) “highlights the continued lack of awareness among consumers of ways of accessing digital radio”. Consumers have low awareness of their ability to already access digital radio, and It appears that the words “digital radio”, “digital audio broadcasting” and “DAB” are not yet precisely understood. This uncertainty makes the results of market research about ownership levels of DAB radio hardware somewhat unreliable.

One of the targets set by the Digital Radio Working Group at the end of 2008 for the implementation of digital radio was that DAB radios should reach 50% of radio receiver sales by volume by the end of 2010. However, if the current rate of growth continues, this target is unlikely to be reached until 2016 (see chart below).

Besides, this target is largely irrelevant to digital switchover because it seems to assume that consumers are making a definitive choice between the purchase of a DAB radio or an analogue radio. In fact, as the earlier chart shows, the majority of DAB radios presently offered by retailers also include FM radio. Although the DRDB data states that 22% of radios sold in the UK incorporate DAB, the vast majority of those include FM too. So, for every 100 new radios sold, you are probably adding to the UK’s inventory of receivers between 95 and 98 new FM radios, at the same time as adding 22 new DAB radios. In other words, the household penetration level of analogue radio receivers is barely diminishing at all, a fact that will ensure that FM broadcasting remains as vital to our radio system as it has always been.

In summary, the DAB platform seems to be developing slowly as a supplementary platform to existing analogue radio reception. Far from DAB radios ‘replacing’ analogue radios, the overwhelming majority of new radios purchased in the UK are still analogue-only. The remainder are mostly DAB/analogue combination receivers. In this way, DAB has much in common with ‘Long Wave’ radio, where consumers for a long time were offered a choice of ‘FM+AM’ or FM+AM+Long Wave’ receivers in retail stores. Like Long Wave, for a minority of consumers DAB may be a ‘must have’ when purchasing a new radio, but for the majority it is merely an optional extra whose purchase is likely to be very dependent on the comparative prices of available options.

Conclusion

The publicly available data on the demand for DAB is not particularly encouraging for the platform’s future. Much of the implementation of DAB to date in the UK has focused on ‘supply-side’ issues, without seeming to determine whether there is sufficient demand from consumers for new content, and without determining whether that new content would prove sufficiently attractive to lure consumers into shops to purchase DAB radios. Ironically, it appears that if our existing system of analogue radio broadcasting had been less well developed in terms of both the range of available content and its near universal delivery, DAB might have been better able to address any pent-up demand from consumers. As it is, the majority of consumers seem very content with their existing radio options. Our pursuit of excellence in radio over the last 80 years has created something we can be proud of – but it has also made it hard for it to be bettered by a ‘new’ system such as DAB.

[For more data on the challenges facing digital radio in the UK, check out a presentation I made to the European Broadcasting Union Digital Radio Conference in June 2009]

Funding DAB radio infrastructure upgrade: still 'no'

The Media Show, BBC Radio 4, 2 September 2009 @ 1330

Steve Hewlett interviewed Tim Davie, Director of BBC Audio & Music

We talked at the Radio Festival a few months ago and you talked a lot about DAB. The criteria have been stated now for moving forward to switchover, or before anyone contemplates switching off the analogue FM signal, of 50% of listening and 90%+ of coverage. Do you think that’s realistic by 2015?

I use the word ‘ambitious’ and I mean it. I think it’s tough. It is possible. I think the radio industry to date has shown an incremental path towards digital and, unless you get a big step change, you’ll never get there. And, to be fair, the BBC has driven this harder than anyone.

When we last spoke about it, there was a discussion of £100m or so being needed to pay for the rollout of not the BBC stuff but whatever is necessary for the commercial sector to go digital. At that time, I asked you specifically whether there was any money in your budget identified for that purpose and you said ‘no’. Has anything changed since we last spoke?

It’s another ‘no’. No, nothing has changed and until the plan ….

This is not going to happen, is it?

I think that radio will move to digital, and I think that ….

Will it be DAB?

I think at this point, it will be …. I believe in DAB. I say ‘at this point’ because I think we have hurdles to jump over.