DAB – Page 8 – Grant Goddard : radio broadcasting expert : media analyst : writer/author

The DAB challenge: most radios stay tuned to one station most of the time

A ‘thought piece’ by Ipsos MediaCT, entitled ‘The Future of Radio’, identified the many challenges for the government’s proposed digital radio switchover to be successfully implemented by the 2015 target date:

• digital listening share has to more than double in just four years
• the UK’s DAB coverage [..] is currently around 90%, but there is now the need to extend it across all the UK population
• a requirement to improve the quality of [DAB] reception and sound
• the issue of people having to replace their analogue radio sets
• less than 1 in 10 of these [existing radio] sets is DAB, so a very significant number of replacements need to be sold
• all manufacturers are committed to producing sub-£20 sets in the next two years
• more digital radios need to be fitted in new cars and more digital converters need to be sold for existing cars
• take-up of digital platforms has been steady, but not remarkable
• digital listening has a long way to go to meet the Government’s targets
• there are a number of barriers to overcome to meet the demands of the Digital Britain Report, which require investment – in a recession – and co-operation between manufacturers and broadcasters
• DAB will have to be marketed properly and quickly

A Capibus study conducted by Ipsos found that a high proportion of radio receivers were tuned to the same station most of the time:
• 86% of kitchen sets
• 79% of bedroom sets
• 74% of living room sets
• 70% of car radios

Ipsos asked:

“What happens when the switchover occurs and the station now only broadcasts on DAB? Do listeners go out and buy a new DAB set for each room in the house or switch their listening to another station or stop listening? This will be a major issue for stations and their audiences. It will be the listener who will be in control of radio’s digital destiny.”

FRANCE: Digital radio “is not progressing one inch”

A meeting of radio sector stakeholders on Monday 15 March 2010 at France’s media regulator, the CSA, failed to progress the plan to launch digital terrestrial radio this year. According to Le Point, the commercial broadcasters – RTL, Europe 1, NRJ and RMC – demanded a moratorium. State broadcaster Radio France is one of the few continuing to support the CSA’s plan to launch digital radio, delayed from 2009 to mid-2010, using the T-DMB transmission standard.

A member of the Bureau de la Radio trade organisation commented: “There is no economic model [for digital radio]. The choice of the [T-DMB] broadcast standard adopted in Bercy is very expensive. The upside for listeners is not sufficient for us to fund a third broadcast platform to add to the existing Long Wave and FM [platforms]. … We are disappointed because this meeting has not enabled anything to progress. What happens next?”

According to Le Point, the regulator has responded only with “radio silence”. Its headline read: “Digital terrestrial radio is not progressing one inch.”

DAB converters for portable analogue radios? It’s a “no no”

All of us would like to invent a ‘killer application’ that could captivate consumers with its usefulness, change the future direction of technology, and make millions. But there is a big difference between inventing one in our heads and turning it into a technical reality in the marketplace.

The converter/adapter that is able to magically transform a portable analogue radio into a DAB radio is one such invention. It exists in the heads of the DAB radio lobby as a means to persuade politicians that mass consumer conversion to DAB is a possibility rather than a pipedream. Unfortunately, it does not exist in reality.

When the notion of such a converter was mentioned last year, I examined the analogue portable radios scattered in almost every room of our home. The only access to their internal electronics that some of them allow is via a headphone socket – and when you insert anything into that, the loudspeaker cuts out. So how exactly could any kind of gizmo be ‘added’ to such radios to transform them into DAB?

My doubts were confirmed when Intellect, the trade organisation that represents UK radio receiver manufacturers, wrote to Parliament in February 2010 and stated: “Whilst it is technically feasible, there are currently no products on the market that can adapt an analogue radio to receive DAB signals.”

Subsequently, Laurence Harrison of Intellect presented evidence in person on this issue to the Lords’ Communications Committee: “A converter would have to include within it pretty much all the components, bar the speakers, of a standard digital radio anyway. Therefore, the cost differential for a converter will be minimal between that and just buying a new digital radio.”

The converter is a prime example of the radio industry’s current pre-occupation with technology being the answer to its problems. Last week, Steve Orchard (former group programme director of GWR, former operations director of GCap) wrote an opinion piece which proclaimed: “DAB is vital to commercial radio’s future.” What?? Sorry?? Surely, it is ‘content’ which is vital to the future of commercial radio, just as it always has been, and just as it always will be. Content = listening = advertising = revenues = profit. Whereas: DAB = platform = infrastructure = investment = risk.

The radio industry desperately needs a strategy that focuses on producing content, rather than focusing on DAB. We already have platform businesses such as Arqiva whose function is transmission infrastructure such as DAB and FM; and we already have consumer electronics companies that produce radio receiver hardware. I don’t see Arqiva or Roberts trying to produce radio shows, so why does the radio industry so desperately want to control platforms and invent hardware?

As ever, the challenge for the radio industry is to create content that is sufficiently compelling, regardless of the platform. Consumers gravitate to content, whatever platform that content is on. The history of radio has demonstrated this time and time again. For example:

• 90% of the population listen to analogue radio for around 20 hours per week (on FM and AM platforms that the radio industry has lobbied to have shut down)
• BBC Five Live and TalkSport attract 5% and 2% shares respectively of all radio listening, despite being broadcast on AM (a platform that commercial radio lobbied the regulator in the 2000s to write off for mainstream formats)
• Pirate radio with poor FM reception continues to attract significant audiences in cities (stations which the radio industry has long lobbied to be shut down, despite itself not offering consumers any comparable content)
• Atlantic 252 attracted a 4% share of all UK radio listening in 1994, despite broadcasting from Ireland on Long Wave (a platform the BBC tried to shut down in 1992)
• Ricky Gervais’ radio show remains the most downloaded podcast ever, despite never having been broadcast and only ever having been made available as an online download (a platform largely ignored by commercial radio).

Sometimes, it seems that parts of the radio industry have stumbled so far away from their core product, content, that the eventual outcome might even be (to adapt Steve Orchard’s comment): ‘DAB is a vital part of commercial radio’s death’. The sector’s profitability is already zero. This is no time for distractions that will not directly put bums on seats.

The quotes below offer more detail on recent dialogue concerning the mythical DAB adapter.
…………………………………………….

“For customers who don’t want to buy a new radio set, it will be possible to convert existing sets to digital instead. An adaptor device will come onto the market soon that will cost around £50 and, in time, conversion may cost less than a new radio set.”
Digital Radio UK
2 December 2009
……………………………………………

House of Lords
Select Committee on Communications
20 January 2010

Witnesses:
Ford Ennals, Chief Executive, Digital Radio UK
Barry Cox, Chairman, Digital Radio Working Group

Lord Gordon of Strathblane: There is, I might suggest, a vital difference. It is comparatively easy and cheap to convert a television set to digital with a set-top box that you can buy from Tesco for £20. Can you do that to an analogue radio set?

Mr Ennals: I fully expect that there will be low-cost converters available. We were talking to companies which were making these last week, and they are talking about DAB adaptors for about £20 or £25. When the DTT Freeview development started, those products were costing over £100. The market will become more competitive, prices will come down. You can replace your radio for £25 with a digital radio. There will be a burden of cost on the consumer, but it is significantly more affordable than it would have been in the past.

Lord Gordon of Strathblane: If it is as cheap to buy a new digital set as it is to buy a converter, there is a fair disposal problem involved in 50 to 100 million radio sets that are good to go to the rubbish dump.

Mr Cox: There is undoubtedly a difference with television because you can keep your old set and put the adaptor on it. I heard what Ford was saying, and it would be useful if some adaptors come on the market, but the likelihood is that many of those analogue sets will have to be disposed of.
……………………………………………

Intellect [UK trade association for the electronics industries]
Written evidence to the House of Lords Communications Committee
1 February 2010

“Converting analogue radios to digital:
Whilst it is technically feasible, there are currently no products on the market that can adapt an analogue radio to receive DAB signals. Our members would undoubtedly produce such devices should a clear market demand ensue following the passing of the Digital Economy Bill.
However, simply adapting an analogue product will not allow listeners to enjoy the full range of benefits that DAB can offer. With some entry level digital radio receivers costing as little as £25, adapter devices are likely to cost more than digital receivers at the start.”
……………………………………………

House of Lords
Select Committee on Communications
24 February

Witness:
Laurence Harrison, Director, Consumer Electronics, Intellect

Lord Gordon of Strathblane: What about converters for what are known as ‘kitchen’ sets? [….]

Mr Harrison: Converters – if you like, a set-top box for an analogue radio – are technically possible. I think we need to look at just how appealing that would be for the listener. A converter would have to include within it pretty much all the components, bar the speakers, of a standard digital radio anyway. Therefore, the cost differential for a converter will be minimal between that and just buying a new digital radio.

Lord Gordon of Strathblane: So they are not going to fly off the shelves?

Mr Harrison: It will depend on just how much the individual values their analogue set. Of course, converters would also come into play if you are talking about, for example, a large expensive hi-fi system; they would work for that, and if you like the sound quality of that hi-fi then a converter may be an option, but I do think we need to be careful, purely because we know that the price differential, for example, will not be that great between a converter and a standard digital set.

Lord Gordon of Strathblane: So for big, stand-alone hi-fi sets with colossal speakers and everything else it might make sense but for the small ‘kitchen’ portable a no no?

Mr Harrison: We know that some manufacturers are looking at the possibility of introducing a converter, so it may well be that some of those do come to market. I just think for the context we need to be aware of what that converter will look like, and how appealing it may be. I think your assessment is correct.

[…]

Lord Maxton: There is a major difference; with your existing television all you need is a box.

Mr Harrison: Indeed.

Lord Maxton: A converter, basically. With radios that is not the case.

Mr Harrison: That is true.

Lord Maxton: You do not have to get rid of the televisions but you do have to get rid of the radios.

Mr Harrison: That is absolutely true. All I would say on TVs – you are absolutely right and I do not want to downplay the situation at all ……

Lord Fowler: “There will be a public outcry if we get the radio digital switchover wrong. There could be a very big row indeed about this.”

The Digital Economy Bill was debated in the House of Lords this week in its ‘Report Stage’. Once again, amendments that had been proposed specifically to take into account the views of listeners and small radio stations were rejected by the government. As it stands, the Bill only requires Ofcom and the BBC to be consulted before the government can take a decision about switchover from analogue to DAB radio.

Parallel with the progress of the Bill through the House, Lord Fowler has been chairing a separate Select Committee on Communications inquiry into digital switchover. Through its weekly meetings, where it has collected copious evidence from witnesses, it must be becoming increasingly obvious to the Committee that the government plan for digital radio switchover is an undignified mess. Lord Fowler’s growing displeasure with this situation surfaced during Debate of the Bill:

“I do not intend to pre-empt our [Committee] report, but I must say that it is generally a very important issue with the public and that there will be a public outcry if we get the radio digital switchover wrong. There could be a very big row indeed about this. …. I think I probably speak for the committee when I say that there is public confusion at the moment about what exactly the plans mean to the individual consumer, and I cannot believe that that is a sensible way of proceeding.”

The government’s frosty response, delivered by Lord Davies, conveys everything:

“[Lord Fowler] told me, as if I did not know, that there could be the most enormous row if this switchover went wrong.”

The government simply refuses to listen to commonsense on this issue, even from the chairman of the Lords Communications Committee. As a result, a “very big row” about digital radio switchover is indeed inevitable, probably at Easter, and more so following publication of the BBC Strategy Review.

Here is the ‘radio’ part of the debate in full:

The House of Lords
Parliamentary Debate
3 March 2010

Digital Economy Bill
Clause 30 : Digital [radio] switchover

Amendment 137
Clause 30, page 36, line 33, after “to” insert —
“(a) ”

Amendment 138
Page 36, line 35, at end insert —
“( ) the needs of local and community radio stations; and
( ) the needs of analogue radio listeners”

Lord Howard of Rising: My Lords, I tabled Amendments 137 and 138 again simply to get more detail from the Minister, as his assurances about these points were not wholly convincing. The amendments would give the Government an explicit requirement to take into account the views of radio listeners and local and community stations. The Minister argued that this was unnecessary because of the breadth of the requirements to consult that are already proposed and the commitment to consult widely. The problem with such vague assurances is that they can be quickly forgotten. The [Bill] currently states that the views of the BBC and Ofcom should be given due regard before the Secretary of State nominates a date for the digital switchover. It does not say too much about consulting widely or taking into account in any way those who are most affected by the switchover — the listeners. I hope the Minister can give more encouragement that the listener will not be forgotten in this whole process. I beg to move.

Lord Clement-Jones: My Lords, I commend the amendments, which are a very constructive way of seeking further assurance from the Minister. Indeed, they very much reflect the concerns that I expressed from these Benches in the Clause 30 stand part debate in Committee. Assurances about the future of analogue radio in particular are so important. The noble Lord, Lord Young, and I engaged in a slightly semantic conversation about whether FM’s existence would be perpetual or whether it would simply be there for the long term. I think the assurances were that it would be there for the long term, which did provide some reassurance. However, the interests of the ultra-local stations and the consumers of the product of those stations are extremely important, and I very much hope that the Minister can cast more light on the future of analogue in the face of the digital switchover.

Lord Fowler: My Lords, I congratulate my noble friend on the amendment — I am now rowing back frantically — on a very important issue. It is so important, in fact, that the Select Committee on Communications is currently engaged in an inquiry on precisely this — the digital switchover — although a number of reasons have been adduced as to why it should be called not a switchover but various other names. I do not intend to pre-empt our report, but I must say that it is generally a very important issue with the public and that there will be a public outcry if we get the radio digital switchover wrong. There could be a very big row indeed about this. My only reservation about the amendments is that I can think of quite a number of other issues on which I would like the Government’s assurance. There are, for example, 20 million car radios out there. What will happen to those? How will they be converted? What are the plans? There are so many issues here that either we will have a totally comprehensive list or we will simply have to ask the Minister at this stage for his current views. I think I probably speak for the committee when I say that there is public confusion at the moment about what exactly the plans mean to the individual consumer, and I cannot believe that that is a sensible way of proceeding. My noble friends on the Front Bench have raised a crucial issue to which we will have to return again, and very soon.

Baroness Howe of Idlicote: My Lords, I absolutely agree with what has been said so far. This is one of the greatest eye-openers. As we have proceeded with this Bill — particularly as it has run parallel to the deliberations of the Select Committee which the noble Lord, Lord Fowler, is chairing so ably — we have come to realise just how important radio is to so many people, whether to the disabled or to all of us, listening as we do for a vast amount of our time to the radio. However, this is clearly one of the areas in which there is still a need to reassure people locally. The idea was that analogue transmission could be switched off once 50 per cent of listening is to digital radio. Then there was the business of how long FM would be available once it is more or less accepted that there will be a change. As regards the production and selling of cars, the issue is when there will be sufficient technology to convert radios already in cars and to convert some DAB radios to the right level. No one is trying to argue for a moment that the quality of digital radio will not be valued. But getting to that point will need a lot of reassurance to citizens. I would be grateful, as would I am sure other noble Lords, for further reassurance from the Minister that FM will be available ad infinitum, but certainly well beyond the point of switchover. That would do a great deal to reassure noble Lords who have looked into all this. But much more importantly, the citizens and the consumers — I come back to them because I am looking at this issue from both viewpoints — are crucial. I hope that the Minister will be able to give that reassurance.

Lord Gordon of Strathblane: My Lords, I do not have any problem with the sentiments behind the amendments. The only problem is that if those points are listed, it would look as though that is what the Government or Ofcom should give priority to, but they are only three of a myriad number of conditions to which they must give attention. Specifying that is almost counterproductive.

The Lord Bishop of Manchester: My Lords, I rather echo that point. In Committee, I expressed, as did many noble Lords, concerns about local and community radio stations and about the extension of FM. These are very important matters, but as other noble Lords have indicated in this short debate, there are other areas as well. In all this, I hope that we will continue to recognise that, while it has often been said that the switchover for television has gone very smoothly, the complexities in relation to radio are far greater. While supporting so much that lies behind these amendments, it would be a great shame, in a sense, to wreck it by omitting rather than being inclusive.

Lord Davies of Oldham: My Lords, I am grateful to all noble Lords who have spoken in this short debate, particularly the right reverend Prelate the Bishop of Manchester and my noble friend Lord Gordon, for identifying the weaknesses of the amendment and the nature of the issue on which the Government need to take care. Perhaps I might say that if I was not going to take care after the Opposition Front Bench and the noble Lord, Lord Clement-Jones, had spoken in support of the amendment, I certainly was after listening to the noble Lord, Lord Fowler. First, he told me, as if I did not know, that there could be the most enormous row if this switchover went wrong. I could not agree with him more and I accept entirely what the right reverend Prelate has said. The switchover from analogue to digital for television is much easier than this exercise because of the diversity of radio opportunities and provision. But the noble Lord, Lord Fowler, produced an even greater anxiety for me when he mentioned car owners. He is right that we would not dare to get that wrong. I know that we are not far from a general election, but the idea that the Government are about to alienate 20 million car owners by telling them that their radios are defunct, out of date and will not work is somewhat unrealistic. The conversion of car radios is an important point that has to be established before a digital switchover could conceivably be considered a success. We have been clear that an affordable in-car converter is key to the success of digital radio switchover. There are already devices on the market which will convert an FM car receiver to receive DAB. One would predict that this market will expand very rapidly. Very few markets move quite as quickly as the car accessories market, which helps to guarantee the sale of cars. That point therefore will be taken into account, as will the other points about the importance for the Government of effective consultation before such a switchover could take place. We have made clear that, for the foreseeable future, the Government will consider FM radios to be part of the broadcasting firmament. Radio stations will want to combine to broadcast on FM to take account of the points that the right reverend Prelate drew to the attention of the House. What date will all this be effected? That is a pointed and precise, but nevertheless very difficult, question. We have indicated that 2015 is ambitious, although it is achievable. If we do not set a target, there is no stimulus to all those who can make a contribution to effecting this successfully to get to work and do so. So we want a date and have identified 2015, but we recognise that it is a challenge. However, we accept the concept behind the amendments; namely, that the fullest consultation will be necessary. Otherwise, the almighty row anticipated by the noble Lord, Lord Fowler, will descend upon the Government who get it wrong. Why do I resist the amendments, as we did in Committee? It is simply because consultation is written into the Bill already. We could not dream of going forward or of proposing that the Government could go forward with an issue of such significance to our people without the fullest consultation in order to guarantee that we do not fall into those dreadful traps to which noble Lords have called attention. Again, I am grateful to the Opposition Front Bench for drawing our attention to the necessity for care and consultation. That is part of the Bill and the amendments are unnecessary. Having stimulated a further debate, after the extensive one we had in Committee, I hope that the noble Lord will withdraw his amendment.

Baroness Howe of Idlicote: My Lords, can the Minister clarify the point about which a lot of people are concerned; namely, that whenever the point of switchover occurs, FM will continue beyond that point? A lot of small operators are very concerned about that.

Lord Davies of Oldham: My Lords, I wanted to indicate that. If I did not make it clear enough in my reply, we see FM continuing, but we also see the kind of criteria that will be necessary before we begin the process of significant switchover. As I have indicated, the Government will move with the greatest care with regard to this issue, as we have with television switchover. Noble Lords will know of the care that we have taken to make sure that groups who might not be able to make that switchover effectively because of limited resources are given support. Radio is much more complex and difficult, as the right reverend Prelate made clear. The Government are fully seized of that, which is why consultation is written into the Bill on this issue.

Lord Howard of Rising: I thank the Minister for his comments, and I thank my noble friend Lord Fowler for his support. I was delighted to hear some support from the noble Lord, Lord Clement-Jones, after the sandbagging that I received from the noble Baroness, Lady Bonham-Carter. Having raised the issue and heard how sympathetic the Minister is to the potential problems — even though he dodged with his customary skill committing himself specifically to consulting listeners — I beg leave to withdraw the amendment.

Amendment 137 withdrawn.
Amendment 138 not moved.

[the Report Stage of the Digital Economy Bill continues in the House of Lords on 8 March 2010]

DAB radio receiver sales: never let facts get in the way of a big number

A newsletter arrived in my in-box today from Digital Radio UK, the new organisation charged with making DAB radio a success. It told me some startling news:

“By the end of 2009, when buying a radio, more than three quarters of people chose a digital one.”

And, just in case I did not believe this fact, immediately beneath, it told me the same thing again:

“New sales figures reveal that, when buying a radio, more than 75% of people choose a digital one.”

I did not believe it. All the previous data from the radio industry had shown that DAB radios are around 22% of total radio sales, as demonstrated in the graph below.

A year ago, the government’s Digital Radio Working Group had set an ‘aspirational’ target for DAB radios to be 50% of total radios sold by the beginning of 2011. As this graph clearly shows, the odds of successfully coming anywhere close to that target are zero.

Maybe something revolutionary had happened in the consumer market for the proportion of DAB radios sold to have suddenly surged from 22% in Q1 of 2009 to 75% by year-end. It was extremely puzzling.

Then I read an extraordinary letter that Ford Ennals, chief executive of Digital Radio UK, had written to the House of Lords Select Committee on Communications on 15 February 2010. It said in part:

“I thought […] that it might be useful if I wrote with the very latest radio sales data. Encouragingly, it shows that, during 2009, consumers increasingly chose digital sets over analogue ones.

I thought it clearest to present the data in a simple table, which is attached, but it may be useful if I explain a couple of the terms used. Where the data refers to ‘kitchen radios’ it means the kind of sets that you and I would call ‘a radio’ i.e. a set whose sole function is to listen to the radio.

Where it refers to ‘all radios’, these figures include those pieces of electrical equipment which happen to have a radio chip in them (e.g. a hi-fi where the main reason for purchase may be to listen to CDs or an MP3 player where listening to downloaded music is the primary function).

As you can see, by Christmas 2009, 76% of people buying ‘a radio’ chose a digital one…… [emphasis added]”

Aha! Now I think I understand. The only way in which it is possible to contrive that more than three quarters of radios sold are digital radios is to arbitrarily create a completely new definition of ‘radio’. In this brave new world, only a ‘kitchen radio’ will now be called a ‘radio’. (The truth is: 76% of people who purchased a kitchen radio during December 2009 bought a digital radio, though the proportion for the whole of 2009 was 63%.) Every other type of radio is no longer defined as a radio. This new definition of ‘radio’ would completely exclude:
     • Micro systems
     • Clock radios
     • Tuner separates
     • Handhelds
     • Boomboxes
     • In-car radios
     • Audiovisual systems
     • Home cinemas
     • Docking stations
     • Dect phones [?]
     • Mobile phones
     • LCD TVs
     • Record players

This seems like a long list of products which, if they also happen to include a radio, will no longer be defined as having a ‘radio’. How can a ‘clock radio’ not be a radio? How can a ‘tuner’ not be a radio? I know this long list to be a comprehensive definition of ‘radio’ because it was the very definition of ‘radio’ used by the Digital Radio Development Bureau, the forerunner to Digital Radio UK, in its published data. Of course, that was last year. In 2010, ‘radio’ seems now to have a whole new definition.

What can I say? However desperate you might be to try and make DAB radio a success, how is it justifiable to deliberately mis-state data so outrageously in print? And to Parliament?

Car industry: “gaps in digital coverage are a major deterrent to [the] introduction of digital radios”

The Society of Motor Manufacturers and Traders [SMMT], representing 500+ companies in the UK car industry, has submitted written evidence to the House of Lords Communications Committee inquiry into digital radio switchover. Its members have itemised a number of concerns about the practicalities of the government proposal that all new cars be offered for sale with DAB radios by 2013:
• “the apparent perception that the markets for in-vehicle radios and domestic radios are similar, if not identical, and that any assumptions about the speed of take up can be applied to both markets
• the timeline for adapting the existing vehicle parc [cars already on the road]
• the continued availability of traffic information after 2015 to those driving vehicles which are not digitally-enabled
• the extent of radio transmitter coverage
• the need for broadcasters to promote the advantages of digital radio to consumers to create demand
• safety and security issues arising from the use of digital convertors
• the need for pan-European approaches to the introduction of digital radios in vehicles.”

The key issue raised by SMMT concerning the necessary robustness of DAB in-car reception across the whole of the UK would require a massive investment from the radio industry to rectify:

“SMMT members are clear that the gaps in digital coverage are a major deterrent to their introduction of digital radios as standard equipment. As outlined [below], any vehicle manufacturer bears the reputational risk if a radio in one of its products appears not to work properly. Drivers have become accustomed to the gradual deterioration in FM reception which occurs throughout parts of the UK and recognise this is not the fault of their radios. At the present stage of digital roll-out, shortcomings tend to be blamed on the vehicle manufacturer.

SMMT members therefore welcome the statements in the [Digital Britain] report that:
• one of the criteria for deciding the date of the Digital Radio Upgrade will be whether national DAB coverage is comparable to FM coverage and that local DAB radio reaches 90% of the population and all major roads
• the BBC should begin an aggressive roll-out of the national multiplex to ensure that its national digital radio services achieve coverage equivalent to FM by 2014.

However, there is also a need for a plan to enable reception on those stretches of road, primarily tunnels and long underpasses, where reception goes ‘dead’ for a short period. At present, for instance, FM coverage in the Dartford Tunnel is addressed by special measures. In shorter tunnels, the FM signal tends to deteriorate but not disappear, whereas the digital signal disappears entirely.”

SMMT noted that:

“There appears to be an assumption that the market for in-vehicle radios and that for domestic radios have similar, if not identical, features. In fact, they differ in five main ways:
• in the automotive market, the vehicle itself, not the radio, is the reason for the purchase
• vehicles are required to undergo an approval process which is far lengthier than any applying to consumer goods
• the sizes of the two markets and their dynamics are vastly different, where customers purchase new radios more frequently than they do vehicles
• if a radio in a vehicle fails, or even only appears not to work properly, blame is attached to the vehicle manufacturer, whereas the reputational risk if a domestic radio fails is borne by the radio manufacturer
• in automotive applications, the radio is not static. It moves between transmitters and, therefore, complete and national coverage of the digital radio network will be required.”

SMMT’s concern for new cars is that:

“meeting a deadline of 2013 will be a challenge for vehicle manufacturers who began product development in 2009, but we expect it to be achievable. A bigger challenge is represented by those models already on the market or most of their way through the development cycle, where the manufacturers will have to decide whether to divert engineering resources to the task of digitally-enabling them or provide new vehicles with digital convertors.”

SMMT’s concerns for the cars already on UK roads are:

• “The [Digital Britain] report suggests that the majority of the vehicle parc should be converted to digital by 2015, with low-cost convertors for the remainder.
• Vehicle manufacturers are certain that retrofitting of digital radios on a large scale is impractical. Vehicles’ electronic systems have become increasingly integrated; often, the radio is part of this integration and cannot easily or economically be replaced. A radio has to operate in the vicinity of sensitive electronic components, and poor integration has a detrimental effect on other systems.
• Retrofit also affects the perceived quality of the vehicle:
* antennae have to be chosen very carefully – reception from an internal antenna may be poor if a vehicle is fitted with infra-red reflection glass, or if a magnetic antenna base is fitted to an aluminium body
* poor refitting of trim items removed to permit a retrofit will cause rattles.
• Drivers will, therefore, be reliant on the use of digital convertors to enable continued use of their analogue radios after 2015. As vehicles have very long lives, most of the vehicles first registered since 2006, if not earlier, will still be in use in 2015. It is likely that over 20 million vehicles will have to be so fitted, and very likely that most of the necessary sales will be made in the few months before the date for digital migration. The commitment for a cost:benefit study to be conducted before any digital migration date is announced is therefore welcomed by vehicle manufacturers because it should firmly identify the progress made towards digitally-enabling the car parc.”

The message from the car industry seems clear – why should they risk their reputations by installing DAB radios that will suffer poor reception due to lack of a robust DAB radio transmission system in the UK?

The bigger question is – why would consumers pay extra for a DAB car radio that offers increasingly little additional mainstream content over a standard FM radio?

Digital radio switchover: a Broadcasting Minister’s last day: "there is nothing that I am trying not to say"

Apologies: this is an extremely long blog entry. I suggest it is worth persevering with because, more than any other ministerial statement, the transcript below illustrates perfectly the government’s mistaken determination to press ahead with its policy to adopt DAB radio. During the weeks it has been sitting, the House of Lords Communications Committee has become increasingly adept at understanding the flaws and contradictions in the Digital Economy Bill’s radio clauses, which is why their dialogue here with the Minister crackles with suspicion.

Siôn Simon handles his government script with the aplomb of a dodgy used car salesman, combined with the smug self-satisfaction of a schoolboy who can proffer a verbal comeback to any question asked of him. In December 2009, Simon had to repay £20,000 in parliamentary expenses for a second home he was renting from his sister between 2003 and 2007. Embarrassingly, the Broadcasting Minister reveals here his mistaken belief that the government’s proposed 2015 digital radio switchover date is written into the Digital Economy Bill. It isn’t.

I could itemise the many flaws in the Minister’s replies to the Committee’s questions, but it would spoil your reading fun. Your starter for ten – Halfords does not stock DAB radios.

House of Lords
Select Committee on Communications
“Digital Switchover of Television and Radio In The UK”
10 February 2010 [excerpt]

Witnesses:
Mr Siôn Simon, a Member of the House of Commons, Minister of State for Creative Industries
Mr Keith Smith, Deputy Director, Media in the UK, Department for Culture, Media and Sport

Chairman: Good morning. Thank you very much for coming, you are very welcome to the Committee. Now, Mr Simon, you are the Broadcasting Minister.

Mr Simon: For the moment, until the end of today.

Chairman: Well, that is what I was going to raise with you. How long have you been in this post?

Mr Simon: I have been in this post since, I think, the beginning of June last year and today is my last day, so this will be my final appearance before a Select Committee and I am looking forward to it tremendously.

Chairman: Well, before you look forward to it too immensely, let me ask you a question, and I ask the question because, on my reckoning, there have now been five broadcasting ministers since May 2006. That is a very high turnover. Do you think that these frequent changes help in making policy?

Mr Simon: I think I should have been appointed in 2005, but —-

Chairman: But Number Ten actually omitted to do so?

Mr Simon: They omitted to do so and, as you know, you will have to ask the Prime Minister about the appointment of ministers because that is his decision, not mine.

Chairman: Well, the resignation of ministers, on the other hand, is very much in the hands of ministers, is it not? You are not even going to take the Digital Economy Bill through?

Mr Simon: I have had great enjoyment and satisfaction dealing with it as it has been through all the various stages of consultation with stakeholders across industry and Parliament since I inherited the White Paper. The White Paper was published the week I was appointed, the Digital Britain White Paper.

Chairman: By your predecessor who also only lasted a year.

Mr Simon: I think he did an outstanding job actually, I must say. Having come in and inherited his output, I think Lord Carter did a very, very sophisticated, subtle and impressive job across a whole range of industry sectors.

Chairman: At any rate, you enjoyed it so much that you are not going to stay for a couple of months?

Mr Simon: It has been an absolutely tremendous pleasure and privilege. I think it is one of the best jobs in Government. I have lots of reasons that I am stepping down as I am deciding to do other things and I am also stepping down from Parliament.

Chairman: What are the other things you are going to do?

Mr Simon: I am going to run, if I can, to be the first elected Mayor of Birmingham, which will probably be a couple of years, but is a job worth doing and worth planning for.

Chairman: Well, as a Birmingham MP for 27 years, I am probably the person round this Committee who has most sympathy with that ambition, although I do not think the job actually exists, let alone you are going to win it. Quite seriously, do you really think that these swift changeovers of ministers actually do the policy process any advantage?

Mr Simon: I do seriously have to tell you that I am a junior minister and junior ministers, as you know with all your experience, are not responsible for the appointment of ministers, the policy towards the appointment of ministers or the length of tenure of ministers. You need to take that up with the Prime Minister; it is not a matter for me.

Chairman: Well, I doubt very much whether the Prime Minister is going to agree to come to this Committee, given all the other things he has got on his mind just at this period in Government, but never mind.

Lord Maxton: Do we know who your successor is going to be?

Mr Simon: I do not know.

Lord Maxton: Presumably, somebody will have to be appointed this afternoon if you are going this afternoon?

Mr Simon: Again, it is a matter for Downing Street, not for me or officials.

Chairman: So you are going this evening and we do not know who is going to take your place?

Mr Simon: I think it is fairly common procedure that it is after the one minister has resigned that the next one is appointed, so I assume there will be an announcement from the Prime Minister in due course about what arrangements will need to be made.

Chairman: Okay, I do not think we are going to get much further on this particular path. Let us ask you about the digital switchover. This is a short inquiry that we have conducted and most complaint, I think, has been about radio. There seems to be enormous uncertainty amongst the public about what is happening and indeed what the case for radio switchover is. We have just been talking to consumer groups and, just to give you some flavour of what they said initially, one said he could not see any advantage, another said it was difficult to see what the benefits are and a third said that they were concerned about the expense of throwing away sets, and I think that is one of the issues that has come through from some of our correspondence as well. What would you say are the advantages of digital switchover as far as radio is concerned?

Mr Simon: I think there are several advantages. Firstly, digital has practical and technical advantages of benefit to the consumer, so there is a whole range of extra functionality and interactivity that you get from a digital radio set that you will not from analogue. It is also the case that the FM infrastructure, the transmission infrastructure of FM, is ageing, FM is an old analogue technology, and the likelihood is that in the medium term the question will arise anyway of whether this infrastructure can economically be renewed and the likelihood is that it probably would not be economic to renew this infrastructure. What you would be faced with in that case would be a piecemeal disintegration of the FM infrastructure in a disorderly way and an inevitable move by the market towards digital. What the Government is, therefore, doing is trying to help manage this move in an orderly and efficient way.

Chairman: So what would you say to the member of the public who has written a not untypical letter to us in which he said, “We have acquired a large number of FM radios over the years, all of which work perfectly. Five of these are used regularly in different rooms. Why should we ditch these for no good reason?”?

Mr Simon: Well, firstly, they will not necessarily have to ditch them; it will depend what services they are using them to listen to, and it may be that there are different members of the family using different sets in different rooms at different times to listen to different services. It is reasonable to assume, therefore, that in a typical family some of those sets in some of those rooms will be used to listen to the kinds of local commercial services or community radio services which will remain on FM, indeed which will be expanded and have their presence secured on FM and remain available. Now, clearly it will be the case that, in order to listen to major national or large regional broadcasters after 2015, consumers will need some kind of upgrade to listen to digital. It is very likely that a relatively cheap, small add-on which converts an analogue set to a digital set will become available before the switchover date. We are talking to manufacturers, and I cannot guarantee what manufacturers will manufacture, but we think it very likely that a small, cheap converter will be available and people will purchase over time new sets.

Chairman: Well, we will come to that point. Can I just ask one broader point though than that. Ofcom commissioned a cost-benefit analysis of digital radio migration from Price Waterhouse. That report found that the benefits might outweigh the costs only after 2026. Is that the basis upon which you are planning as well?

Mr Simon: I think that the report that Ofcom commissioned was into the recommendations of the Digital Radio Working Group, which were different from those which eventually made it into the Digital Britain White Paper and the Digital Economy Bill, so, to be honest, it is not really a straight comparison because the Price Waterhouse report was not into what is going to happen, it was into a different set of recommendations by a different group.

Chairman: I hear what you say, but why has the Price Waterhouse report not been made public?

Mr Simon: Clearly, there has been a little bit of difficulty about this. There is no sense at all in which it was intended not to be made public. It is now on the DCMS website. It should have been on the DCMS —-

Chairman: In a redacted, blacked-out form.

Mr Simon: I believe that the form that it is in on the website is redacted to remove commercially sensitive information, which is the usual practice with commercially sensitive information, but I am told that the Committee has been supplied with an unredacted version by Ofcom, and any stakeholders who have asked for a copy have been sent a copy. We should have put it on the website more quickly. There were technical difficulties to do with the report not having been written internally and being supplied in the wrong format and so on which meant that it did not get on the website. There has been no intent whatsoever, and there is no intention, to keep private the report.

Chairman: Well, we, I gather, have received the report this very morning, so we obviously have not looked through it yet

Lord St John of Bletso: I noticed in the written evidence from DCMS that one of the challenges of the digital radio switchover will be converting the occasional radio listener rather than the avid listener who has already invested in DAB sets. There has been also a commitment to a further cost-benefit analysis of the digital radio upgrade. What is the timetable of this proposed new cost-benefit analysis, and will you wait for the outcome of this analysis before taking further decisions to go forward?

Mr Simon: I think the commitment with the digital radio upgrade is for a full impact assessment and a cost-benefit analysis particularly of the need for, the case for and the design of a possible digital radio help scheme. As to the sense in which there is a cost-benefit analysis of the whole programme, rather than a kind of discrete piece of commissioned work, like the report we were just talking about, this would be a constant, ongoing process of review which is starting this year and will be constantly reviewed, measured and updated as the programme unfolds.

Lord St John of Bletso: We have, as I understand it, 90 per cent still on analogue and ten per cent on digital, but have you estimated the effects of the costs and revenues to the different radio stations and the bodies arising out of digital migration, and how will profitability change and who will benefit? That is really what we are trying to get at.

Mr Simon: I think the percentage already listening on digital is higher than that, I think it is more like 20 per cent, and we are committed to not switching over until listenership on digital is at least 50 per cent and coverage is at least comparable to FM, which would be 98.5 per cent. Can you just tell me a bit more as I was not quite sure exactly what you wanted in your subsequent question?

Lord St John of Bletso: It was just the phasing of the transfer as far as not just the timing of the cost-benefit analysis, but what the effects would be and the costs and revenues for the different radio stations and others.

Mr Simon: The intention is that the radio market be much more distinctly than it currently is organised into three distinct tiers, so a national tier at the top, which would be digital, a large regional tier, which would also be digital, and then at the lowest end a local tier, which would be small, local commercial broadcasters and community radio stations who would remain on FM. The effect would be that some currently medium-small commercial broadcasters would probably grow their broadcast areas and migrate on to digital. Some of that size could potentially shrink slightly and stay on FM, the underlying dynamic being that it is much cheaper to stay on FM than go on to digital, and there would be small commercial broadcasters for whom it would not be economic to migrate to digital which has inherently a much bigger footprint.

Lord Maxton: I am not quite clear where the BBC would fit into that because they provide national and local services.

Mr Simon: If I may say so, my Lord, that is a very good question and the answer is that in the crucial matter of building out extra transmitter infrastructure so that the coverage of digital matches by 2015 the current coverage of FM, which is about 98.5 per cent of the country, the assumption is that the commercial sector and commercial operators would fund that build-out as far as it was commercially and economically viable, and then the assumption is that the BBC, with its obligation to provide a universal service, would fund the probably seven or eight per cent of the build-out which was not commercially viable.

Lord Maxton: But they were only talking about 90 per cent, the BBC were last week.

Chairman: Is it going from 90 to nearly 100 per cent?

Mr Simon: Very roughly. It is between 90 and 98.5 which, it is assumed, would not be commercially viable.

Chairman: But you are assuming that the cost of that will be taken from the licence fee?

Mr Simon: I am assuming that the BBC would be building those transmitters. We are talking about a cost of probably between £10-20 million a year.

Chairman: So it would be taken from the licence fee?

Mr Simon: I think the assumption is that the BBC would be able to absorb that within its current budgets.

Chairman: Well, the BBC said to us that actually they would like to talk to you about the licence fee, so there may be a constructive dialogue to be had there!

Lord Maxton: Obviously, what you are saying does imply a fairly major restructuring of the radio industry. I assume you are going to be consulting on this, are you?

Mr Simon: We are, and have been, consulting continuously. I have had two summits with small commercial operators who, at the beginning of the process of talking to them, were a bit concerned.

Lord Maxton: Can I link this to one of the Government’s other quite right policies, which is extending broadband to everybody. Where does that fit into radio because it seems to me that people are already selling internet-available radios so that you can pick up radio stations from wherever?

Mr Simon: It is all part of the same, I think, pretty relentless drive towards digital, but they are different strands of the same broad movement rather than being directly interlinked or dependent, so internet radio listenership forms part of the digital radio listenership, but it actually forms a very small part of the digital radio listenership and there is still a case and a clear need for an explicitly transmitted-over-the-airwaves radio digital output as well; you
cannot do it all on the internet.

Baroness McIntosh of Hudnall: I just wanted to go back to two things that you said in your last couple of answers, Minister, and the first one was about the 50 per cent target for digital listenership before making the decision to migrate to digital. We had evidence from the witnesses who were here immediately before you that there is a strong likelihood that the 50 per cent of people who, at that point, would not have taken up the digital option may include a high proportion of vulnerable listeners. Do you have any observations, or indeed has your Department done any research, to demonstrate whether or not that is likely to be the case? Also, you made the point about the BBC becoming responsible for making up the shortfall between 90 and 98.5 per cent, and the evidence that they gave us last week demonstrated, or they believe it demonstrates, that the level of investment to produce that last eight to ten per cent’s worth of coverage is enormously much greater than the level of investment that has been necessary, or will be necessary, to arrive at 90 per cent. I think, from memory, they were talking about having 90 transmitters currently and needing to invest in a further 140 in order to meet that remaining ten per cent. That is a pretty big ask, and I just wonder whether you would, in the light of that, be prepared to reconsider your answer to Lord Fowler about where the money is going to come from.

Mr Simon: If I could take those two, in the first case we have not commissioned research about that yet. Intuitively, I suspect that you are probably right and that there will be a disproportionately high number of, for instance, older, disabled or other vulnerable people in the cohort that is not digital by the time we switch over, so, for that reason, we will be commissioning a full impact assessment and cost-benefit analysis, looking into exactly those issues and using that information to determine, and what would be the details of, some kind of digital switchover help scheme in just the same way that we commissioned research which informed the digital TV switchover Help Scheme that we have ultimately put into place and which is, I think, widely held to have been pretty successful. On the second question, we have been talking to the BBC very closely and very recently about this and, no, I am pretty clear that what I said initially was right, that we are talking about costs of somewhere between £10-£20 million.

Baroness McIntosh of Hudnall: Sorry, £10-20 million per annum, you said earlier?

Mr Simon: Per annum, yes.

Baroness McIntosh of Hudnall: Over what period? An additional net £10-20 million spend for the BBC into an indefinite future or over a specified period of time?

Mr Simon: No, over the period of the switchover, after which the BBC’s costs would decline by up to £40 million a year because they will only be transmitting on one platform and the cost of analogue will be deleted. The basic principle is that the market will pay the cost as far as it is viable. For those people who live in areas, presumably almost always more rural areas, where it is not commercially viable to build out digital transmitters, then the BBC, because it has in its Charter an obligation to provide a universal service, will likely be bound to build out those transmitters. In our conversations with them, they have recently seemed to recognise that and I certainly have not had a sense from them that they believe that the cost would be prohibitive.

Chairman: I am bound to say, it is not the flavour of the evidence that they gave to us last week. I think Lady McIntosh makes an extremely good point here. Rather than continuing this, we had better just recheck with the BBC what exactly it is that they want and require here, but, I have to say, your evidence is slightly at variance with what the BBC were telling us.

Baroness Howe of Idlicote: I think quite a number of the questions I was going to ask have been answered, but I am still not clear about this £10-20 million that you are talking about with the BBC. Presumably, this will be extra money over and above what they are getting at the moment that you are negotiating with them?

Mr Simon: This is not money that we anticipate giving to them. It is a cost which we anticipate will accrue to them when they are building out new transmitters in order to meet their obligation in respect of universality.

Baroness Howe of Idlicote: So there will be a difference in that they are prepared to go up to 90, but not beyond that?

Mr Simon: The commercial sector will build out to 90 per cent and for the rural areas, the seven or eight per cent beyond that which the commercial sector would not build to because it would not be commercially viable, the assumption is that the BBC will build out that step further and that that will cost them about £10-20 million a year during the period of switchover, which they will later recoup as they make savings from not transmitting anymore on analogue.

Chairman: So you are cutting the budget of the BBC by £10-20 million in that period?

Mr Simon: Well, I do not have any control over the budget of the BBC.

Chairman: You are telling them what to do!

Mr Simon: I am not telling them. I am just telling you what the assumptions are about where the likely build-out will come from.

Baroness Howe of Idlicote: I also want to go back to this whole business of just when the radio switchover is actually going to happen as there are huge question marks over this. I know the target is 2015, but, as you probably also heard, a lot of people do not even want it to happen. If we are looking at FM and the extension of time that may well be required, is the Government prepared to give a guarantee that FM will remain right the way through whatever period it is, even if it takes another ten years or even longer for the total switchover to take place?

Mr Simon: I think the Government can guarantee that FM will remain for the foreseeable future. The Government cannot give guarantees indefinitely, but for the foreseeable future the part of the FM spectrum which will be used for local commercial and community radio will continue to be available for that.

Baroness Howe of Idlicote: Well, could you please define for me the ‘foreseeable future’? How far beyond 2015 would that be?

Mr Simon: I cannot put a number on it, but I would have said it would be well beyond 2015, well beyond.

Baroness Howe of Idlicote: Well, 2020, say?

Mr Simon: My personal guess, for what it is worth, is probably well beyond that.

Baroness Howe of Idlicote: You are probably aware that there will be, and there are already, efforts to get on the face of the Bill a guarantee that it will stay for as long as that.

Mr Simon: A point I would make is that, as far as we are aware, we cannot find any evidence anywhere that the FM spectrum will be, going forward, of any particular economic value to anybody. We are not aware of anybody being likely to want it and certainly to want to pay anything in order to use it for anything else. As long as it remains viable for people to use it for radio, as long as people want to continue to use it for radio and as long as the infrastructure still works, then there is no reason at all why it should not continue. It could be another 50 years.

Baroness Howe of Idlicote: But you did in fact say that it was an ageing infrastructure. Have you got any guess about how long it would remain a viable infrastructure to be used?

Mr Simon: I honestly do not know. There is no sense whatsoever in which I am prevaricating or equivocating, there is nothing that I am trying not to say, but I simply cannot give you any certainty because there is no certainty.

Baroness Howe of Idlicote: I wonder whether Mr Smith might have an answer.

Mr Smith: I have nothing really to add to what the Minister has said. Again, and it is a personal view, but I would expect FM to be available well into the future and I think I would share the Minister’s view of beyond 2020, but we do not know precisely when. The infrastructure is an ageing infrastructure, but who knows how long it might last.

Lord Inglewood: I would just like briefly to turn back to the question of extending the DAB national network because it has been measured in the discussions so far by reference to the percentage of the population, but, since the population is scattered relatively randomly across the country, of the final ten per cent of the population, how much in terms of the total number of transmitters and transmission stations does that represent? In fact, in terms of the total cost of rolling this out, that last ten per cent is going to cost a great deal more than the first ten per cent, is it not?

Mr Simon: In answer to the first question, nobody knows how many transmitters —-

Lord Inglewood: No, but just an order of magnitude; I am not interested in specifics.

Mr Simon: I do not know.

Lord Inglewood: But it is much more than ten per cent of the total cost of the thing, is it not?

Mr Simon: Certainly, you would expect for the non-commercially viable, rural final percentage that the unit cost would be higher than doing the middle of big cities obviously, yes.

Baroness McIntosh of Hudnall: Just on the question of who is listening, there appears to be some evidence, including from Ofcom’s research, that most people who listen to the radio at the moment are pretty happy with what they have got now and that actually this notion of extensive choice and interactivity, which is the key selling point really of digital radio, as you said yourself at the beginning of your evidence, actually does not weigh that heavily with most consumers. We also have heard evidence from John Myers, who was commissioned by the DCMS to report on this, that there is a considerable oversupply of radio services in the sense that there are too many stations out there fulfilling need which is perhaps not as great as they need it to be to be commercially viable, so are you convinced that there really is the consumer-led demand for a digital switchover, or is this really being driven by the fact that the technology exists and, because we can do it, we will do it?

Mr Simon: In the first instance, I think the clearest evidence that there is a demand for digital radio is that in the last ten years ten million digital radio receivers have been bought, and many of them in the earlier years quite expensively and many of them repeat purchases. For a new technology from a standing start where the existing technology remains in place and is dominant, I think that is clear evidence of significant demand and it is a market that continues to grow.

Baroness McIntosh of Hudnall: Before you go on from that, could you just tell us what the percentage of the absolute number of radio sets is, as far as it can be estimated, in the country?

Mr Simon: It is impossible to say because there are wildly different estimations of how many radio sets —-

Baroness McIntosh of Hudnall: Well, on what do you place reliance?

Mr Simon: The estimations of the number of analogue sets in existence, which I can think of having heard, varies between about 40 million and 100 million plus, and it is a technology that is 100 years old, so that is a massive accumulation of equipment and it is, therefore, very difficult to compare with a ten-year-old technology. Out of maybe 50 million meaningful analogue sets, if there have been ten million digital sets sold in the last ten years, I think that shows significant consumer demand for a new technology. On the second question about whether the market is oversupplied, firstly and fundamentally, the size of the market is a matter for the market and for the consumer and it is not ultimately my job to manage the size of the market. However, one thing that we are trying to do with this move, as I have said, is to stratify the market into large national, large regional and very local services, which should mean that, rather than everybody in their rather disorderly fashion competing perhaps on unequal terms in one chaotic market, people can do business more efficiently in a more discrete market, and local commercial radio stations, for instance, can do local commercial advertising that will not overlap and be in competition with big national chains and so on.

Baroness McIntosh of Hudnall: So, leaving aside just the generality of choice as a benefit in itself, if you had to say what the benefits are to consumers of the particular way in which the Government is driving the digital switchover in radio, what would you put as your two or three most significant benefits? Would it be, for example, an extension of nationally available commercial broadcasters on digital platforms, or what would it be?

Mr Simon: I think it would be, firstly, that the technology offers additional benefits, so it offers for most people more stations more clearly defined and a better mix of the different tiers, additional functionality, interactivity; digital radios do things that analogue radios do not. Secondly, I think it offers the consumer an orderly, consistent and coherent pathway to a digital future which is inevitable. The FM technology is ageing and the economics suggest that it would not be economic for major broadcasters to replace that infrastructure nationally and, rather than let it disintegrate in a piecemeal way and let it be replaced in a piecemeal way and have consumers all over the country who no longer can get the services that they have been used to, I think it is appropriate for the Government to try and manage this transition in a coherent way.

Chairman: What I do not quite understand is that you talk about new services being provided, but they are going to be provided in an industry, or you are relying on them being provided in an industry, a particularly commercial industry, which is going to be competing with the BBC, which obviously one wants to see, but that commercial industry itself is struggling, not to survive, but certainly struggling in very, very difficult economic circumstances at the moment. I do not quite see where this expansion is going to come from.

Mr Simon: I am not saying that the aim of the policy is to expand the market for commercial radio. The aim of the policy is to manage the transition in a way that works both for the businesses of the broadcasters and for the consumers and to manage the experience in a way that works for the consumer. As you say, the commercial radio market in terms of revenue has shrunk by a third over the last ten years as advertising revenues have shrunk for all broadcasters, print media and so on. It is a business in which people are under real pressure and that is why, among the overwhelming majority of commercial broadcasters, there is a strong support and an appetite for a clear, managed, relatively swift, but not rushed, pathway to digital where, although in the first instance they will have some additional cost, they can see a future in which they can do more business and make more money.

Lord Inglewood: Just really arising out of that and something you said earlier, it is not part of your case, is it, that, if the analogue network were not ageing and hence degrading, that would not be the reason for moving to digital? The reason for moving to digital is not because the analogue network is simply breaking down, is it?

Mr Simon: The fact that the FM infrastructure will need to be replaced in the short to medium term and that it looks like that replacement would not be economic is certainly one of the underpinning factors.

Lord Inglewood: But that goes back to the question of Lady Howe’s, does it not, that the foreseeable future is actually defined by the capability of the FM infrastructure to deliver the services it currently does?

Mr Simon: I am not sure I understand the question. I understood her question.

Lord Inglewood: Yes, but she said, “How long is it going to go on for?” and you said, “For the foreseeable future”, which was fair, but I think in fact that the way it is defined is that it will go on, according to the evidence you have subsequently given us, for as long as the FM transmission infrastructure is capable of delivering it. When it collapses, that is —-

Mr Simon: They are two different points though. There is the question of how long it will be possible for some people locally to continue to broadcast on FM, which is a different question from at what point do businesses need certainty about the capital investment decisions they might need to take in the future to renew the major national infrastructures.

Lord Inglewood: Sorry, but I may have misunderstood your evidence, in which case I apologise, but I thought what you said was that you did not believe that the industry was prepared to invest for the further life that the FM infrastructure would require.

Mr Simon: That is correct.

Lord Inglewood: If that is the case, why are they prepared to invest in the infrastructure for digital, which is part of the proposal that you are describing to us?

Mr Simon: Because renewing an old technology with its limited functionality does not make economic sense to them, whereas investing in a new technology with additional functionality does. When it comes to making the investment decisions, they are not going to buy the old kit again, they are going to buy the new kit.

Lord Inglewood: I understand the argument, thank you. The other thing I wanted to ask you about was right at the outset when there was a bit of verbal sparring going on between yourself and our Chairman, reference was made to things, such as cheap sets and set-top boxtype devices that would enable analogue radios to pick up digital and so on, and you used the subjunctive, that they might well become available, it was very likely. Is there any assurance that you have been given by any of the manufacturers about the actual provision of these products and, if there is not, as events move on, if it becomes apparent that a lot of this hardware may not be available, will that delay and/or postpone any digital switchover?

Mr Simon: Their adaptor-type technologies are already available for cars, so you can already buy a little thing in Halfords that you can put on your analogue car radio that will enable it to receive the digital signal. I do not think that you can easily get hold of such a product to adapt a domestic transistor radio, but the technology already exists. I am led to believe that they would not be difficult to manufacture and there is no reason to believe that they would be. We are talking to manufacturers who say that such products are on the way.

Lord Inglewood: Do you know in what sort of price range these things might be?

Mr Simon: I honestly do not off the top of my head.

Lord Maxton: On Amazon, £65.

Mr Simon: Currently?

Lord Maxton: For the car one, and you have to buy an aerial as well.

Mr Simon: We expect all of these prices to come down a lot.

Chairman: They have already come down quite a bit, have they not?

Mr Simon: Yes, they have come down tremendously. Digital radios themselves, the cheaper sets, you can now get a set for less than £25, which is very, very greatly less than the cheapest even a couple of years ago. As the market expands, the costs will come down, and it is expanding all over Europe. We are also working with, and encouraging, manufacturers to use, without being too technical, what is called the ‘World DMB Profile One chip’, which is compatible all across Europe, and that will give them great European economies of scale which again should make it easier for them to produce even cheaper sets and adaptors. In answer to the question, if nobody produces these things at affordable cost, would that delay switchover, I think it would depend what effect that had on the market. If that meant that nobody bought them and nobody bought any digital radios either and we did not get over the listenership threshold, then yes, it would delay. If it simply meant that people did not bother with an adaptor, but bought new digital radios, then it would not.

Lord Inglewood: I sense you sense that this is not actually going to be a problem.

Mr Simon: That is my belief.

Baroness Eccles of Moulton: I think, Minister, it is quite clear to us that there is going to be plenty of equipment around for converting, multi-chip, et cetera, et cetera, but why are we continuing to base the whole of our digital radio switchover on what is becoming an outdated system, which is DAB, as opposed to what other countries have done, which is either to scrap DAB or start off with DAB+? Why have we allowed ourselves to get caught in being committed in an early stage of the development of the switchover to what is now not the most up-to-date and modern form of broadcasting?

Mr Simon: That is a very good question which lots of people ask. The answer is that we were in this country by far the earliest adopters as a market of digital radio and we took it up far more quickly and far earlier than anybody else, as a result of which the amount of stock in the market that you would have to write off in this country is vastly greater than European comparators. There are ten million DAB sets, many of which have been bought at early adopter prices in the market in the UK and, if we abandoned DAB, it would mean that all those early digital adopters had their digital investment written off after a very few years, which just seems really counterintuitive in terms of how to drive the market towards digital and hardly also would seem likely to inspire much confidence in those people to make them very likely to buy another digital radio of the new standard. What we are saying is that the new sets henceforth should have the DMB World Profile One chip in, which is DAB, DAB+ and DMB compatible, and it would mean that you could use it anywhere in Europe and receive all that mix of signals. It does not preclude us in the future from moving to a technology which is greater than DAB, but it is a cost-benefit decision that has had to be taken and the clear consensus, not just in the Government, but of the regulators and stakeholders, has been that writing off the ten million DAB sets that have already been bought would be counterproductive.

Baroness Eccles of Moulton: Is including the new chip in any radio that comes on to the market from hereon going to be mandatory in the same way as fitting seatbelts in cars became mandatory?

Mr Simon: Not in the same way in the sense that, I think, seatbelts in cars was a piece of primary legislation, but mandatory in the sense that we will work with manufacturers in order to draw up the technical specifications for the new generations of sets, and they will be the formal technical specifications which will be adopted, hopefully, European-wide, so in that sense mandatory.

Baroness Eccles of Moulton: So you would not be able to sell the set if it did not meet the technical specifications?

Mr Simon: You would not be able to sell an approved set. It would not be a crime to sell a set, but it would look like a dodgy set.

Lord Maxton: France is setting the law which says that by 2012, I think, all radios sold must be DAB+ and that would include all car radios, which is the market area which we really have not looked at, but it is a very important area. Is it right that 20 per cent of all radio listening is in cars? That is a very large percentage, but it is a very difficult area to switch from FM to digital, even with the device which we have talked about already, is it not?

Mr Simon: Our targets are switchover by 2015 and new cars all being digitally radio-ed by the end of 2013. That is our clear target. Now, obviously, even if all new cars are digital by 2013, that still leaves the majority of the car stock analogue for a while beyond 2015, at which point one hopes that the price of the adapters, which you can already buy in Halfords, has come down considerably from the price that you mentioned on Amazon. I did not think they were that expensive in Halfords.

Lord Maxton: Well, they are £79 in the shop and, to be honest, with the reviews they have had of them, you have to almost buy an external aerial.

Chairman: I would not take him on on this!

Mr Simon: I am not going to, not for a minute am I going to! He is obviously speaking with some authority.

Lord Maxton: It will cost you another £12 or £13 on top.

Mr Simon: All I can say is that manufacturers assure us that this technology will be getting cheaper, better and more widely available over the three years before cars go all digital and over the five years until digital switchover. That is a long time for them to make big improvements.

Lord Maxton: I have not got one yet, by the way!

Mr Simon: I guessed!

Chairman: But you said that the target date is 2015?

Mr Simon: Yes.

Chairman: That remains the target date, does it?

Mr Simon: That is the firm target.

Chairman: That is a firm target date and, therefore, will that go into the Bill as a date, the Digital Economy Bill going through at the moment?

Mr Simon: Is it not on the face of the Bill?

Mr Smith: The Bill sets out the conditions which would have to be met for the target to be set.

Chairman: But I think I am right, am I not, that 2015 is not there as a target?

Mr Smith: It is not on the face of the Bill, you are absolutely right.

Chairman: Why not?

Mr Simon: Because it is a target.

Chairman: An aspiration?

Mr Simon: No, I am happy with the word “target”. It is a firm target, but it is not an inflexible or dogmatic target. It relies on our having met the listenership test, met the coverage test and, if we do not meet those tests, then we will not hit that date. We believe that we can, and should, hit that date.

Lord Inglewood: It will not be brought forward?

Mr Simon: That is very optimistic.

Lord Inglewood: I am just asking, not suggesting.

Mr Simon: I think it is unlikely.

Chairman: So you may miss the target. That is basically what you are saying.

Mr Simon: I am saying that, if we do not satisfy the criteria, then we will not do it if the nation is not ready.

[this is an uncorrected and unpublished transcript]

DENMARK: government contemplates DAB radio’s future

Politicians in Denmark are presently considering what to do about digital terrestrial radio. The next funding period for state radio runs from the beginning of 2011 to the end of 2014 and will have to take into consideration a political decision taken in June 2009 to forge ahead with the migration from analogue radio to the DAB platform. Presently, only state radio stations are available on DAB.

The governing Liberal Party says it “wants to create real competition in the radio market” because state broadcaster Danmarks Radio has “a de facto monopoly over radio in Denmark and so the diversity and choice in radio remains limited.” The party decided in 2009 that it would support FM switch-off as a means to create a “new start” for radio in Denmark. To ensure that DAB will prove an attractive investment proposition for commercial radio, FM would be switched off between 2016 and 2018. The Liberal policy document states:

“An expansion of DAB radio allows for a potentially very large number of different radio channels. This expansion is in full swing in all major European countries, several of which already offer between 60 and 100 digital radio channels, while Denmark currently only offers 20 channels in total. The technological opportunities need to be exploited for the benefit of listeners. And development of DAB also provides the opportunity to create a balanced radio market, where there are real opportunities for development of commercial radio, which has proven not to be possible on the FM band. We should therefore concentrate on the offensive deployment of DAB. England has the full support of all radio operators in the country who decided to work for the switch to DAB in 2015. Recently, France decided that DAB radios must be in all French cars from 2014 and, in March 2009, the German Broadcasting Commission decided to roll out DAB+ in Germany. Although progress has been slow, and in some places has become completely stagnant, there is no longer the same uncertainty that DAB (Eureka147 standard) is the future of radio.”

The Liberal Party document goes on to cite the ‘success’ of DAB in the UK and mistakenly believes that UK government policy is to switch off FM (a fallacy shared by many):

“Today, around 8% of total radio listening [in Denmark] is on DAB. In England, that figure is 12.7% and soaring. To ensure that DAB is an attractive platform for both listeners and investors, it is important that DAB radios are made attractive by adding more unique content. This is the same set of conditions which must be present in other countries that anticipate the same trends. For example, Norway has estimated that at least half of the population must have a DAB radio before [analogue] switch-off can be announced. England will switch to DAB in 2015. Moreover, it is recommended that all cars sold in England from 2013 must be equipped with DAB radios. This decision is backed by both the public service and commercial radio stations. The assumption is that DAB listening will reach 50% in 2015 and coverage will reach 90% of the country and all main roads. Lord Carter’s report ‘Digital Britain’ in January 2009 also defined a set of criteria that must be met in order to close [analogue radio] permanently.”

Ellen Trane Nørby, media spokesperson for the Liberals, said: “Danmarks Radio is proposing that we switch off analogue radio in 2015, but they offer no viable way to get Danes to listen more to DAB.” Nørby believes that the biggest driver for DAB take-up will be when state radio channels are progressively removed from FM: “The people who listen to DAB are heavy listeners to the channels they cannot find anywhere else. If the offerings on DAB are not unique, why would you buy a DAB radio?”

Nørby said that the transition to DAB needs to adopt a realistic timescale: “Today, we are in a situation where most listening takes place on FM and each of us has about five FM radio receivers, compared to only 1.5 million DAB radios [sold in total]. Therefore, it is important that we have a real debate over the future of digital radio, and how we progress safely from FM to DAB. The honest discussion we propose is in contrast to others who say simply that we must switch off [analogue radio] but do not explain how.”

Although the Liberal policy document is resolute about digital radio switchover, Nørby appears more circumspect in interviews. In December 2009, she said: “It is not enough simply to say that FM will be switched off in 2015 without considering a discussion on content. …. Driving the take-up of digital television was the Danish desire to have a flat-screen TV. I have seen no Christmas boom – and we have not seen this for many years – in the sales of DAB radios. That’s why we Liberals have been so critical of the migration plan, because DAB has not won as much grassroots support as you could ask for.”

The government proposals drew a critical response from Michael Christiansen, chairman of Danmarks Radio. He said: “The Liberal Party proposal is a barely disguised attempt to destroy Danmarks Radio’s stations. … The proposal totally disregards modern Danish music by moving the P3 channel over to DAB at a time when it its coverage is not enough. … Replacing P3 [on FM] with a more or less indifferent foreign [commercial] radio channel, I cannot take seriously. We want to help the drive towards DAB, just as we have driven the migration to digital TV. But no one thought of closing down DR1 or DR2 [TV stations] on analogue until digital TV signals were available [to all]. The notion is so far out that I find it hard to relate to.”

European commercial radio trade group says ‘no’ to universal FM switch-off date

At the start of its annual conference held in Brussels on 11/12 February 2010, the Association of European Radios [AER], the trade group representing 4,500+ European commercial radio stations (including RadioCentre members in the UK), issued the following press statement:

“AER considers that setting a date for the switch-off of analogue radio services is currently impossible. Indeed, the question of which kind of technology will be used should be solved first. Hence, broadcasting in FM and AM shall remain the primary means of transmission available for radios in all countries, with the possibility to simulcast in digital technology, until market developments enable a potential time-frame for general digitisation of radio. Transition to any digital broadcasting system should benefit from a long time-frame, unless there is industry agreement at national level to move at a faster rate.”

This statement followed on from a policy paper the Association had published a few days earlier, responding to the European Commission’s Radio Spectrum Policy Group plans for its draft Work Programme. The paper said, in part:

“It should be underlined that, in most of Europe, currently and for the foreseeable future, there is only one viable business model: free-to-air FM broadcasting on Band II. Thus, Band II is the frequency range between 87.5-108 MHz and only represents 20.5 MHz. Across Europe, nearly every single frequency is used in this bandwidth. Thanks to the broad receiver penetration and the very high usage by the listeners, this small bandwidth is very efficiently used. On-air or internet-based commercially-funded digital radio has indeed not yet achieved widespread take up across European territories. These two means of transmission will be part of the patchwork of transmission techniques for commercially-funded radios in the future, but it is hard to foresee when.

So no universal switch-off date for analogue broadcasting services can currently be envisaged and decision on standards to be used for digital radio broadcasting should be left to the industry on a country-by-country basis.

Radio’s audience is first and foremost local or regional. Moreover, spectrum is currently efficiently managed by European states and this should remain the case: national radio frequency landscapes and national radio broadcasting markets are different, with divergent plans for digitization, diverse social, cultural and historical characteristics and with distinct market structures and needs…..”

“Finally, AER would like to recall that European radios can only broadcast programmes free of charge to millions of European citizens, thanks to the revenues they collect by means of advertising. These revenues are decreasing all through Europe due to two factors: the shift towards internet-based advertising, and the recent financial crisis. For 2009, radio advertising market shares were forecast to decrease by 3 to 20% all across Europe, compared to 2008.

In some countries (e.g. France and the UK), a part of the revenues derived from the TV digital switchover was supposed to be allocated to the support of digitisation schemes for radio. This is no longer the case. In most countries, it is still unclear who will bear the costs of the digitisation process.

However, any shift towards digital radio broadcasting entails very long-lasting and burdensome investments. Nevertheless, some individual nations may wish to proceed with a move to greater digital broadcasting at a faster rate, as there will be no ‘one-size-fits-all’ approach.

So, any shift towards digital radio broadcasting will most likely require a very long process. Decision on the adequate time-frame should be left to each national industry: as a matter of principle, transition to any improved digital broadcasting system should benefit from a long time-frame, unless there is industry agreement to move at a faster rate.

It should also be recalled that commercially-funded radios are SMEs, and are in no position to compete for access to spectrum with other market players. So, market-based approaches to spectrum (such as service neutrality or secondary trading) should not be enforced in bands where commercially-funded radios broadcast or may broadcast.

To end up with, AER would like to recall that, in most of Europe, currently and for the foreseeable future, there is only one viable business model: free-to-air FM broadcasting on Band II; hence:

• no universal switch-off date for analogue broadcasting services can currently be envisaged
• now and for a foreseeable future, commercially-funded radios need guaranteed access to spectrum, in all bands described above. Besides, no further change to the GE 84 plan [the 1984 Geneva FM radio broadcast frequencies agreement] should be suggested, but the plan should be applied with consideration to the technological development (and its enlarged scope of possibilities) throughout the past 25 years
• any shift towards digital radio broadcasting should benefit from a long and adequate time-frame.”

NORWAY: every fifth radio sold is an internet radio, every eleventh is DAB

In Norway, sales of internet radio receivers are booming. During the final quarter of 2009, 22% of radios sold were internet radios, up from only 1% a year earlier, according to Norwegian website Sandnesavisen. By comparison, only 66,000 DAB radios were sold in 2009, 9% of the total 729,000 radios sold during the period, according to data from the Electronics Industry Foundation. Additionally, 200,000 mobile phones were sold in Norway during 2009, none with DAB capability but many with integrated FM radios.

Erik Andersen, information officer for the Electronics Industry Foundation, said: “We estimate that there are somewhere between 12 and 15 million FM radios that are in regular use around the country while, in comparison, only approximately 290,000 DAB radios have been sold in recent years.”

Andersen is not surprised by the rather low DAB radio sales, and finds it problematic that a date for FM band switch-off has not been announced which could be referred to. “We have no desire to mislead customers so, as long as politicians do not give us a switch-off plan, we advise enquiring customers to buy an FM radio,” said Andersen.

Jarle Ruud, acting general manager of Digitalradio Norge, the organisation charged with ensuring a speedy and smooth transition from analogue to digital radio in Norway, said: “This is a classic ‘chicken and egg’ situation, both in terms of sales volumes versus a switch-off date, and the channel selection on DAB.” Just as consumers are hesitating to buy a DAB radio before the government announces a switch-off date, Ruud thinks there are many radio stations that refuse to invest in digital transmission equipment because of the potentially lengthy and costly period of dual distribution.

The sales trend came as no surprise to Øyvind Vasaasen, media manager at NRK (state broadcasting) and chairman of Digitalradio Norge, who said: “This is what we predicted. We have remarked to the authorities that sales appears to have stabilised at around 60,000 DAB radios sold per year, and this is also the result for 2009. It shows that the sales trend is far too slow.”

Geir Friberg is managing director of Norway’s largest local radio group, Jærradiogruppen, which owns more than 20 of the approximately 150 local stations in Norway. He said: “There is really no great difference between FM and DAB. There are too few radio stations that broadcast on DAB today, and listeners cannot hear the difference between FM and DAB.” Friberg believes that adding more FM stations may even be a better policy than DAB.

Per Morten Hoff, general secretary of IKT Norge (Norway’s IT industry interest group), queried the accuracy of the published sales figures: “More and more consumers have eyes for internet radios, and the Norwegian company TT-Micro has alone sold 20,000 web radios. Since these radios can also receive FM, DAB and 13,000 internet stations, they are strangely classified as ‘DAB radios’ in the statistics. This is apparently to show that DAB is not a total failure. The true DAB sales are probably no higher than 40,000 units, and that figure is getting smaller. There is also the riddle that sales of mini-TV’s are included in the sales statistics of DAB radios.”

Jørn Jensen, president of World DMB Forum, responded: “Hoff does not know what he’s talking about. Radio broadcasting on DAB and DAB+, as well as mini-TV’s in DMB, all use DAB technology.”

At the beginning of February 2010, the Norwegian media regulator, Medietilsynet, submitted a 145-page document to the government on the digitisation of radio broadcasting. This is in preparation for a White Paper on digital radio that will be published by the government during 2010. The report was commissioned to map the Norwegian local radio industry’s opinions on the migration to digital radio and how it could be achieved. It collated responses from 55 parties and it concluded:

“The results of the survey reveal that virtually all local radio licensees believe that the digitisation of local radio will have economic consequences for them as businesses. The players fear that a transition will be so costly that only a few of the current licensees will survive digitisation. The consequence may be that ownership diversity disappears and that the market is left with big group operators. Besides mentioning competence-building, information and predictability, the majority of licensees believe that the most important measure the government can contribute to the digitising process is financial support in one form or another.

Local radio licensees who participated in the survey are roughly evenly split down the middle on their view of whether local radio should be digitised or not. Those who are negative to digitisation weigh the economic aspect heavily. When asked what distribution platform they see for themselves as the primary platform for local radio in the future, 52 percent responded analogue broadcasting via the FM band, 33 percent broadcasting via a digital platform such as DAB, DRM, etc and 9 percent broadcasting via the internet……”

“Amongst local radio licensees, 78 percent are negative about a switch-off date for analogue local radio broadcasting. 18 percent are positive about a switch-off date.”

Vigleik Brekke, chairman of the Norwegian Association of Local Radio (NLR) said that there was no economic reason for many of his 150 member stations to migrate to digital transmission. “Closing FM radio will create problems for stations,” he said. “They will not be able to survive.”

Professor Lars Nyre of the University of Bergen’s Institute of Media Studies said he was sceptical about DAB, especially as FM radio seemed to be perfect for listeners.

Asked whether the government’s White Paper will include a switchover date, Norwegian Culture Minister Roger Solheim said: “This is an important issue, and we aim to present the facts in 2010. One of the key questions we want to work with in the White Paper is whether we should fix a switch-off date.” Asked if his predecessor Trond Giske’s policy still held sway that half of Norway’s households should own a digital radio before a switch-off date is announced, Solheim said: “It is certain that digital radio will come, we see that too, in the developments. The question of the timing, and the state’s role in it, we must come back to in the White Paper.”

According to industry data, one in three households in Norway buy a new radio each year. Each household owns between 6 and 7 radios.

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