UK commercial radio – Page 4 – Grant Goddard : radio broadcasting expert : media analyst : writer/author

Selling the UK DAB radio ‘success’ story overseas

In amongst all the jubilant public statements from media stakeholders following Assent of the Digital Economy Act 2010 this month, one press release stood out for taking wild optimism to new heights. It said:

“The Digital Economy Bill is linked to the government’s Digital Britain report which defines a digital radio switchover plan lasting two years. The migration start date for this is triggered when DAB coverage reaches the same as today’s FM and when 50% of all radio listening is via a digital platform. Based on current digital listening projections from Rajar, and the roll out of new DAB transmitters from Arqiva and the BBC, the UK market is set to achieve both of these milestone [sic] in 2013 …”

Will 50% of radio listening in the UK be delivered via digital platforms by 2013? Not a chance. Even our politicians have admitted this will not happen. Look at the graph below.

The government’s Digital Britain report, published in mid-2009, had forecast that digital listening would be 26% by year-end 2009, which proved to be wide of the mark. The actual figure was 20.9%. What is the chance of 50% being reached by 2013? Zero.

So why is this press release so determined to tell us that “the UK market is set to achieve” a milestone that is so obviously impossible? The answer lies in this next graph which shows that DAB radio receiver sales in the UK were lower in 2009 than in 2008, and lower in 2008 than in 2007.

The market for DAB radio receivers in the UK has been slowing since the end of 2007. DAB radio unit sales are now less than 2m per annum, a volume last seen in 2006. For financial stakeholders in the UK DAB radio receiver sector, this is very bad news.

Frontier Silicon is one of those main stakeholders, a private UK-based semiconductor company that supplies 70% of the global DAB receiver market. With the UK market for DAB drying up, and the European market never having really developed at all, companies such as Frontier Silicon are having to look further overseas for DAB sales. Trade shows such as last week’s Hong Kong Electronics Fair become significant events to convince new territories of the advantages of DAB radio.

So the Frontier Silicon press release quoted earlier, though datelined “London”, is not intended for domestic consumption at all. Yes, it might seem laughable in the UK to believe that digital listening will reach 50% by 2013. But, for Frontier Silicon, this ‘success’ story will help convince overseas markets that DAB is already a raging success in the company’s homeland. This is ‘sales patter’, not fact.

Who at the Hong Kong event would want to learn that the commercial radio industry in the UK has been brought financially to its knees by its decision more than a decade ago to pursue the DAB dream?

Digital Economy Act 2010: a smokescreen for backroom radio ‘deal’

On 8 April 2010 at 1732, the Digital Economy Act was given Royal Assent by Parliament. Who exactly will benefit from the radio clauses in the Act? Certainly not the consumer.

“The passing of the Digital Economy Bill into law is great news for receiver manufacturers,” said Frontier Silicon CEO Anthony Sethill. As explained by Electronics Weekly: “Much of the world DAB industry revolves around decoder chips and modules from UK companies, in particular Frontier Silicon. These firms can expect a bonanza as consumers replace FM radios with DAB receivers.” Frontier Silicon says it supplies semi-conductors and modules for 70% of the global DAB receiver market.

Sadly, the Bill/Act was not really about digital radio at all. For the radio sector lobbyists, it was all about securing an automatic licence extension for Global Radio’s Classic FM, the most profitable station in commercial radio, so as to avoid its valuable FM slot being auctioned to allcomers. The payback on this valuable asset alone easily justified spending £100,000’s on parliamentary smooching. It was interesting to see one Labour MP acknowledge the true purpose for all this parliamentary lobbying in the House of Commons debate when he congratulated “[Classic FM managing director] Darren Henley for making a cause of the issue.”

The clauses in the Digital Economy Bill on the planned expansion of DAB radio and digital radio switchover were simply promises that Lord Carter had insisted upon as the radio industry’s quid pro quo for government assistance to Global Radio’s most profitable asset. The existence of this ‘deal’ between Lord Carter and Global Radio was confirmed by Digital Radio Working Group chairman Barry Cox in his evidence to the House of Lords:

“Lord Carter did not like to do [the deal] immediately. As I understand, he wanted to get something more back from the radio industry. I think there is a deal in place on renewing these licences, yes.”

However, the quid pro quo promise to develop DAB radio will never come to fruition. Now that Global Radio has got what it wanted, over the coming months, the radio industry’s commitment to continue with DAB will inevitably be rolled back. Every excuse under the sun will be wheeled out – the economy, the expense, the lack of industry profitability (having spent nearly £1bn on DAB to date), consumer resistance, the regulator, the Licence Fee, the government (old and new), the car industry, the French, the mobile phone manufacturers, whatever …….

The reasons that digital radio migration/switchover will never happen are no different now than they were before the Digital Economy Bill was passed into law. For the consumer, who seems increasingly unconvinced about the merits of DAB radio, this legislation changes nothing at all. Those reasons, as itemised in my written submission to the House of Lords in January 2010, are:

• The characteristics of radio make the logistics of switchover a very different proposition to the television medium
• The robustness of the existing analogue FM radio broadcasting system
• Shortcomings of the digital broadcast system, ‘Digital Audio Broadcasting’ [DAB], that is intended to replace analogue radio broadcasting in the UK.

More specifically:

1. Existing FM radio coverage is robust with close to universal coverage
• 50 years’ development and investment has resulted in FM providing robust radio coverage to 98.5% of the UK population

2. No alternative usage is proposed for FM or AM radio spectrum
• Ofcom has proposed no alternate purpose for vacated spectrum
• There is no proposed spectrum auction to benefit the Treasury

3. FM/AM radio already provides substantial consumer choice
• Unlike analogue television, consumers are already offered a wide choice of content on analogue radio
• 14 analogue radio stations are available to the average UK consumer (29 stations in London), according to Ofcom research

4. FM is a cheaper transmission system for small, local radio stations
• FM is a cheaper, more efficient broadcast technology for small, local radio stations than DAB
• A single FM transmitter can serve a coverage area of 10 to 30 miles radius

5. Consumers are very satisfied with their existing choice of radio
• 91% of UK consumers are satisfied with the choice of radio stations in their area, according to Ofcom research
• 69% of UK consumers only listen to one or two different radio stations in an average week, according to Ofcom research

6. Sales of radio receivers are in overall decline in the UK
• Consumer sales of traditional radio receivers are in long-term decline in the UK, according to GfK research
• Consumers are increasingly purchasing integrated media devices (mp3 players, mobile phones, SatNav) that include radio reception

7. ‘FM’ is the global standard for radio in mobile devices
• FM radio is the standard broadcast receiver in the global mobile phone market
• Not one mobile phone is on sale in the UK that incorporates DAB radio

8. The large volume of analogue radio receivers in UK households will not be quickly replaced
• Most households have one analogue television to replace, whereas the average household has more than 5 analogue radios
• The natural replacement cycle for a radio receiver is more than ten years

9. Lack of consumer awareness of DAB radio
• Ofcom said the results of its market research “highlights the continued lack of awareness among consumers of ways of accessing digital radio”

10. Low consumer interest in purchasing DAB radio receivers
• Only 16% of consumers intend to purchase a DAB radio in the next 12 months, according to Ofcom research
• 78% of radio receivers purchased by consumers in the UK (8m units per annum) are analogue (FM/AM) and do not include DAB, according to GfK data

11. Sales volumes of DAB radio receivers are in decline
• UK sales volumes of DAB radios have declined year-on-year in three consecutive quarters in 2008/9, according to GfK data

12. DAB radio offers poorer quality reception than FM radio
• The DAB transmission network was optimised to be received in-car, rather than in-buildings
• Consumer DAB reception remains poor in urban areas, in offices, in houses and in basements, compared to FM

13. No common geographical coverage delivered by DAB multiplexes
• Consumers may receive only some DAB radio stations, because geographical coverage varies by multiplex owner

14. Increased content choice for consumers is largely illusory
• The majority of content available on DAB radio duplicates stations already available on analogue radio

15. Digital radio content is not proving attractive to consumers
• Only 5% of commercial radio listening is to digital-only radio stations, according to RAJAR research
• 74% of commercial radio listening on digital platforms is to existing analogue radio stations, according to RAJAR research

16. Consumer choice of exclusive digital radio content is shrinking
• The majority of national commercial digital radio stations have closed due to lack of listening and low revenues
• After ten years of DAB in the UK, no digital radio station yet generates an operating profit

17. Minimal DAB radio listening out-of-home
• Most DAB radio listening is in-home, and DAB is not impacting the 37% of radio listening out-of-home
• Less than 1% of cars have DAB radios fitted, according to DRWG data

18. DAB radio has limited appeal to young people
• Only 18% of DAB radio receiver owners are under the age of 35, according to DRDB data
• DAB take-up in the youth market is essential to foster usage and loyalty

19. DAB multiplex roll-out timetable has been delayed
• New DAB local multiplexes licensed by Ofcom between 2007 and 2009 have yet to launch
• DAB launch delays undermine consumer confidence

20. Legacy DAB receivers cannot be upgraded
• Almost none of the 10m DAB radio receivers sold in the UK can be upgraded to the newer DAB+ transmission standard
• Neither can UK receivers be used to receive the digital radio systems implemented in other European countries (notably France)

21. DAB/FM combination radio receivers have become the norm
• 95% of DAB radio receivers on sale in the UK also incorporate FM radio
• 9m FM radios are added annually to the UK consumer stock (plus millions of FM radios in mobile devices), compared to 2m DAB radios, according to GfK data

22. DAB carriage costs are too high
• Carriage costs of the DAB platform remain too costly for content owners to offer new, commercially viable radio services, compared to FM
• Unused capacity exits on DAB multiplexes, narrowing consumer choice

23. DAB investment is proving too costly for the radio industry
• The UK radio industry is estimated to have spent more than £700m on DAB transmission costs and content in the last ten years
• The UK commercial radio sector is no longer profitable, partly as a result of having diverted its operating profits to DAB

24. DAB is not a globally implemented standard
• DAB is not the digital radio transmission standard used in the most commercially significant global markets (notably the United States)

These factors make it unlikely that a complete switchover to DAB digital terrestrial transmission will happen for radio in the UK.

With television, there existed consumer dissatisfaction with the limited choice of content available from the four or five available analogue terrestrial channels. This was evidenced by consumer willingness to pay subscriptions for exclusive content delivered by satellite. Consumer choice has been extended greatly by the Freeview digital terrestrial channels, many of which are available free, and the required hardware is low-cost.

Ofcom research demonstrates that there is little dissatisfaction with the choice of radio content available from analogue terrestrial channels, and there is no evidence of consumer willingness to pay for exclusive radio content. Consequently, the radio industry has proven unable to offer content on DAB of sufficient appeal to persuade consumers to purchase relatively high-cost DAB hardware in anywhere near as substantial numbers as they have purchased Freeview digital television boxes.

Additionally, it has taken far too long to bring DAB radio to the consumer market, and its window of opportunity for mass take-up has probably passed. Technological development of DAB was started in 1981, but the system was not demonstrated publicly in the UK until 1993 and not implemented for the consumer market until 1999. In the meantime, the internet has expanded to offer UK consumers a much wider choice of radio content than is available from DAB.

In this sense, DAB radio can be viewed as an ‘interim’ technology (similar to the VHS videocassette) offering consumers a bridge between a low-tech past and a relatively high-tech future. If DAB radio had been rolled out in the early 1990s, it might have gained sufficient momentum by now to replace FM radio in the UK. However, in the consumer’s eyes, the appeal of DAB now represents a very marginal ‘upgrade’ to FM radio. Whereas, the wealth of radio content that is now available online is proving far more exciting.

The strategic mistake of the UK radio industry in deciding to invest heavily in DAB radio was its inherent belief in the mantra ‘build it and they will come.’ Because the radio industry has habitually offered content delivered to the consumer ‘free’ at the point of consumption, it failed to understand that, to motivate consumers sufficiently to purchase relatively expensive DAB radio hardware would necessitate a high-profile, integrated marketing campaign. Worse, the commercial radio sector believed that compelling digital content could be added ‘later’ to DAB radio, once sufficient listeners had bought the hardware, rather than content being the cornerstone of the sector’s digital offerings from the outset.

In my opinion, the likely outcome is that FM radio (supplemented in the UK by AM and Long Wave) will continue to be the dominant radio broadcast technology. For those consumers who seek more specialised content or time-shifted programmes, the internet will offer them what they require, delivered to a growing range of listening opportunities integrated into all sorts of communication devices. In this way, the future will continue to be FM radio for everyday consumer purposes, with personal consumer choice extended significantly by the internet.

Marketing DAB radio: misleading listeners only damages the medium

The radio medium’s loyalty amongst consumers derives substantially from the trust engendered between the on-air presenter and the listener. Research has demonstrated that radio is trusted more than any other medium, and that its audience feels a much greater affinity than it does with less intimate media such as television and newspapers.

In view of the importance of this ‘trust’ between radio and its audience, it seems a remarkable own-goal for radio to be promoting itself in a misleading way in advertisements carried on its own medium – radio. If listeners cannot trust radio people to be truthful about radio on the radio, then does it not undermine the bond that exists between a radio station and its listenership?

A recent radio advertisement placed on commercial radio stations by the Digital Radio Development Bureau, the agency tasked with persuading the public to buy and use DAB radios, stated:

“This is an advert for DAB digital radio. If you were listening to me on a conventional analogue …” [the sound of radio interference interrupted the speaker momentarily. The voice-over then continued:] “… radio you might very well hear strange noises …” [further sounds of radio interference followed. The voice-over continued:] “… which would ruin your enjoyment of your favourite programme …” [more interference sounds were audible. The voice-over continued:] “… meaning you might miss out on the crucial …” [radio interference sounds could be heard once more] “… but, with a DAB radio, you can enjoy crisp, clear digital sound. To find out more and discover loads more stations, visit getdigitalradio.com. Prices start from £24.99. Digital radio, get more from your radio”.

Listeners complained to the Advertising Standards Authority [ASA] that this advertisement was misleading because, when the DAB radio signal is inadequate, the audible broadcast signal is interrupted.

The Digital Radio Development Bureau responded that:
• because DAB is a digital technology which is either ‘on’ or ‘off’, the signal is always the same right up to the coverage limit
• DAB uses single-frequency networks technology where the same programme is transmitted from a number of sites, and DAB receivers add the signals from all the transmitters together, reducing gaps whereas, in an analogue radio network, gaps between transmitters cause the signal to fade in and out as the listener moves around
• a digital radio receiver is not subject to the background hiss and interference that might be audible with an analogue radio, and it is only when the listener is not in a digital station’s coverage area that the signal drops out
• electrical interference from fridges, thermostats, motors or light switches can cause crackle on analogue radio, whereas digital radio is not susceptible to this
• the other interference referred to in the advert is intrusion of pirate radio broadcasters that listeners might hear on analogue radio. Because there is no low-grade, cheap equipment available for DAB, pirates are not able to broadcast on digital radio
• the advert sought to promote the fact that DAB radio was hiss- and crackle-free, which the Bureau believed was reasonable and responsible.

The ASA believed otherwise. It said it understood that “if listening to digital radio whilst travelling, the digital signal could drop out when entering a built-up area or walking between tall buildings,” whereas the adverts “gave the misleading impression that listeners would never experience any interruption to a DAB signal, when that was not the case.” The ASA banned future use of the advert.

This was not the first occasion on which advertisements promoting DAB radio have been found to be misleading. In 2005, the ASA had similarly banned a radio advert which had stated:

“If you’re someone who thinks an iPod is something you might keep your contact lenses in you probably haven’t heard about DAB digital radio. With a new digital radio costing from as little as 49.99, not only can you hear all your current favourites in crystal clear sound, you can switch on to a dial-full of digital-only stations specialising in everything from classic rock to books that talk. The future is here today with distortion free DAB digital radio: taking the hiss out of the way you listen to the radio. Message provided by TWG Emap Digital.”

On this occasion, the ASA decided that “not all DAB digital radio listeners would receive ‘distortion free’ and ‘crystal clear’ sound and concluded that the claims were misleading,” it having “received no evidence to show that DAB digital radio was superior to analogue radio in terms of audio quality.”

On another occasion, in 2004, Ofcom banned an advertisement broadcast on London station Jazz FM which had claimed falsely that DAB radio offers consumers “CD-quality sound”. Ofcom concluded that “some listeners, in particular listening circumstances, would perceive a difference in sound quality between services using lower bit rates or broadcasting in mono compared to the quality attainable on CDs.”

There is a recurring theme here of DAB radio marketing campaigns repeatedly being found to be misleading listeners. Their response: just try and try and try again. Perhaps there should be a ‘three strikes, then you’re out’ policy. Do not pass go. Do not advertise DAB radio misleadingly on the radio. Do not continue to abuse the trust between the radio medium and its listenership.

When is an FM radio not a radio? When it’s in a portable media player, says digital switchover group

Digital Radio UK is the new organisation funded by the BBC and commercial radio “to ensure that the UK is ready for digital radio upgrade”. In February 2010, Digital Radio UK submitted written evidence to the House of Lords Communications Committee informing it of the latest data for UK retail sales of radio receivers. Amongst other things, the data showed that:

• Sales of digital radios in 2009 were under 2 million units, their lowest annual volume since 2006
• Sales of analogue radios seemed to have dropped dramatically to 5.2 million in 2009 from between 7 and 8 million during 2008
• As a proportion of the total volume of radios sold, digital radios had apparently leapt to 28% in 2009 from 21% only a year earlier.

I was puzzled. Why had sales of analogue radios fallen so dramatically by year-end 2009 (see graph below)? There seemed to be almost no substitution effect by DAB radios, whose volume sales were also down, though not by as much as analogue radios. It appeared as if many consumers had just suddenly decided to stop purchasing radios. I wrote to [*****], the company that [***********************************************] Digital Radio UK, asking why the data had suddenly ‘jumped’ in Q4 2009.

The written response from [*****] was:

“The q4 2009 drop is more about the basket of products included as areas previously included such as set top boxes and portable media players were excluded from the data at that time.”

[*****] defines a ‘portable media player’ as any device that plays music and has a 3.5mm headphone jack: MP3 players, iPods, portable cassette players, portable CD players, etc. From Q4 2009 onwards, when any of these devices are sold in the UK and also include a radio, they are no longer counted as ‘a radio’. Now, every MP3 player sold that includes a radio is simply excluded from these statistics. This is why the number of radios sold appeared to drop so significantly (by around 2m units per annum) in the latest Digital Radio UK data.

Why was this change in definition made? It is hard to understand the logic because a radio within an MP3 player is still used as a radio and has no other purpose. It is a real radio, not a fake radio, but to [*****] it is no longer a radio.

The answer seems to be that a huge number of MP3 players are sold in the UK (value £666m in 2009) but almost none of them incorporate a DAB radio. When an MP3 player does include a radio, it is inevitably an FM radio. MP3 players are manufactured and sold globally by multinational electronics manufacturers who understand that FM remains the universal standard for listening to broadcast radio, while DAB is still confined to no more than a handful of countries. Global manufacturers are reluctant to mass produce an MP3 player incorporating a DAB radio because the sales market would be limited to a few, small territories.

I checked the Argos retail website this week and found it offered 82 models of MP3/MP4 player. None incorporated DAB radio, whereas there were 16 that included an FM radio and 66 that had no radio.

It seems that the last resort for Digital Radio UK to be able to demonstrate to a sceptical public (and increasingly sceptical members of the House of Lords) that DAB radio is ‘taking off’ with consumers is to fix the figures to make it look that way. If you cannot convince the public to stop buying analogue radios, you can ‘bend’ the figures to magically make it appear that the public is buying fewer analogue radios.

Earlier this month, I documented how Digital Radio UK had similarly fixed the same dataset from [*****] to declare in its publicity that “when buying a radio, more than 75% of people choose a digital radio”. This was not at all true. The real fact was that, in December 2009 alone (December always being the peak month for DAB radio sales), 76% of people who bought a kitchen radio bought a digital kitchen radio. That was an attempt to brazenly redefine ‘a radio’ as only ‘a kitchen radio’ so as to exclude clock radios, tuners, in-car radios, boomboxes, etc.

I can only repeat what I said then. 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?

The Digital Economy Bill: let the horse-trading begin, says Shadow Minister

Ed Vaizey MP for Wantage & Didcot
Conservative Party Shadow Minister for Culture
23 March 2010 @ Imperial War Museum North

In today’s radio industry, brands have been shaped more by scarcity of analogue spectrum than necessarily by the market. Brands have been built as much on the frequencies they occupy as much as the characteristics of their content, and commercial revenues have tended to stay limited to local markets.

We very much support the move to digital switchover, both because we believe it is important obviously to upgrade the technology, but because we also think that it will encourage plurality and expand listener choice. We have got to be concerned that people will be ready before any switchover takes place and that there won’t be literally millions of analogue radios which suddenly become redundant. As you know, the government has set a provisional target date of 2015 and we are sceptical about whether that target can actually be met. That is not to say that we are sceptical about digital switchover. We simply think that 2015 might be too ambitious. But we are delighted to see that Ford Ennals is now chief executive of Digital Radio UK, after having steered digital television switchover so successfully, and we hope that all hurdles can be overcome.

We hope that the advent of new digital stations will bring significant new opportunities for independent radio production and it will also free up commercial radio spend. At the moment, as I understand it, the commercial sector spends nearly 10% of its annual revenue on analogue transmission. In the battle for ratings in the new digital world, we would hope that great programming would be at the forefront and that therefore a good proportion of the £40m annual cost of analogue broadcasting will go to independent radio production.

At the moment, the BBC holds four out of the five available national FM licences, and it has the only national digital multiplex. So the aspiration as we move over to digital is as much about making more space for plurality in radio broadcasting as it is about new technology. And if new stations are broadcast, we hope there is plenty of scope for new exciting radio production.

We are also keen obviously not to switch off FM, but to maintain FM as a spectrum particularly for local radio. As you are probably aware, there has been a lot of lobbying during the passage of the Digital Economy Bill about that. I’m pleased to say, as well, that some of the new technology that seems to be coming on-stream, with radios that can switch seamlessly between digital and FM broadcasts, will ensure that there will still be a place for ultra-local FM broadcast stations.

Obviously, many of you will also be interested in what will happen with the Digital Economy Bill as we approach the dissolution of Parliament. My understanding is that the Second Reading will happen on the 6th of April, which I think is also the date that Gordon Brown drives up the Mall to see the Queen to call for the dissolution of Parliament if he wants an election on the 6th of May […] We will have this rather surreal Second Debate in the House of Commons and then we will go straight into what is now called the ‘wash up’ where we horse-trade over the various clauses of the Digital Economy Bill to be passed by the 8th of April. But I can assure you that the deregulation of radio clauses in the Digital Economy Bill have strong cross-party support so, if anything is going to go through, it will be those clauses.

[…]

Q&A

Q: It’s interesting that you touch on digital radio as a platform going forward. Once we find the larger stations, commercial and the BBC, make the switch to digital, and they leave the FM spectrum, do you feel that the majority of listeners will move to digital radio when they vacate their homes, as most cars don’t come with a DAB receiver, so obviously the commercial sector and the BBC are going to be losing listeners because the majority of times listeners tune in to these station is in the car? Furthermore, with DAB, it’s reported and seen by some people in the media/press as being a failed format, competing with new technologies such as DRM. With these changes, do you think that, when people do make the migration to DAB, that smaller stations are going to lose out and that the money from the commercial side is going to be re-invested in programming and we’re not going to lose the quality of the content…

A: Well, I think the problem in the last few years has been a kind of half-way house, so people weren’t really sure what the future of digital radio was going to be, particularly with commercial radios stations that were having to make a double investment which was costing them a lot of money, so we supported the government in making a firm decision that we were going to move over to digital switchover. As I said in my remarks, I think that 2015 might be a bit ambitious.

Your particular point about converting cars to digital radio is, I think, the crucial point. We have got to get to a stage where new cars are fitted – as the French have now mandated, for example – with digital radios and that it gets easy to convert to digital in the car. I think that 2015 is going to be ambitious, but that does not mean that we are sceptical about switchover.

The other point about FM, as against DAB. I think that there will be… There are radios on sale now that switch seamlessly between FM and digital as if you were simply changing channels. I think that, particularly as FM will then be, broadly speaking, a spectrum used by the local radio stations, that won’t be such a problem if you’ve only got a digital radio in your car, as you tend to listen to a local radio station when you’re at home – or you can de-construct that remark. The point you make about whether DAB is the right technology or whether we should be using DAB+, to a certain extent I slightly take the view that we have gone down this road, so let’s leave it. I think the pain of trying to move to DAB+ or beyond will be too much, given how far we’ve come.

Q: I also found it quite interesting that you had the idea that there were going to be more digital-only services. In the past, we have seen digital services such as Capital Life and Core which have come and now gone again because they were not commercially profitable. Do you think that is not going to have an impact when most people make the migration to DAB? Do you think that the local full-scale FM operators are going to suffer?

A: Er, well, er, I hope that they won’t. There will be a distinction between national or big regional radio stations and local stations, and there is already a distinction between local and community which is ultra-local. As I say, we want to put in place a platform that will also enable cross-media ownership at a local level that will enable local media companies to create scale. So, what I hope is that, across the range of media. there will be opportunities for any good radio station that is likely to command a loyal audience – whether that be an ultra-local audience, a regional audience or a national audience – because, in terms of Capital Radio coming and going, I think that was frankly a symptom of that we were in a half-way house about digital. We need to drive digital, which I think is now underway.

[…]

Government: digital radio switchover in 2015 “still on track”

Tony Lloyd MP Manchester Central
Chair of the Parliamentary Labour Party
23 March 2010 @ Imperial War Museum North

One of the commitments that the government has already made is the switchover to digital [radio]. That will go ahead, although it will go ahead dictated by the pace of change that the markets themselves will involve. You know the ground rules for that. I was talking to a multimedia producer who just tells me she can’t get digital radio in her own home. Now this is still one of the big issues because, until we have got 90% coverage of the country and until we see something along the lines of 50% of people using digital, that switchover won’t take place. But all the evidence is that we are still on track for that switchover to take place by 2015.

The second debate within that is how is that paid for, how far will the commercial sector – the commercial radio stations – be prepared to pay to invest in the digital networks and how far will the BBC contribute? Because what is clear is that there always will be a role for the BBC to fund because there will be parts of the country where the commercial sector simply won’t take that process forward.

We know that the analogue [radio transmission] system, even if we do nothing at all to maintain it, will require investment of the order of £200m simply to keep the existing networks up and running and that money frankly is better spent on the switchover to digital and, of course, there will be consequential changes in terms of the licensing framework at the point of switchover.

[…]

This government, the Labour government, once re-elected, probably on May 6th ….

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]

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.”

Digital radio stations: listeners abandon ship

The latest RAJAR radio audience data demonstrated one thing clearly: the UK radio industry’s strategy for its digital stations is in tatters. Audiences for digital radio fell off a cliff during the last quarter of 2009. This did not appear to be the result of any specific strategy shift (no station closures, only one minor format change) but more the result of increasing public malaise about the whole DAB platform and the radio content that is presently being offered on it (plus a little Q4 seasonality) . The figures speak for themselves.

Total listening to digital radio stations is back down to the level it achieved in 2007, following a period of sustained growth between 2000 and 2007. Far from moving towards some kind of exponential growth spurt as the industry had expected, total listening now seems to have plateau-ed. It appears that market saturation has already been reached for much of the content presently available on digital radio platforms, considerably earlier than had been anticipated, and at a level of listening that cannot justify these stations’ existences for their commercial or BBC owners.

In the commercial sector, only Planet Rock has maintained its momentum, probably a reflection of its commitment to offering its listeners genuinely unique content. Elsewhere, the jukebox music stations have suffered massive falls in listening, possibly a result of their ease of substitution by online offerings such as Spotify and Last.fm, and of owner Bauer’s policy to curb investment in digital radio broadcast platforms and content.

Commercial radio has talked the digital talk for years about striving to make DAB a successful platform, vaguely promising new digital radio ‘content’ that it has still not delivered. Instead, it has spent the last few years cutting costs, consolidating, lobbying the government, complaining about the BBC, closing its digital stations and contracting out its DAB capacity to marginalised broadcasters (religious, ethnic, government-funded and listener-supported stations) that will never attract mainstream audiences to the platform (and whose listening is not even measured in the RAJAR audience survey).

From the listener’s perspective, the only thing that has happened to the DAB platform in recent years is the disappearance of commercial digital stations such as OneWord, TheJazz, Core, Capital Life and Virgin Radio Groove. For the average consumer, the arrival of Traffic Radio, Premier Christian Radio or British Forces Broadcasting Service are hardly replacements.

A report commissioned by RadioCentre from Ingenious Consulting in January 2009 concluded:

“Commercial radio is now at a crossroads with respect to DAB. It needs either to accept that the commercial challenges of DAB are insuperable and retreat from it – such a retreat, because of contractual and regulatory commitments, would be slow and painful; or strongly drive to digital.”

In the year since this report was prepared, commercial radio has done neither. Instead, it has spent a small fortune on parliamentary lobbying, not one iota of which has had a direct impact on 10 million increasingly baffled DAB radio receiver owners. These latest RAJAR data convey their clear message that content is their only concern.

For the BBC, the problem is somewhat similar. With the exception of Radio 7, listening to its digital radio stations remains unimpressive, despite them benefiting from massive BBC cross-promotion over many years. Some stations are outright disasters – Asian Network is listened to less now than it was almost seven years ago, when only 158,000 DAB radios had been sold. Some stations are simply not suited to the DAB platform – 1Xtra targets a youth audience who listen to a lot of radio online and via digital TV, but who have little interest in DAB (particularly as DAB is not available in mobile phones). Some stations will become redundant in an increasingly on-demand world – Radio 7 would eventually be little more than a shopfront for the huge pick’n’mix BBC radio archive to be made available to consumers online.

For the BBC, it is becoming increasingly hard to justify spending, for example, £12.1m per annum on the Asian Network when its peak audience nationally is only 31,000 adults. Broadcast platforms such as FM attract huge audiences for a fixed cost, making them the most efficient distribution system for mass market live content. As a result, Radio 1 costs us only 0.6p per listener hour. By comparison, the Asian Network is costing 6.9p per listener hour, probably making it more expensive to ‘broadcast’ than to send each listener a weekly e-mail attaching the five hours of Asian Network shows they enjoy.

The BBC should still be congratulated for creating new digital radio services in 2002 that attempted to fill very specific gaps in the market which commercial radio was unlikely to ever find commercially attractive. This is precisely why we value a public broadcaster in the UK. However, the BBC digital radio strategy over the last decade has suffered from:
• The BBC’s evident inability to successfully execute the launch of genuinely creative, innovative radio channels that connect with listeners (GLR, the ‘new’ Radio 1, the original Radio 5)
• The BBC pre-occupation with constantly creating new ‘broadcast channels’ when most niche content is more suited to narrowcasting and delivery to its audience via IP (live, on-demand or downloaded).

For the UK radio industry, its digital ‘moment of truth’ has belatedly arrived. A new strategy now has to be adopted which does not continue to raise the DAB platform to the level of a ‘god’ that has to be worshipped above all others. The future of radio is inevitably multiple-platform and the industry’s focus has to be returned to producing content, rather than trying to control the platforms on which that content is carried.

I suspect that Tim Davie, director of BBC Audio & Music, will eventually lead these winds of change, following in the wake of director general Mark Thompson’s pronouncements at the end of this month as to where the internal financial axe will fall. Where the BBC leads, commercial radio will inevitably (have to) follow.

The future digital radio strategy is likely to be ‘horses for courses’. Rather than all radio content being delivered via all available platforms, it will in future be delivered only where, how and when it is most demanded by listeners. Our economic times make this mandatory. The DAB platform’s mass market failure will make it necessary.

Renewal of national commercial radio licences: debated in the House of Lords

House of Lords
8 February 2010 @ 1723
Digital Economy Bill
Committee (7th Day)

Clause 31 : Renewal of national radio licences
Debate on whether Clause 31 should stand part of the Bill.

Lord Clement-Jones: My Lords, before I propose that the clause not stand part, I must apologise. As a result of the way in which the business of the House has been organised today, I shall not be able to be here for about two hours of the Committee’s proceedings. I very much regret that, as many important matters remain to be debated. However, since the business was switched at extremely short notice — I hope that the Whips are whipped for it in some future incarnation —

Lord Davies of Oldham: Oh!

Lord Clement-Jones: I am of course not referring to the noble Lord, Lord Davies. Moving this business from Tuesday to Monday at very short notice is not a happy situation. I therefore hope that Ministers will give full and frank responses as if I were present. I am very grateful to my noble friend Lord Addington, who has kindly agreed to step into the breach when I am not able to put the arguments. I propose that Clause 31 should not stand part. Under this clause, the national analogue radio stations talkSPORT, Classic FM and Absolute Radio are receiving valuable seven-year extensions to their licences. In exchange, the existing licensees have been asked to give their support to an early switchover, with the proposed 2015 date coming much earlier than that recommended by the Government’s 2008 Digital Radio Working Group. However, there is a view among some operators that extensions to these licences are not worth the damage to radio of a digital switchover policy which assumes an unrealistic timetable for digital switchover and which fails to provide solutions that allow all local radio stations to move to digital. They do not accept that as a reasonable quid pro quo for an early switchover. They believe, on the contrary, that the industry’s engagement with the digital radio switchover proposal has been distorted by its interest in licence extensions which are essentially to do with the attractiveness of the current analogue model for radio rather than the proposed digital model. Their view is that Clause 31 will deprive the Government of revenue due from re-auctioning the licences for these national analogue stations. However, the Government have failed to publish an assessment of how much revenue will be lost to the Treasury under this approach. The Government need to justify the advantage of the clause against the background of the following factors: that the sums lost to the Treasury will clearly amount to tens of millions of pounds over the lifetime of the extended licences; and the lack of evidence about whether digital investment by the holders of these licences will continue without the extensions. On the face of it, many are already, contractually or otherwise, committed to digital even without this.

Lord Howard of Rising: My Lords, although I share a number of the noble Lord’s concerns, I do not think that removing the clause would be helpful. It is a facilitating clause that enables the move to switchover at a later date, and it does not set in stone when the switchover will take place or indeed that it must happen. It is more important that the Secretary of State considers a range of issues before nominating a switchover date than that the process in its entirety is stopped. I believe that the level of digital radio listening should be much higher than the Government have suggested. It would also be very much better if the fact that the FM spectrum will remain in use for local and community radio stations was on the face of the Bill. More progress should be made in creating a help scheme and a recycling scheme. We should be focusing on these issues rather than on an attempt to derail the digital switchover process completely.

The Lord Bishop of Manchester: My Lords, I recall that last week the noble Lord, Lord Clement-Jones, and I supported each other’s amendments, but sadly that relationship is about to be broken albeit, I hope, temporarily. To allow the Bill to pass without this clause would pose a real problem for the entire digital radio project. The three commercial stations currently granted national analogue licences cater for a broad range of tastes, from Beethoven and Brahms to Bon Jovi, via the latest soccer score from Bolton Wanderers. Their collective appeal has been vital to encouraging digital take-up by listeners, with around a fifth of their current audiences now listening via a digital platform. To disrupt that migration would be rather unwise. Re-advertising these national licences with just a few years to run before we expect to switch off the service seems to be sending the wrong signal to both the industry and to listeners. It seems to suggest that we are not fully committed to digital as the future, that we doubt whether we will be in a position to switch over the bulk of national stations in seven years, and that we can expend less energy on the steps that are undoubtedly still needed to get listeners to switch to digital, especially through pushing down the cost of DAB radio sets and through getting DAB into more cars as standard. I do not think that any of those things are the right course. If, as I understand it, the message from the legislature to the private sector is to be, “We want you to invest in this new technology, market it to your listeners and encourage them to adopt the new listening platforms”, surely we cannot keep expecting these companies to keep on writing blank cheques. We all appreciate that digital platforms are still in their relatively early days. It has to be remembered that not one digital radio station has yet posted a profit. For their pioneering endeavours, they deserve the stability that this reprieve offers them. One does not often hear pleas for breaks for business from these Benches, but this is a case of tidying up the licensing regime to make it serve the purposes of the digital age.

Lord Eatwell: My Lords, I declare an interest as chair of the consumer panel of Classic FM. This panel is entirely independent of the company. It is devoted to maintaining the standards of Classic FM and the widespread broadcasting of classical music by the independent sector. If this clause does not stand part of the Bill, your Lordships should be aware that the future of Classic FM will be severely compromised because it is a requirement of existing law that the analogue licences are auctioned. As at present conceived, analogue licences do not have a clear format specification. There is not a licence for classical music. There is simply a licence for non-speech, which is the licence held by Classic FM. If these national stations were to be auctioned in the near future, I would be willing to bet the noble Lord who is opposing that Clause 31 shall stand part of the Bill at least a bottle of claret that this licence would be secured by a pop music station, and that Classic FM would disappear. I wonder whether the noble Lord has taken into account that possibility in his proposal.

Lord Young of Norwood Green: My Lords, key to supporting the drive to digital is to encourage and to allow broadcasters to invest in their digital futures. Experience shows that licence renewals, which are linked to the provision of a digital service, are a key incentive. At a time when the Government are asking the industry to contribute to a focused and intense drive towards digital, we believe that it would be wrong to remove this incentive. Clause 31, alongside Clause 32, would allow Ofcom to grant a further renewal period of up to seven years to analogue licence holders who also provide a digital service. Clause 31 relates specifically to the national analogue licences, although the rationale for the decision for extending the renewal is identical for both national and local licences. I do not want to take up too much time because noble Lords who have contributed to this debate have put many of the arguments excellently. The noble Lord, Lord Howard, talked about the necessity to maintain the clause. The right reverend Prelate displayed a very catholic — I hope he does not mind me using the word — taste in music from Beethoven to Bon Jovi, which I liked. In his analysis of the need for Clause 31, he is absolutely right. As he said, we cannot expect companies to carry on writing blank cheques. We need to give them an incentive. My noble friend Lord Eatwell’s analysis of Classic FM was exceedingly apposite. We believe that this clause is essential for the reasons stated by a number of noble Lords. In those circumstances, I support the Motion that this clause stands part of the Bill.

Lord Clement-Jones: My Lords, I thank the Minister for that reply. I also thank other noble Lords for contributing to the debate with some fairly bloodcurdling prospects. However, I do not think that the Minister has answered the question about why these extensions are required. I put this proposal somewhat as a devil’s advocate. By and large, I believe that the majority of the radio industry is behind the scheme as put forward by the Government, but there is a significant minority of interest which is not. That is why I put forward the clause stand part debate. But if I was in their shoes, listening to what the Minister had to say, I would consider that his arguments were entirely circular and that the Government have done this because they needed to and that this was the best way forward. I do not think that any real forensic argument has been put forward by the Minister. I could probably put forward rather better arguments than the Minister has. I certainly could have put my finger on areas where investment is needed, since I have been briefed by some of the major radio players. The Minister has been extremely half-hearted in responding. This is the one bit of this Bill which is the Government’s opportunity to set out their stall in terms of their digital radio policy, other than the amendments we have already dealt with. We had quite a useful debate on our last Committee day, but the Minister has not really answered the questions in a robust way. Certainly, he has not set out the stall for the Government’s policy in terms of the extensions of these national analogue radio stations. We are talking about digital radio switchover. What is it about these extensions that will make those radio stations invest more when they migrate to digital? That is what it is all about. The Minister did not even attempt to talk about the amount of money that the Treasury would forgo. Some estimates have put that as high as £73 million, which is a large amount of money. I do not think that the Minister dealt with that either. The Minister has been extremely disappointing. I do not think that that minority of radio stations will be particularly happy to hear the Minister’s lack of engagement with their arguments. It is almost as if he has taken a view that only a minority of radio stations is concerned, that the bulk of the radio industry is quite happy and that therefore that minority will be overridden without so much as a buy your leave. That is an unfortunate position to be in. This House, above all, is about rational debate and about putting forward the arguments. To be frank, in previous amendments to this clause, the Minister put forward some useful points — he certainly did in response to some of mine — but when I have tried to elicit an overarching policy, he has been lacking and I have been somewhat disappointed.

Clause 31 agreed.
Clause 32 agreed.
Amendment 241B not moved.
Clauses 33 and 34 agreed.

Clause 35 : Local radio multiplex services: frequency and licensed area

Amendment 241C
Moved by Baroness Howe of Idlicote
241C: Clause 35, page 39, line 3, leave out “local”

Baroness Howe of Idlicote: My Lords, this amendment, which relates to the provisions for digital radio, seeks to allow for the efficient use of the radio spectrum and for a potential increase in radio listening choice for the people of Northern Ireland. Although national BBC services are available via digital radio in all four parts of the United Kingdom, the national commercial multiplex is unavailable in Northern Ireland. The reasons for that are historical and technical, and relate to how the same frequencies were used in the Republic of Ireland. The result is that stations, including Absolute Radio, Planet Rock, BFBS radio and Premier Christian Radio, cannot be heard digitally in Northern Ireland. There is some hope that the spectrum position will change. However, as currently worded, even if that spectrum were to become available, Ofcom would not have the powers to allow it to be used by the national commercial multiplex. That is clearly an anomaly and, I suspect, an oversight. It would result in the inefficient use of spectrum and an artificial restriction on the radio-listening choice for some citizens. This amendment seeks to correct the situation and, without obliging, would enable Ofcom to increase the coverage of the national commercial multiplex. Were this to become technically possible, Ofcom would follow the process already proposed for similar expansion of local digital radio or multiplexes using the framework already in the Bill. This amendment, while modest and not contentious, will have benefits for the people of Northern Ireland and clearly will be welcomed by the radio industry, so I hope that the Government will be prepared to accept it. I beg to move.

Lord Young of Norwood Green: My Lords, this amendment would allow Ofcom to vary the frequency or licensed area of national, as well as local, radio multiplex licences. On the face of it, this is not an unreasonable change and would potentially enable the national commercial radio multiplex to extend its coverage to Northern Ireland. However, Clause 35 was structured specifically with reference to local radio multiplexes so as to allow them to merge or be extended in order to close the gaps in local radio multiplex coverage in the UK not currently served by DAB. Simply removing the word “local” from the text may not be the best way to achieve the desired result. Consideration needs to be given to what variation powers Ofcom should have with regard to national multiplex licences and to the basis on which such powers should be exercised. We have some sympathy with what the noble Baroness is trying to achieve and the Government will consider this issue before Report. With that assurance, I hope that the noble Baroness will feel able to withdraw the amendment.

Baroness Howe of Idlicote: My Lords, I am pleased to hear that, even if this amendment is not entirely appropriate according to the Minister, serious consideration is going to be given to how this can be made possible. Under those circumstances, I beg leave to withdraw.

Amendment 241C withdrawn.
Amendments 241D to 241F not moved.
Clause 35 agreed.

Clause 36 : Renewal of radio multiplex licences
Debate on whether Clause 36 should stand part of the Bill.

Lord Clement-Jones: My Lords, Clause 36 deals with the renewal of radio multiplex licences and it inserts a new Section 58A after Section 58 of the Broadcasting Act 1996. The House of Lords Delegated Powers and Regulatory Reform Committee, which we always listen to with some respect, had some interesting words to say about this clause: “It is impossible to tell from the Bill whether the policy is that the licences should or should not be renewable at all, let alone for what period or on what grounds. Indeed, paragraph 56 of the memorandum candidly admits that the relevant policy decision has yet to be made. We draw attention to the skeletal nature of the power in clause 36, to enable the House to examine it further and determine whether it is justifiable in this context”. I am merely a humble hand maiden of this House in tabling this clause stand part debate, and I hope that the Minister can give us further enlightenment.

Lord Young of Norwood Green: I have never had to respond to a hand maiden before in this House. I am still wrestling with that analogy. The Government stated in the Digital Britain White Paper that we would work with the industry to agree a plan to build out the DAB infrastructure to current FM coverage. We recognise the need to limit as much as possible the impact of such build-out on radio stations. One way this can be achieved is to allow multiplex operators to spread the cost of the investment in the new infrastructure by extending the period of their licence. We have suggested that licences could be extended up to 2030. The renewal of multiplex licences as a means to support digital radio was first introduced in the Broadcasting Act 1996. However, these renewal powers only apply to licences which were granted within 10 years of the 1996 Act coming into force. Therefore, there are a number of multiplex licences which are currently not eligible for a renewal. If renewals are to provide a real support to the build-out of DAB coverage to FM levels, they need the flexibility to achieve three objectives: first, to allow the extension of the licence period for those licences which are already eligible for, and in some cases have already been awarded, a renewal under the existing terms; secondly, to allow the renewal to apply to all multiplex licences, including those not currently eligible within the existing provisions; and thirdly, to ensure that any further renewals are awarded with conditions which link them to the progress to digital radio switchover, and more specifically to an agreed build-out plan and timetable. The link to a DAB coverage plan for switchover, which is likely to take a year to agree, is why we believe these powers are most appropriately applied via an affirmative order. I note concerns about the breadth of the order-making powers and I hope that I have satisfied noble Lords that they are justified because of the range of changes needed to implement this policy.

Lord Clement-Jones: I thank the Minister for that brief but — I hope to discover on reading Hansard — informative statement. As somebody who is not fully conversant with the radio multiplex licence variations, that was not the clearest possible answer I could have asked for. I hope that it will make sense on further consideration. It seemed to tell me that the Government need the maximum possible flexibility without having determined exactly which licences require extension. I am not sure that takes us a great deal further than what the House of Lords Delegated Powers and Regulatory Reform Committee said, but perhaps, as I say, on reading Hansard it will all become blindingly obvious.

Clause 36 agreed.
Clause 37 agreed.

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