Memorandum submitted by GWR Group plc
GWR Group is the UK's leading commercial radio
broadcasting company. It operates the national stations Classic
FM, Core and Planet Rock and 37 local stations in the UK. It is
the majority shareholder in Digital One, the national digital
radio broadcaster, and holds 21 digital radio licences. It also
has interests in stations in Australia, Austria, Bulgaria, Finland,
Holland, Hungary, Poland and South Africa. It employs 1,200 people
in the UK. Committed to training, GWR spends more than £1
million a year on training and development.
1. SUMMARY
GWR Group welcomes the Communications White
Paper introduced to Parliament by the Secretary of State for Culture,
Media and Sport on 12 December 2000. However, GWR and the rest
of the radio industry are disappointed that a number of crucial
areas have not been adequately dealt with in the White Paper.
This response identifies these issues as a contribution to the
Culture, Media and Sport Committee's inquiry into the White Paper.
1.1 Radio is the senior broadcast medium,
consumed and used more than TV and mobile phones. Although there
may be 40 million mobiles and 45 million TVs, there are 120 million
radios in the UK and 90 per cent of the population—of all
ages—consumes 23 hours of radio a week. This universality
of radio is under threat from the disproportionate attention paid
in the White Paper to the requirements of television and telecommunications.
1.2 Radio is also a major employer: the
Skillset Employment Census 2000 found 22,819 people working in
Broadcast Radio, compared to 24,102 working in Broadcast TV. It
is time to give radio its fair share of legislative attention.
1.3 GWR welcomes:
— The commitment to create "a
new system for the regulation of media ownership which is appropriate
to fast-changing, modern market conditions" (White Paper,
4.2.7).
— The proposal (5.11.1) that the local
nature of independent radio be maintained while format controls
are lightened.
— The harmonisation of licence periods
(5.11.3) through "extending analogue licence periods to equate
for those for digital licences".
— The prospect (5.11.1) of OFCOM negotiating
with current providers for "renewal of a licence if it is
justified by their level of performance".
1.4 GWR feels that further work is needed
to address a number of issues:
— A stronger commitment to revoking
the current radio ownership points system, including the BBC's
influence in the new system (4.7).
— The renewal of national radio licences.
— Consistent regulation of BBC content.
— A recognition of the sales success
of digital radio receivers at Christmas 2000, reflected by a clear
statement of the criteria that the Government would use in considering
digital switchover (5.11.3).
1.5 We now examine these issues within the
framework of the Government's vision and objectives for communications
in the 21st century, as set out in the White Paper.
2. THE GOVERNMENT'S
VISION: MAKING
THE UK HOME
TO THE
MOST DYNAMIC
AND COMPETITIVE
COMMUNICATION AND
MEDIA MARKET
IN THE
WORLD.
2.1 For consumers to benefit from the communications
and media revolution, their needs must be held paramount by media
companies. Therefore, regulatory changes intended to contribute
to a dynamic media market must also offer benefits to consumers.
Revoking the restrictive radio ownership points system within
a clearly defined period will help to achieve these twin objectives.
Failure to do so now will also inhibit the radio industry's prospects
of playing a leadership role in European and international broadcasting.
2.2 Ownership
The White Paper recognises (5.11.1) the "risk
that new owners move uniformly towards a middle ground of national
taste" and proposes that OFCOM should review the onward sale
of local licences to reduce this risk. Implicit in this section
is an understanding of the inverse relationship that can exist
between plurality of ownership and diversity of output—a
multiplicity of owners in one locality will tend to converge on
the mainstream audience. Conversely, ownership convergence will
cause an owner to allocate his channels to a variety of formats,
minimising overlap between services and therefore serving the
largest combined audience.
2.3 The evidence supports the contention
that common ownership of channels reduces overlap and widens listener
choice. The BBC's five radio networks are an example. It is given
six sets of spectrum allocations per area (including local radio)
and, by striving for minimum overlap between stations, the BBC
satisfies the maximum number of licence fee payers.
2.4 In the newest form of licensing, digital
radio, control of up to 10 formats in one area rests with one
"owner"—the multiplex operator. The 1996 Broadcasting
Act charges the multiplex operator with providing a combination
of services which will attract the maximum number of listeners.
Positioning the services for minimum overlap satisfies the largest
audience. Attracting one listener with two services is a waste
of production resources and valuable spectrum, when those two
services with proper targeting should serve two distinct listeners—the
strategic imperative coincides with the public interest of maximising
listener choice.
2.5 Sensible relaxation of ownership rules
would result in a greater variety of formats, with "niche"
formats being supported by an owner's mainstream stations as a
way of providing a comprehensive range of choices to listeners.
Therefore the Government's vision of a dynamic and competitive
media market can be combined with the consumer benefits produced
through more liberal radio ownership controls.
2.6 In a converged regulator such as OFCOM,
the degree of ownership control must be aligned from sector to
sector. To allow ITV companies the competition law regime proposed
in the White Paper, whilst continuing to restrict radio ownership,
would place great strain on OFCOM's ability to regulate in a consistent
manner between sectors.
2.7 The new system
Nationally, we believe that radio ownership
should be governed purely by competition law: in their submissions
prior to the White Paper, the radio industry and its regulator,
the Radio Authority, were unanimous in this view. Keeping the
interests of the consumer at the heart of the legislation, audience
share (including the BBC) is the most appropriate measure of influence.
Such a regime would imply a threshold of a 25 per cent share of
listening before an investigation by the Competition Commission.
2.8 Locally, numerical controls should be
placed on the number of stations under single ownership, with
the limit moving on a sliding scale related to the total number
of stations (national, regional and local, including the BBC)
available in the area. In smaller local markets, where there might
be 17 stations in all, the limit would be four stations under
a single owner (an increase of one over the current limit). In
medium sized city markets (with 21 or more stations) this would
rise to five stations in common ownership, and in the bigger cities
(23 or more stations) the ceiling would be six stations under
one owner. This is in line with the mechanism proposed by the
Radio Authority: we have extended it (see table below) to take
account of the increased station numbers which will be brought
about by digital radio.
| Stations in Market |
Ownership Threshold |
| 17 or more | 4
|
| 21 or more | 5
|
| 23 or more | 6
|
| 25 or more | 7
|
| 27 or more | 8
|
| 29 or more | 9
|
| 31 or more | 10
|
| 33 or more | 11
|
| 35 or more | 12
|
2.9 Cross-media Ownership
GWR Group is a pure radio company, specialising in radio
broadcasting and directly related activities such as web sites
and the Classic FM Magazine. We believe that cross-media ownership
issues should be decided by competition law, interpreted by the
competition division of OFCOM. In each case OFCOM will be considering
the effect on readers, viewers and listeners of the concentration
of ownership in an area: in this the "Share of Voice"
is the most appropriate measure (share of viewing, share of listening,
share of readership, etc.) as it includes the effect of the BBC.
Each form of media consumption should be treated as equal—a
reader is equivalent to a listener and equal to a viewer—to
reflect the impact of the media on consumers.
2.10 Licence renewal
GWR welcomes the prospect (5.11.1) of OFCOM negotiating with
current local providers for "renewal of a licence if it is
justified by their level of performance". The problem remains,
however, of how to effect the renewal of national analogue licences,
especially in the light of the removal of format controls (5.11.2).
This could result in Classic FM—which provides a major consumer
benefit to its 6 million listeners—being replaced by a non-classical
service which bid slightly more for the licence under the current
"cash bid" system. This would disenfranchise a large
number of classical music listeners: to avoid this the analogue
national radio licences must be extended by OFCOM to run parallel
with the digital national radio licences. Whilst it may have been
appropriate to auction licences initially as a means of selecting
those willing to take the risk in establishing a service, the
service has now provided itself to be successful and embedded
in the cultural heritage of the UK. It would not serve the public
interest to allow the licence and format to be removed simply
by competitive cash bid.
2.11 Licence duration
GWR supports the proposal (5.11.3) to "extend analogue
licence periods to equate to those for digital licences".
This will encourage further investment in digital radio, which
in its early stages is being funded by cross-subsidy from income
from analogue licences. The harmonisation of licence periods will
contribute to the creation of the dynamic market which government
wants.
3. THE GOVERNMENT'S
VISION: ENSURING
UNIVERSAL ACCESS
TO A
CHOICE OF
DIVERSE SERVICES
OF THE
HIGHEST QUALITY.
3.1 Spectrum availability
Commercial radio offers, at no cost to the public, a diverse
range of high quality services. For analogue transmissions, coverage
is practically universal but for digital radio a clear policy
of government support for spectrum availability is required. On
the current frequency allocations, many areas—particularly
along the south coast—will have to wait a number of years
before digital radio is available to them, depriving them of the
range of choice and quality of output of digital radio. The White
Paper commits (2.7.1) to the "timely availability of spectrum
to meet growing demands" and this principle must be adhered
to in digital radio spectrum allocations. We urge the Government
to begin to release L-Band spectrum, currently earmarked for digital
radio from 2007, as early as 2003 to allow all local analogue
radio to upgrade to digital and to allow the development of broadcast
services which will complement mobile telephony and thereby allow
their spectrum to be used more efficiently. We believe that use
of L-Band is entirely possible and a joint study should be undertaken
immediately to re-assess the timing for this spectrum.
3.2 Digital radio and universal Internet access
Digital radio can assist in the objective of achieving universal
Internet access by 2005. The new generation of digital radio devices
such as the Psion Wavefinder turn PCs into radio receivers, with
the data capacity of digital radio (5.11.3) producing text, graphics
and pictures on the PC screen. Using the data capabilities of
digital radio in this way introduces users to the benefits of
the Internet with no connection costs. Radio is seen as the most
friendly medium, and through new types of receiving devices listeners
who do not wish to have a computer in their home can sample the
Internet "experience" through an established relationship
of trust with their preferred radio station. Additional spectrum,
as outlined in 3.1, would enable universal access to be achieved
more rapidly.
3.3 Digital radio switchover
The White Paper asserts (5.11.3) that "switchover to
digital listening is . . . not an early prospect". The Christmas
2000 sales figures for digital radio receivers were impressive,
with the number of receivers in use doubling to 25,000 in the
space of two months. Sales continue to increase as new products
come to the market and prices fall. Digital One projections forecast
at least 50,000 receivers in use by the end of 2001, and government
should define at the earliest opportunity the criteria for digital
switchover. The factors affecting the decision will be similar
to those used for digital TV, and would include transmission coverage
and market penetration of receivers.
The timescale is longer than that for TV, but a switchover
plan would provide a necessary and valuable target for the industry,
and encourage manufacturers and retailers to step up their plans
for the digital radio market. In Germany, where a switchover plan
has been announced, manufacturers and retailers have reacted positively,
bringing forward production and marketing plans.
3.4 The value of spectrum
The White Paper (2.7.3) proposes that "spectrum used
by broadcasters should be valued". GWR welcomes the promise
of full consultation with the industry and would emphasise the
public service contribution made by stations such as Classic FM
and GWR Group's local radio stations. The Classic FM "Do
More With Music" strand encompasses Music Teacher of the
Year, support for National Orchestra Week and Opera Week, the
Foundation for Youth Music and many other activities centered
on bringing new audiences to classical music and encouraging participation
at all levels. GWR's local stations place themselves at the centre
of their communities, acting as both a conduit and a catalyst
for local initiatives in economic and community development. The
"Reading Buddies" campaign, originated in Peterborough
in 1999, is now rolling out to all GWR stations to encourage businesses
to twin with local schools to increase literacy levels. The "2smart4drugs"
initiative on Essex FM has diverted countless young people from
a life of drug dependency, and the charitable funds raised by
the stations exceed £2 million pounds a year. In periods
of extreme weather—most recently the floods which affected
many parts of the country—GWR's local radio stations become
a vital focus for the community, with airtime given over to details
of road closures and public safety announcements. If spectrum
valuations are to consider the public service content of what
is broadcast, GWR's stations are making a significant contribution
in this respect.
National broadcasters such as Classic FM already make revenue-related
levy payments—in Classic FM's case this is 14 per cent of
revenue, together with an annual index-linked levy of £1
million. In assessing any spectrum valuation, account must also
be taken of these payments to the Treasury by the industry.
3.5 One to one or one too many?
The use of spectrum for broadcasting achieves the Government's
universal access objective in a way which mobile communication
systems (one to one use of that spectrum) could never achieve.
Of the 35 million people who listen to broadcast radio in the
UK between 6am and 9pm each day, limited mobile telephone network
capacity means that less than 1 per cent could achieve a mobile
telephone connection to receive the same information. Also, those
calls would be charged, whereas broadcasts are received free of
charge. So, the value of spectrum must be considered in terms
of the numbers of people who benefit from its use, in addition
to the public service nature of its use.
3.6 Access radio
The White Paper (4.5) seeks views on the concept of "Access
Radio"—new third tier stations which would not be funded
by advertising or sponsorship, using Internet distribution or
very low power FM spectrum. GWR believes that such stations would
serve interest groups whose needs are unmet by BBC and commercial
stations, and would provide access to the airwaves for those who
cannot find a niche in mainstream broadcasting. As one of the
largest employers in the industry GWR Group supports third tier
radio as a source of potential talent already: through our relationship
with the Student Radio Association, a better funded and more diverse
third tier would provide even more people with a stepping stone
to a career.
3.7 Therefore GWR supports the creation of a "third
sector" of stations, but the stations must be truly complementary
to existing provision: they must cover communities (of interest
or of geography) that currently lack coverage, and must gain their
funds from sources that are distinct from those which fund the
other two sectors. Hence "Access" stations must not
accept advertising or sponsorship from any source, nor should
they be funded by a levy on the commercial stations' income, which
would be accepting advertising at one remove. A third sector of
stations should attract a third sector audience and be funded
from a third set of sources—government and European funds,
charitable trusts, the Lottery, and voluntary listener subscription.
Such mechanisms work well in other countries, and would serve
a useful purpose here.
3.8 These funding mechanisms should also be available
for new public service programmes and projects on existing independent
national radio and independent local radio services. Public service
projects are already an integral part of many stations' output—Classic
FM Families, which guided first-time concert goers through performances
all over the country, is an example. Backing from new funding
sources would increase the number of such initiatives and add
to the richness and choice available to listeners.
4. THE GOVERNMENT'S
VISION: ENSURING
THAT CITIZENS
AND CONSUMERS
ARE SAFEGUARDED
4.1 Content regulation
GWR welcomes the move (5.11.1) to relax local radio formats
to "respond to local audience expectations and demand"
whilst maintaining the local character of services, which GWR
has found to be one of the major reasons for the success of its
services. Content regulation in the future must be rigorously
consumer-focused, and must be the minimum required to maintain
the spirit of the programme plans which, in the case of local
commercial services, led to the licence being awarded.
4.2 Consistent regulation of the BBC
Consistency of approach across sectors underpins the White
Paper, and consistent regulation of the BBC must figure in this.
The new DCMS BBC Public Service Approvals process provides a useful
structure for bringing BBC content under consistent, independent
regulation.
4.3 Currently independent radio services run to tight
"formats" imposed by the Radio Authority, whilst BBC
services are approved—on much looser definitions—by
the Secretary of State. OFCOM should provide independent regulation
of both commercial and BBC content, to ensure that services do
not overlap and that the widest range of services is provided.
The recently introduced DCMS guidelines for assessing BBC public
service channel proposals provide an excellent starting point,
in ensuring "that the value to the public of the service
is proportionate to its likely impact on the market. The Secretary
of State will consider . . . the likely impact of the proposed
service on commercial services already in the market and on potential
future services." The channel definitions provided by the
BBC under this system give insufficient detail at present, but
the current system could easily be improved to provide a similar
degree of programming detail as is found in Radio Authority licence
applications. The definition could then be used to consider the
factors outlined in the quote above, to decide whether the new
channel would add to listener or viewer choice.
4.4 Under the current system, the Secretary of State
examines the evidence and makes the decision on whether a new
BBC channel should go ahead. Under OFCOM, it would be appropriate
for that assessment to be carried out by the regulator, with the
decision resting with the OFCOM Board.
4.5 OFCOM sprang from a desire for consistency across
the converged communication industries: it must also provide consistency
between the BBC and commercial sectors.
4.6 Formats
Formats should be revised (5.11.1) as new stations come into
the market—especially in digital radio. Over the course
of a licence changes in public taste and in the choice of stations
available will require format adjustments to maintain and increase
listener choice.
4.7 Co-regulation
GWR commends the suggestion (6.8.1) that co-regulation—self-regulation
by the industry to codes of practice developed in partnership
with the regulator—should be expanded. This mode of working
can be extended to cover "light-touch" content regulation
in many areas, as proposed below.
4.8 Format evolution
All of GWR's stations go through an annual programme planning
process—reviewing market conditions, analysing changes in
listener tastes, and planning new programme content to keep the
output fresh and entertaining for listeners. From this process—already
in place—we would produce an annual statement of programme
plans for OFCOM to consider. This statement of intentions could
then, 12 months later, be used to review achievements and as a
starting point for a new statement of programme plans for the
12 months ahead. Using this existing internal process as a basis
for co-regulation would avoid the fossilisation of formats and
would achieve a smooth evolution of formats.
5. CONCLUSION
The Communications White Paper lays a forward-looking foundation
for flexible converged regulation for the future. For independent
radio to take its place as a medium of the 21st century, the Communications
Bill must set out a new radio ownership regime based on competition
law, to allow the radio industry to grow to provide new programme
services and to invest further in digital radio. Radio is the
oldest of the broadcast media, but the one best able to flourish
alongside new media such as the Internet. But in a global communications
environment which is changing at unprecedented speed, swift action
needs to be taken if consumers' long-term needs are to be met
and protected, and if Britain's radio industry is to be enabled
to provide real choice and quality in the developing digital world.
The Communications Bill has the potential to revolutionise
radio's contribution to the communications revolution—GWR
Group stands ready to lead the industry into that future.
February 2001
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