Select Committee on Culture, Media and Sport Appendices to the Minutes of Evidence


Memorandum submitted by the Commercial Radio Companies Association


  The Commercial Radio Companies Association (CRCA) is the trade body for UK commercial radio. It represents commercial radio to Government, the Radio Authority, copyright societies and other organisations concerned with radio. It manages the Radio Advertising Clearance Centre which clears national and special category advertisements prior to broadcast. CRCA also jointly owns Radio Joint Audience Research Ltd (RAJAR) with the BBC and has been instrumental in the formation of the new Digital Radio Development Bureau, a company owned by UK digital radio multiplex owners.

  CRCA supports the submissions made by those with commercial radio interests who were invited to give oral evidence. These are BIPA (of which CRCA is a founding member), CRCA members Emap Radio and GWR, and Virgin Radio.


  This memorandum seeks to assist the Committee's deliberations regarding the development and regulation of radio: the regulation of public service broadcasting by OFCOM; and media and cross-media ownership.

  Our recommendations flow from CRCA members' desire to broadcast high quality, distinctive information and entertainment.

  CRCA supports the views of BIPA regarding the future regulation of audio-visual content on the Internet and the remarks made by Virgin, GWR and Emap regarding the need for the Government to enable OFCOM to do more to encourage consumer take-up of digital radio. This note concentrates on consistency of content regulation; the benefits of liberalising commercial radio and cross-media ownership restrictions; and proposals in the White Paper regarding "Access Radio".


  We recommend that OFCOM should regulate both commercial and BBC radio content, to ensure that services do not overlap unduly and that the best and widest range of services is provided in the public interest.

  The White Paper says that the UK has benefited from "having a mixture of publicly owned, publicly regulated and purely commercial broadcasters" (5.3.12). Undoubtedly, the competition between these sectors improves performance. CRCA submits, however, that the main and most beneficial difference between the UK public and private sectors is the way in which the two are funded. BBC Radio can and should provide programmes of the highest quality precisely because it is generously publicly funded and unencumbered by commercial considerations. It should have no need to maximise ratings success. Its programme producers and managers should not be influenced by commercial considerations when making their plans. Commercial radio broadcasters, on the other hand, must consider, when planning their output, the environment in which advertisers wish their messages to appear and must target the demographic groups that advertisers wish to use radio for. This difference between production influences should be maintained. Certainly, our European colleagues regard the UK system as the most desirable and regret that public and private funding differences have been irrevocably eroded and blurred in almost every other major European country.

  No system is entirely perfect, however. Over the years, UK broadcasting legislation has created, on the one side, a highly regulated, vertically segregated, commercial media sector and, on the other, the BBC, a large, self-regulated, publicly-funded, cross-media corporation. The disadvantage of this structure is that, unless it is carefully controlled, the BBC can weaken or stifle commercially-funded competition. Its content resources can become so vast and its services so numerous that private companies are unable to compete with it. This situation will be made worse if the BBC is encouraged both by Government and senior ex-commercial management to supplement its public revenues with commercial ones. This has the undesirable effect of creating an environment in the UK where some communications services unnecessarily become mainly the preserve of the publicly funded corporation and the BBC's UK competitors are enfeebled. It is not in the interests of the UK economy, citizens or consumers to allow the BBC to become an unrestrained elephant in the marketplace. CRCA submits that this danger can be overcome by independent regulation of the BBC within OFCOM.

  The White Paper seeks to provide "a more level playing field that is fair between different broadcasters, taking account of their differing missions and funding sources" (5.4.1). It intends to achieve this by the creation of OFCOM and yet (5.6.7) will maintain "the link between the legal responsibility and authority of the BBC Governors for delivering the BBC's remit... (including) interpreting the Charter and setting the strategy to deliver the BBC's remit and responsibilities". In paragraphs 5.8.6 and 5.8.7, it is made clear that the "backstop powers of the BBC will remain with the Secretary of State for Culture, Media and Sport, and with Parliament, through Charter Review. The Secretary of State will also retain the power to approve new BBC licence fee-funded services and material changes to existing services." OFCOM "will, however, give formal advice to the Secretary of State on the, often important, market impact of both proposals for new BBC public services and for material changes to existing ones, before he reaches a final decision".

  At time of writing, the CRCA is preparing commercial radio's response to proposals made to the DCMS Secretary of State by the BBC for the provision of five new publicly funded digital radio services. Thus, the UK publicly funded broadcaster must already in part justify its proposed activities to an external regulator. However, we think that the time is now right to arrange that, in future, this external regulation should be at arm's length from Government. We submit that as media and communications converge, only a regulator with responsibility for, and an overview of, all broadcasting and telecommunications services and systems stands the best chance of ensuring good value, choice and quality for consumers and citizens.

  We note that there is no intention to inspect, examine or restrict any plans the BBC may have for launching commercially-funded services either alone or as a joint venture with others. The BBC is thus being encouraged to seek commercial funding despite recent generous additions to the licence fee. We do not see the public benefit of this sort of BBC commercial activity and neither can we see how clear separation between public and commercial activities can be achieved when both use the BBC brand, BBC expertise and/or promotional exposure on BBC publicly funded services.


  CRCA does not seek further relaxation in the requirements of "local radio programme formats" (White Paper 5.11.1). We regard their maintenance as useful positive content regulation.

  In our submission in advance of the White Paper we asked that any new regulator should only need to re-advertise radio licences where it felt that the incumbent licensee was performing unsatisfactorily in some way. This remains our view and we are pleased that OFCOM may be empowered to negotiate with a current licensee "for renewal of a licence if it is justified by their level of performance".

Safeguarding the interests of radio listeners

  The intimate nature of radio and the multiplicity of radio services targeted at very different audiences with different expectations will be important factors which OFCOM will need to bear in mind when considering radio.

The Regulation of Advertising

  We note that the Government considers the maintenance of strong regulatory back-up powers essential (6.8.4) in the event that any industry-based approach might fail. We accept this and look forward to discussing with OFCOM how a co-regulated advertising regulation mechanism might work along the lines covered in paragraph 6.8.3.

The New Organisational Framework

  In our submission in advance of the White Paper we proposed that regulation of radio should be administered by a unique department or organisation within a single overarching regulator, and should not be coupled to regulation of television broadcasting. This remains our view.


  CRCA believes change in ownership regulation is vital to secure the commercial radio industry's future. We seek ownership deregulation so that commercial radio can grow and provide listeners with greater content diversity.

  Commercial radio services face competition for listeners both from each other and the BBC. They face competition for revenue from each other, television, local and national press, outdoor (posters), cinema and magazines. Radio's share of display advertising is currently 5.9 per cent. Thus it is a small player and needs to grow if it is to hold its own against both traditional and new media.

  CRCA proposes that nationwide ownership controls should be left to competition regulation. We suggest the competition regulators can be left to decide the number of national services that a single owner may control.

  CRCA proposes that local ownership rules should be governed by a numerical formula. We favour a numerical formula rather than local competition regulation for the following reasons:

    —  Regulation by a numerical formula is simple, transparent and fairly "hands free". Simplicity is beneficial to business investment and planning.

    —  Regulation by the competition authorities occasionally relies on defining "no well-defined market" (Yarrow, July 2000) and is therefore sometimes cumbersome and subjective to delays.

  A thorough examination of our argument for relaxing local ownership rules is given in Annex A[2] to this memorandum.

A Numerical Ownership Formula for Local Radio

  The White Paper says regulation must "be capable of being adapted quickly to changing market conditions. Rather than having detailed rules set out in primary legislation, the regulator will have the responsibility to develop and maintain the necessary rules within the statutory framework" (8.10.1). In these circumstances, a numerical formula can be altered reasonably quickly in the light of circumstances. The CRCA board is still discussing what the minimum number of local radio station owners in a market should be. We will inform the Committee of the outcome of those deliberations by means of an amended version of this memorandum in due course.

How a Local Radio Market Might be Defined

  The points system that currently governs commercial radio ownership of stations is based on potential not actual audience. Potential audience is calculated by measured coverage area (MCA).

  In discussing "Radio Ownership" (4.7.2), the White Paper points to the greater accuracy of audience share statistics these days. This refers to the research conducted on behalf of both BBC and commercial radio by the jointly owned company Rajar Ltd. It is worth noting that Rajar researches a station's total survey area (TSA) and reflects a station's share of listening in that area. Rajar data is therefore, to a degree, a measurement of actual influence while the raw population figure of an MCA is not. Potential influence is not the same as actual influence. This difference lies at the heart of the unfairness inherent in the current "points system" where, for example, Jazz FM is given the same points value as the more "popular" Capital FM.

  However, even time spent listening to a radio service and the size of audience spending that time do not in themselves necessarily reflect genuine or important "influence". Is the speech-based LBC, for example, more or less influential than the various styles of popular music services provided by Capital, Virgin, Magic or Heart in London? On balance, therefore, we recommend that a numerical formula needs to be founded on a reliable and non-disputable basis and believe that the Radio Authority's MCAs provide this.

  Furthermore, we recommend that the assessment of the number of stations in a local market should be based on the largest station (in coverage terms) involved. The market covered should include those stations that share more than 50 per cent of the potential audience.


  CRCA does not seek single medium ownership rule protection. Should the Government be concerned about undue influence that might result from cross-media ownership consolidation, then we recommend (with slight amendment) the sliding scale system recommended by the IPPR in


  The White Paper "seeks views on extending the diversity of radio services through Access Radio" (4.5).

  We wish to draw the Committee's attention to the valuable contribution provided by small-scale commercial radio services to the communities they serve. We note that the value of these services was firmly endorsed in the submission made by the Radio Authority prior to the White Paper that raised the prospect of "Access Radio".

  We assume that the rationale for an additional tier of local radio is to improve on the contributions and provisions made by small-scale, local commercial radio stations. We suggest that, if they have content shortcomings, then these must be, at least in part, caused by the stations' need to behave commercially—to appeal to a wide audience and embrace as much of the community as possible in order to attract revenue. If this is the case, then it follows that "Access Radio" services are not expected to be commercially viable as their audiences would be too small to attract sufficient revenue. If a service is not commercially viable then it requires alternative methods of funding and a service that enjoys alternative funding should not be allowed to undermine the commercial viability of small-scale commercial services. To allow "Access Radio" to be funded by advertising or sponsorship revenue would lead "Access Radio" services to behave in a way that would severely undermine the distinction between themselves and small-scale commercial services. At the same time, it would imperil existing small-scale broadcasters' survival by drawing revenue from an already well-stretched market. It cannot be Government's intention that, in an attempt to provide additional radio services that it believes the market does not provide, the consequence is to threaten the survival of small-scale commercial radio services. We propose that "Access Radio" should not be funded by commercial revenues of any sort.

February 2001

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