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


Memorandum submitted by GWR Group plc

  GWR Group has more radio licences and a larger audience than any other UK commercial radio broadcaster. We operate the national stations Classic FM, Core and Planet Rock, 32 local stations in the UK and the and internet services. GWR is the majority shareholder in Digital One, the sole commercial national digital radio multiplex company, and holds 16 digital radio licences. The Group also has interests in stations in Australia, Austria, Bulgaria, Finland, Holland, Hungary and South Africa.


  GWR Group commends the Culture Media and Sport Committee for staging this Inquiry at a crucial time for the development of the UK's Communications Sector. A White Paper produced during a boom time for the industry must now be translated into legislation appropriate to challenging economic conditions, and the pace of legislative change must be maintained for the industry to benefit from the new regulations.

  The key points of GWR's submission are:

    —  Economic conditions have worsened significantly since the White Paper.

    —  The Communications Bill must proceed without delay to ensure the continued health of the industry.

    —  A relaxation of radio ownership rules will lead to more choice for listeners.

    —  Analogue revenues will be required to support digital development for much longer than was thought: analogue licence renewals must recognise this.

    —  The BBC must be brought under the umbrella of OFCOM.

    —  Public Service Broadcasting is a benefit provided by commercial broadcasters as well as the BBC.

    —  The BBC must support and promote digital radio, as required by the Secretary of State.

    —  Government should announce its criteria for digital radio switchover.

    —  Cross media ownership rules must be relaxed, using the "sliding scale" proposed in the Ownership Consultation document.


  It is important that OFCOM is in place before the Communications Act becomes law, but the delay in the legislation establishing OFCOM does not seem to us to endanger this objective. Of more concern is the timetable for the main Communications Bill, which must be implemented without delay if the industry is to weather the current economic conditions. GWR is concerned at the size of the new regulator—the organisation proposed by the Towers Perrin report seems to challenge the Government's objective of slimming down regulation. An OFCOM which is larger than the five organisations it succeeds was not what the Government was hoping for. It is important that the Communications Bill defines regulation which is proportionate to the public benefit gained—at present, the tendency of bureaucracies to replicate themselves and grow unchecked has been given full rein. A mechanism to reduce regulation as competition increases—whilst protecting the legitimate public interest—must be the bedrock of OFCOM, yet it is not mentioned in the regulators' planning process.


A(i): The UK communications & media market

  Since the Committee's last report, economic conditions have deteriorated and the ability of the industry to invest, particularly in digital development, is being seriously constrained. In both radio and television, revenues from successful analogue licences fund the start-up costs and early years losses of fledgling digital services. In radio, analogue licence renewals have been used to encourage digital radio investments—once a commitment has been made to broadcast a channel on digital radio the analogue licence has been rolled over. However given the economic downturn and the slow consumer take up of digital radio, analogue revenues will continue to subsidise digital for longer than was originally thought. It is GWR's view that the roll over of national and local analogue licences should be extended and allowed from the second into the third term in order to ensure both the success of digital and the return of the original investment.

A(ii): Access to high quality diverse services

  The Government's current "Consultation on Media Ownership Rules" refers to the US research which found that relaxing ownership rules provided more diversity in the output available to listeners. Hence there is a tension between the Government's objectives of Plurality of ownership and Diversity of output—a reduction in Plurality leads to an increase in Diversity. One owner will provide a range of services which do not overlap with one another (the BBC's five radio networks are an example) whilst a multiplicity of owners conform to the Hotelling effect and all rush to compete in the same middle ground.

  The introduction of less restrictive radio ownership rules will therefore lead to more choice for listeners. These rules—already agreed between the radio companies' trade association, CRCA, and the Radio Authority—would involve competition law alone as the arbiter of UK-wide radio ownership limits, with local ownership questions resolved by a system of local "points" which would guarantee plurality in any area. These rules must be implemented as quickly as possible to allow the UK industry to reach an economically viable scale whilst safeguarding regional and local identities. In the current economic climate any delay is dangerous. Government should give a clear indication of the ownership system it will adopt in the Communications Bill. This will enable discussions to take place within the industry, preparing for changes against that "shadow" template, with the deals actually being completed once the new legislation is in place. Guidance from Government to the Radio Authority that such arrangements are to be encouraged while new legislation is awaited would ease the regulatory path—a similar process of development happened in ITV during the passage of the last Broadcasting Act.

A(iii): Safeguarding Citizens and Consumers

  GWR welcomed the White Paper proposal 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 high audiences of its local services. Consumer input is vital to the success of all radio stations, and GWR is pioneering methods of providing consumers with access to its stations to comment on output and suggest improvements.

  The Classic FM Consumer Panel, chaired by former Secretary of State Chris Smith, attracted more than 1,000 applicants when places were advertised on Classic FM: the applications are currently being sifted and the Panel will meet for the first time in early Spring 2002. The Classic FM Consumer Panel will reflect the views of consumers in the annual programme planning process for Classic FM. With members drawn from a variety of backgrounds, it will provide a vital channel of communication with the audience and a qualitative complement to the quantitative data gleaned from the station's extensive research. It will produce a report annually which will go to the GWR main board: a public summary of the Panel's proceedings will be prepared, released to the press and placed on the web site. The Panel will invite listeners' views by letter or e-mail.

  Initiatives such as the Classic FM Consumer Panel prove GWR's credentials for self-regulation and offer a template for the future. External content regulation in the future must be rigorously consumer-focussed, and must be the minimum required to maintain the spirit of the programme plans which led to the licence being awarded.

B: Defining and providing public service broadcasting

  Public service broadcasting is sometimes understood to mean the BBC: however it is increasingly the case that the BBC does not provide all public service broadcasting, nor is everything that the BBC provides public service broadcasting. Stations like Classic FM broadcast a high proportion of public service output, from support for National Orchestra Week and National Opera Week to initiatives such as the Music Teacher of the Year and the Classic FM Yamaha Music School. The commercial imperative to attract new audience has seen Classic FM reach more than three times the audience of BBC Radio 3, whilst listening by children has leapt by 33 per cent from 270,000 in 1999 to 359,000 in 2001.

  At the local level, GWR's stations are at the heart of their communities, acting on issues as wide ranging as local economic regeneration, education, drugs and homelessness. Severe weather conditions bring out the most immediate examples of this public service broadcasting—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.

  Hence, in defining public service broadcasting the debate should be wider than simply classifying sections of the BBC's output. As the commercial market is increasingly supplying public service output, so the BBC is itself becoming more commercial. If public funding is to remain the bedrock of public service broadcasting, it should be available to the commercial sector as well as to the BBC.

  The BBC's public service responsibilities are too important to be left solely to the Corporation's Governors—only by bringing the BBC under the wing of OFCOM can a cohesive view of the entire media landscape be achieved.

C: The development and promotion of digital radio

  Commercial radio has led the development and promotion of digital radio since Digital One—in which GWR has a 63 per cent share—went on air in November 1999. Since then, despite considerable effort and expenditure from Digital One and the local commercial multiplex owners, development has been slow due to the high price of receivers—although these are now falling below £100 at last—and the reluctance of the BBC to promote the medium.

  Commercial radio looks forward to the BBC playing a full part in promoting digital radio now that it has received permission for its five new services. When the Minister approved the new services there were clear and helpful conditions requiring the BBC to promote the technology and equipment as well as its services and ensure promotion was for digital radio services and equipment and not only for digital television. Indeed, the Minister's conditions stated "relatively few digital radio sets have so far been sold and it is important that the promotion of digital radio services and equipment are included in this campaign". The Committee should ensure in its questioning of the BBC during the Inquiry that the Corporation makes a commitment to meeting these requirements, with reference to the BBC's plans for marketing its new digital channels ( GWR can see no evidence in these plans that the BBC is prepared to meet the explicit conditions set down by the Secretary of State regarding promotion of digital radio and radio receiving equipment.

D: Progress towards analogue TV switch-off

  Government should define at the earliest opportunity the criteria for digital radio switchover, in addition to its plans for analogue TV switch-off. The factors affecting the decision will be similar to those already announced for digital TV, and would include transmission coverage and market penetration of receivers. 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 was been announced by Gerhard Schroder in August 2001, manufacturers and retailers have reacted positively, bringing forward production and marketing plans to prepare for analogue switch off in 2015.

E: Cross Media Ownership

  This remains a largely unresolved issue in the various consultation processes. Of the range of solutions presented in the current ownership consultation, GWR Group prefers the "sliding scale" proposal in 6.5.11 of the document, in which a company would be limited to, say, 40 per cent of a single medium, 30 per cent of each of two markets, 20 per cent of three markets or 15 per cent of four. "Share of Voice" is the most appropriate measure (share of viewing, share of listening, share of readership, etc.) because it includes the effect of the BBC, which makes a significant contribution to diversity and plurality in every area. Each form of media consumption would 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.

  Cross media ownership already works to the benefit of listeners in a number of areas, where local newspapers and local radio stations work together to provide a better service whilst maintaining separate editorial and advertising teams. Ranging from the joint Snowball Charity Appeal in Coventry, through the "Time to Read" literacy initiative in Peterborough, to the campaign to raise funds for a new Children's Hospital for Bristol, co-operation between print and broadcast media has many positive outcomes without threatening the range of news sources available to listeners and readers.

  GWR encourages the relaxation of cross media ownership rules, in parallel with the relaxation of the radio-specific ownership rules.


  The time is ripe for new media regulation, but the timetable must not be allowed to slip—the worsening economic situation has made the current restrictive regulatory regime even more of a handicap for the UK's media industries. The radio industry is ready to move forward with more choice for listeners and a re-energised digital sector, but Government must give the sector freedom from heavy-handed regulation and the opportunity to reach its true economic potential.

  GWR Group has offered to give oral evidence to the Committee and would be happy to expand on these and other areas if asked to attend the Inquiry.

January 2002

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