APPENDIX 31
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 classicfm.com and koko.com 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.
SUMMARY
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.
IMPLICATIONS OF
THE DELAY
TO THE
EXPECTED LEGISLATION
ESTABLISHING OFCOM
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.
DEVELOPMENTS IN
POLICY ON:
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 classicfm.com 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 (http://www.bbc.co.uk/info/news/news372.shtml).
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.
CONCLUSION
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
| 
