APPENDIX 1: ADDITIONAL INFORMATION FROM
THE DEPARTMENT FOR CULTURE, MEDIA AND SPORT |
Thank you very much for your email dated 20 May 2015,
regarding the Legislative Reform (Further Renewal of Radio Licences)
Order 2015. Please find below a response to the points of clarification
Firstly, you point to the conditions of the Act in
'As regards the conditions in section 3(2) of
the 2006 Act, the ED states:
"4. The provision does not remove any
The provision does not remove any necessary protections,
for either the radio industry or public.
"5. The provision does not prevent any
person from continuing to exercise any right or freedom which
that person might reasonably expect to continue to exercise:
The provision does not prevent any person from
continuing to exercise any right or freedom which that person
might reasonably expect to continue to exercise."
I fear that these simple assertions do not go
far enough. We would expect the Department to offer some additional
comments to show why these assertions are made.'
Regarding the point that the provision does not remove
any necessary protections, it is important to recognise that Ofcom
has extensive obligations set out in the Communications Act 2003
and other legislation to protect consumers. For example, Ofcom
has a statutory obligation to monitor competition and to ensure
that the market is not dominated by a small number of players
to the detriment of consumers and media plurality. This measure
will not affect or change Ofcom's role in any way. In addition,
there are protections for licence holders which are not affected
by this Order. Ofcom may only deprive a person of their licence
in particular circumstances, or include provisions about simulcasting
on digital which are in line with the Broadcasting Act 1990.
These are also unaffected by the Order.
On the specific issue around preventing the exercise
of rights or freedoms, we must emphasise that no person or organisation
has a right to hold a radio licence, nor to own or operate a radio
station. This legislation therefore would in no way restrict an
individual's right or freedom on this issue as there are no reasonable
rights or freedoms to restrict. Nor are the rights or freedoms
of existing licence holders restricted; the requirement to simulcast
was introduced as part of the previous extension. There are no
new terms to be included in the analogue licences. As indicated
above, as regards consumers, their listening experience will be
unaffected, as Ofcom remains required to ensure that services
are delivered and that news plurality is maintained.
Secondly, you also noted:
'There seems to be a wide gap between DCMS and
Value Partners (VP) on the issue of maintaining stability in the
commercial radio sector, or rather the threat to such stability
that Option 1 would pose. I assume that DCMS commissioned a report
from VP because the Department regarded the consultancy as expert
in the field. In that case, it would be helpful for the Department
to set out more fully what evidence it has for disagreeing with
VP's recommendation - since it is disagreement on this issue which
underlies the statement in the ED that "we consider that
a relicensing process could be detrimental to the listener experience:
we note that responses to our consultation have highlighted a
real risk that the cost and business impact to licensees of reapplying
for their licences would undermine investment in content."'
Our proposed Order affects those licences which were
renewed under the terms of the Digital Economy Act 2010; specifically
stations that have received or are able to receive a further licence
renewal of 7 years, on the condition that they provide an equivalent
service on DAB.
There are in total around 280 commercial radio licences,
of which over 120 would not be entitled to an automatic renewal
under this Order, as they do not provide an equivalent DAB service.
These licences would therefore be re-advertised - i.e. licensees
would have to re-compete, against other potential entrants - in
an open competition, in line with the terms of the Broadcasting
Act 1990 - they would not be granted a further renewal. As such,
we do not consider that new entrants are excluded from the analogue
commercial radio market. By way of illustration, the Greater London
AM licence was recently re-advertised and Ofcom received six bids
for this frequency (N.B. the licence was eventually re-awarded
to the incumbent Sunrise Radio). The local commercial FM licence
for Portsmouth was also recently put out to competition and attracted
two bids; again, the licence was re-awarded to the incumbent.
These two recent examples demonstrate that new entrants will continue
to have the opportunity to access the analogue market. The Portsmouth
example however, with only two bids, could suggest that interest
in acquiring analogue radio licences is declining, given radio's
future as a digital medium.
Furthermore, we are firmly of the opinion that DAB
provides a rich platform for potential new entrants. DAB is a
more efficient use of spectrum and provides far greater capacity
for new stations than analogue. Ofcom recently let the second
national digital radio multiplex licence which was awarded, following
a competition, to the Sound Digital consortium. When launched
in 2016, the new service will provide 15 new national radio stations
initially, with room for further new entrants in the future.
The Value Partners' report was commissioned to consider
the competition issues arising from the proposed changes and not
to consider the wider impacts on consumers. We do not disagree
with their basic conclusion that there would be interest from
both other existing licensees and new entrants in the affected
licences, but Value Partners were unable to provide quantitative
evidence of the scale of the likely demand for each licence that
is due to expire. Although it may be possible over time to collect
more data here, it is very difficult to demonstrate conclusively
that there would be significant challenge to incumbents given
the options available for new stations either on digital platforms
or on line. Indeed, one of the key challenges is the separation
of possible expressions of interest (which Value Partners' report
alluded to) from the real likelihood of that interest arising
in 3-6 years' time.
Therefore, whilst we acknowledge that there is a
theoretical benefit emerging from open competition highlighted
by Value Partners (i.e. of a potentially greater range of stations
and content), we do not consider that the value of this hypothetical
benefit to listeners and industry of a small number of new services
outweighs the cost and significant impact to the wider radio industry
of a wholesale re-advertisement process. It is worth noting that
over 80% of listeners are satisfied with their local radio station
(Attitudes to Local Radio [a summary of the findings of a quantitative
survey of local radio listeners], Ofcom, July 2013). This also
suggests there is little consumer benefit to be gained from a
widespread re-advertising process. In any event, throughout the
history of the current licensing regime, only around 10 % of re-advertised
licences have been awarded to anyone but the incumbent.
We also consider that the report gives insufficient
weight to the quantifiable costs to industry of re-licensing,
the cost to Ofcom, plus the risk that content quality is reduced.
Further detail of the costs to industry of a relicensing process
can be found in our Impact Assessment, as well as the consultation
responses. This Impact Assessment has been validated by the independent
Regulatory Policy Committee, and I have attached their findings
to the same email as this letter.
8 June 2015
8 We are not including the validation by the Regulatory
Policy Committee in this Report. Back