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Global-GMG Merger Inquiry: Appendices and Glossary

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Global-GMG Merger Inquiry: Appendices and Glossary APPENDIX A Terms of reference and conduct of the inquiry 1. On 11 October 2012, the OFT sent the following reference to the CC: 1. In exercise of its duty under section 22(1) of the Enterprise Act (‘the Act’) to make a reference to the Competition Commission (‘the CC’) in relation to a completed merger, the Office of Fair Trading (‘the OFT’) believes that it is or may be the case that: (a) a relevant merger situation has been created in that: (i) enterprises carried on by or under the control of Global Radio Holdings Limited have ceased to be distinct from enterprises previously carried on by or under the control of GMG Radio Holdings Limited; and (ii) as a result, the conditions specified in section 23(4) of the Act will prevail, or will prevail to a greater extent, with respect to the supply of commercial radio based on listening hours in the UK and the supply of radio advertising services in London, the West Midlands, the East Midlands, the North West, Yorkshire, the North East, Central Scotland, South Wales and North Wales; and (b) the creation of that situation has resulted or may be expected to result in a substantial lessening of competition within any market or markets in the UK for goods or services, including the supply of non-contracted radio advertising services in North Wales, the East Midlands, South Yorkshire and Cardiff. 2. Therefore, in exercise of its duty under section 22(1) of the Act, the OFT hereby refers to the CC, for investigation and report within a period ending on 27 March 2013, on the following questions in accordance with section 35(1) of the Act: (a) whether a relevant merger situation has been created; and (b) if so, whether the creation of that situation has resulted or may be expected to result in a substantial lessening of competition within any market or markets in the UK for goods and services. [SIGNED] Clive Maxwell Office of Fair Trading 11 October 2012 Conduct of the inquiry 2. On 11 October 2012, we posted on our website an invitation to comment on the merger and on 19 October 2012, we published biographies of the members of the Group conducting the inquiry together with a disclosure of interest statement which we subsequently updated on two occasions: 12 December 2012 and 4 January 2013. 3. We received 13 responses to our invitation to comment which were posted on our website. A1 4. On 1 November 2012, we posted an administrative timetable for our inquiry and published an update on 22 January 2013. 5. We invited a wide range of interested parties, in particular competitors and customers of Global and RSL, to comment and to fill out a questionnaire on the merger. We gathered oral evidence through hearings with a number of third parties. Summaries of these hearings are on our website. Evidence was also obtained through further written requests. 6. On 21 November 2012, we posted an issues statement on our website setting out areas of potential concern on which the inquiry would focus. We received three submissions in response. Non-confidential versions of these responses are also published on our website. 7. All members of the Inquiry Group, accompanied by staff, visited RSL’s facilities in Wales and Global’s facilities in London on 7 and 19 November 2012 respectively. 8. We received a written submission from Global and posted a non-confidential version on our website on 29 and 30 November 2012. 9. During the course of our inquiry, we sent Global a number of working papers for comment and considered a number of additional submissions from Global and other parties. 10. A non-confidential version of the provisional findings and notice of possible remedies was placed on the CC website on 15 February. We held response hearings with several third parties and the main parties between 4 and 21 March 2013. We also published 121 responses to the notice of possible remedies and provisional findings on our website. 11. We sent a remedies working paper to the main parties on 11 April 2013 for comment. 12. On 21 May 2013, we published a non-confidential version of the final report on our website. Interim measures 13. On 18 October 2012 we accepted interim undertakings given by This is Global Limited and Global Radio Holdings Limited. These undertakings included a commitment to continue to retain the services of the Monitoring Trustee appointed by Global Radio Holdings Limited on 29 June 2012, in a manner consistent with the directions in Appendix B of the interim undertakings. The interim undertakings were published on our website on 25 October 2012. A2 APPENDIX B Industry background Introduction 1. This appendix sets out details of the commercial radio industry in the UK and its regulatory framework. Analogue and digital radio broadcasting platforms Analogue 2. Analogue commercial and BBC radio stations broadcast in the UK on both AM (LW and MW) and VHF (FM). MW carries the majority of AM stations on frequencies between 558 and 1611 MHz with VHF/FM stations broadcasting on frequencies between 87.5 and 108 MHz. Stations’ services are transmitted via a network of transmission sites across the UK with each station using a subset of this network. These transmission sites are generally owned by a third party (the majority owned and operated by Arqiva) with whom the station must negotiate and pay for broadcast transmission services and network access. The quality of radio reception progres- sively degrades the further it is from the relevant transmitter as the signal strength decreases and it encounters interference from other radio signals.1 DAB 3. DAB is a digital transmission system whereby one or more analogue audio streams are converted to a digital format. The signals are then combined into a single digital stream. This process is called multiplexing. The multiplexed signal is then conveyed to the transmitter sites via fixed line, microwave or satellite where the digital stream is converted into a digitally encoded frequency. The radio frequencies are allocated in 1.536 MHz blocks. The frequency band used for DAB is 217.5 to 230 MHz.To listen to a desired radio station, the listener requires a DAB radio to receive and decode the multiplexed signal and split out the individual stations. A simplified supply chain for DAB radio is shown below. 1 In darkness hours (approximately the period starting 1 hour before dusk and ending half an hour before dawn), ‘sky-wave’ interference from other transmitters will mean that the coverage area will decrease. B1 FIGURE 1 DAB radio supply chain Radio stations (content providers) The process by which programme content is formed into a Radio station output continuous stream of content that can be read by the DAB multiplexing. The technical operation of providing multiplexing services Multiplexing is outsourced by the multiplex operators to third party providers of such services. The distribution system uses a network of terrestrial circuits, microwave links and/or satellite links to inter- Distribution connect each multiplexing system with its respective transmitter network (includes network used for analogue). Each DAB multiplex has between one and several Transmission hundred transmitters of varying powers to provide the required coverage within each designated area. Listeners Source: CC. 4. DAB allows a number of different radio stations (or other radio signals) to be delivered over the same bandwidth. This increases the number of stations potentially available to the listener and decreases the bandwidth resource requirement in any given area. Also, a DAB radio is capable of receiving and decoding signals from more than one multiplex (ie on a number of frequencies), further increasing the number of stations that a listener can receive.2 5. The number of radio channels on a given multiplex depends on the type of channel transmitted. This is because each frequency ‘block’ has a set available capacity and a radio station’s capacity requirements are different according to its output (eg a music station typically requires greater capacity than a talk station). Multiplexes oper- ated in the UK are each able, at present, to accommodate around 10 to 12 radio stations. 6. There are relatively few digital-only radio stations/services in the UK, with most ser- vices broadcast digitally being a ‘simulcast’ of the analogue service. However, not all analogue services are simulcast on the DAB platform. Digital switchover 7. While the transition to digital television services completed in 2012, the switchover to digital for radio is progressing at a slower rate. Nevertheless, the Government has 2 Depending on their location, a listener may be able to receive signals from the BBC multiplex, a national commercial multi- plex, a regional multiplex and one or more local multiplexes (depending on overlaps between frequencies at this level). B2 said that it is committed to a digital future for radio,3 and it believes that a switchover process is the most likely way to deliver a transition to digital radio in a coordinated way.4 8. The Government will make an in-principle decision by the end of 2013 on digital radio switchover. In the event of a positive decision, a date for switchover would be set once listening and coverage criteria are met. The criteria are: (a) 50 per cent of all radio listening being via digital platforms; and (b) national DAB coverage being comparable to FM, and local DAB reaching 90 per cent of the population and all major roads. 9. Once these criteria are met, a date for switchover will be set but any such date will be at least two years after such an announcement.
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