The Future of Radio The future of FM and AM services and the alignment of analogue and digital regulation Consultation Publication date: 17 April 2007 Closing Date for Responses: 29 June 2007 The Future of Radio Contents Section Page Foreword 3 1 Executive summary 6 2 The policy goals in radio 20 3 A changing industry 27 4 Commercial radio content and ownership regulation 43 5 The flexibility to free-up spectrum in the long-term 86 6 Community radio 119 Annex Page 1 Responding to this consultation 149 2 Ofcom’s consultation principles 151 3 Consultation response cover sheet 152 4 Consultation proposals 154 5 Impact assessment 160 6 Analogue commercial radio stations by size 184 7 Current radio ownership rules 191 8 Illustration of new commercial radio ownership proposals 200 9 Community Radio Order 2004 201 10 Key sections of the Broadcasting Act 1990 205 11 Frequency availability for community radio 210 12 The Community Media Charter 212 2 The Future of Radio Foreword Radio, the oldest broadcast medium, is in transition. The overall amount of listening remains as high as ever and listeners are benefiting from a rapid increase in the number and range of stations they can choose from, including new community stations, additional local and national services and stations from around the world via the internet. All of this choice is available across a wide range of platforms from traditional AM and FM radio, to digital radio via DAB, digital television and the internet. There will be other new technologies to come. For established radio broadcasters this explosion of choice brings new challenges through increased competition for listeners and revenues. Broadcasters also face increased costs from having to invest in new platforms and must deal with increased competition from an ever wider range of media. All of these changes create significant pressures on the traditional pattern of local radio, which has emerged as a result of deliberate public policy by successive governments and regulators. This situation presents challenges to broadcasters and to regulators. There is evidence that the changes in listening habits, together with emerging new technologies have had a more rapid and profound impact on the radio industry than was foreseen just a few years ago when the existing legislation was put in place. As a result, the familiar ways of regulating radio, designed for a largely local analogue radio system, which have served listeners and the industry well, may be ineffective and disproportionately costly in the digital era. The goal of this document is to outline an approach to regulation which is capable of delivering radio’s agreed public purposes as a healthy radio industry makes its transition to a digital world. Radio still has a vital role in fulfilling a range of public purposes – a role shared between the BBC, commercial radio and the new community radio sector – and regulation should be focused squarely on ensuring that those public purposes are met in the interests of listeners as citizens and as consumers. Ofcom has clear statutory duties and regulatory principles. We have previously set out how we will combine these with our analysis of the rationale for intervention and potential public purposes to produce a set of strategic aims for regulation in radio: • to enhance choice, diversity and innovation for consumers at the UK, national, regional, local and community levels; • to secure citizens’ interests through the provision of radio designed to meet public purposes; and • to do this with as little intervention in the market as possible, consistent with meeting our objectives. In order to facilitate increased choice and diversity at a UK-wide level, while ensuring that local radio prospers in a digital age, we have already advertised an additional national DAB multiplex, which will provide around ten new national radio services, and we have begun the process of filling-in the gaps in local digital radio provision. But these steps alone will not be sufficient to ensure that the industry remains robust. We believe we need to debate now how best to regulate the industry as it copes with the transition to digital. 3 The Future of Radio This report sets out a comprehensive vision for the future regulation of commercial and community radio. Its proposals, taken individually, may not at first sight appear significant but, taken together, we believe they would create the framework for radio to remain a strong and vibrant medium in the 21st century. Because there is still a great deal of uncertainty about the future shape of the industry, the proposals set out here aim to provide the flexibility to adapt to changing circumstances. Some of our proposals have implications for legislation. It is for Government and Parliament to consider the case for new legislation and to take forward any changes they see fit at the appropriate time. We recognise that such legislation may still be some time away. This consultation sets out Ofcom’s initial thinking on the options available and suggests changes we believe Parliament may wish to consider in due course. There may, of course, be other options for change that emerge as a result of this consultation exercise or elsewhere. We have focused on three main areas: the regulation of content and ownership in commercial radio; the regulation of community radio; and the migration of listening from analogue to digital platforms, opening up the possible use of analogue radio spectrum for other things when the time is right. For commercial radio, most regulation is currently focused on analogue local stations, where station formats and the amount of local output are regulated in much greater detail than those of DAB stations. Stations on other platforms do not have regulated formats at all. The result of this regulatory situation is that the smallest analogue stations often have greater programming obligations than their larger neighbours, but with fewer resources to deliver them. So long as the majority of listening remains on analogue platforms, Ofcom does not propose to change this situation, but as the proportion of listening on digital platforms increases, the current approach to regulating analogue radio will become increasingly anomalous. At that stage, we envisage a significant simplification of the amount of detail required in formats, along with standardisation of the requirements for local material in programming, based on the size of station. This will ensure that local programming is maintained at those times of day when listeners tell us they most value it and help to ensure the viability of the stations providing that programming by allowing broadcasters to share some programming across a number of stations. Plurality of provision of commercial radio services alongside the BBC will, we believe, also continue to be of primary importance. However, Government may wish to consider, at the appropriate time, re-visiting the ownership rules, which currently apply in different ways to analogue and digital stations and which may, as a result, become anomalous as digital listening increases. Combining the rules across platforms for a defined set of ownership areas could, we believe, achieve the goal of robust plurality, while offering the industry greater certainty and flexibility for the future. If persuaded of the need for change, it will be for Government and Parliament to consider whether such a change should also be tied-in to increased digital listening. Community radio is a fledgling new sector which has taken off rapidly in the last couple of years. From a standing start, 122 new stations have already been licensed and many have come on air, offering an extraordinary diversity of services. More awards are in the pipeline. But the level of regulation imposed upon these tiny stations is very high. The detailed criteria which have to be considered when licensing a station, the ownership rules which prevent common ownership of stations, the funding restrictions which may hamper viability and the relatively short 5-year length of each licence, all put pressures on a sector which will need support if it is to emerge as a bedrock of non-profit, very local radio across the UK. 4 The Future of Radio Ofcom will produce a report for the Secretary of State in the autumn, which will review the statutory framework for community radio. In advance of that report, this consultation makes tentative suggestions, based on Ofcom’s early experience of licensing this sector, for possible changes to the existing framework. In doing so, we reaffirm the importance of the sector as a “third force” in British broadcasting, which provides social gain and is not-for- profit, but suggest that the statutory framework surrounding community radio could be simplified significantly. What about the possible switch-over from analogue to digital radio? On current trends, by 2017, 90% of all radio listening will be via digital platforms. It is essential that we do not rush the question of analogue switch-off, but it is also important that we are ready to address the questions raised by digital migration in the right way at the right time. If and when that time comes, there will need to be a full and detailed review of the costs and benefits involved. To allow for this possibility, we highlight areas that are properly the domain of Government and Parliament with regard to the current licensing regime. Under the present system, as commercial radio licences expire, the licence is re-advertised for a period of up to 12 years, with the possibility for some of further renewal beyond that. Currently-held licences begin to expire in 2009 in a rolling process that will take many years to complete, with the result that the UK will be unable to achieve analogue switch-off, even if it is decided that this is the correct course of action.