Select Committee on Culture, Media and Sport Minutes of Evidence

Memorandum submitted by GWR Group plc

  GWR Group is the UK's leading commercial radio broadcasting company. It operates the national stations Classic FM, Core and Planet Rock and 37 local stations in the UK. It is the majority shareholder in Digital One, the national digital radio broadcaster, and holds 21 digital radio licences. It also has interests in stations in Australia, Austria, Bulgaria, Finland, Holland, Hungary, Poland and South Africa. It employs 1,200 people in the UK. Committed to training, GWR spends more than £1 million a year on training and development.


  GWR Group welcomes the Communications White Paper introduced to Parliament by the Secretary of State for Culture, Media and Sport on 12 December 2000. However, GWR and the rest of the radio industry are disappointed that a number of crucial areas have not been adequately dealt with in the White Paper. This response identifies these issues as a contribution to the Culture, Media and Sport Committee's inquiry into the White Paper.

  1.1  Radio is the senior broadcast medium, consumed and used more than TV and mobile phones. Although there may be 40 million mobiles and 45 million TVs, there are 120 million radios in the UK and 90 per cent of the population—of all ages—consumes 23 hours of radio a week. This universality of radio is under threat from the disproportionate attention paid in the White Paper to the requirements of television and telecommunications.

  1.2  Radio is also a major employer: the Skillset Employment Census 2000 found 22,819 people working in Broadcast Radio, compared to 24,102 working in Broadcast TV. It is time to give radio its fair share of legislative attention.

  1.3  GWR welcomes:

    —  The commitment to create "a new system for the regulation of media ownership which is appropriate to fast-changing, modern market conditions" (White Paper, 4.2.7).

    —  The proposal (5.11.1) that the local nature of independent radio be maintained while format controls are lightened.

    —  The harmonisation of licence periods (5.11.3) through "extending analogue licence periods to equate for those for digital licences".

    —  The prospect (5.11.1) of OFCOM negotiating with current providers for "renewal of a licence if it is justified by their level of performance".

  1.4  GWR feels that further work is needed to address a number of issues:

    —  A stronger commitment to revoking the current radio ownership points system, including the BBC's influence in the new system (4.7).

    —  The renewal of national radio licences.

    —  Consistent regulation of BBC content.

    —  A recognition of the sales success of digital radio receivers at Christmas 2000, reflected by a clear statement of the criteria that the Government would use in considering digital switchover (5.11.3).

  1.5  We now examine these issues within the framework of the Government's vision and objectives for communications in the 21st century, as set out in the White Paper.


  2.1  For consumers to benefit from the communications and media revolution, their needs must be held paramount by media companies. Therefore, regulatory changes intended to contribute to a dynamic media market must also offer benefits to consumers. Revoking the restrictive radio ownership points system within a clearly defined period will help to achieve these twin objectives. Failure to do so now will also inhibit the radio industry's prospects of playing a leadership role in European and international broadcasting.

2.2  Ownership

  The White Paper recognises (5.11.1) the "risk that new owners move uniformly towards a middle ground of national taste" and proposes that OFCOM should review the onward sale of local licences to reduce this risk. Implicit in this section is an understanding of the inverse relationship that can exist between plurality of ownership and diversity of output—a multiplicity of owners in one locality will tend to converge on the mainstream audience. Conversely, ownership convergence will cause an owner to allocate his channels to a variety of formats, minimising overlap between services and therefore serving the largest combined audience.

  2.3  The evidence supports the contention that common ownership of channels reduces overlap and widens listener choice. The BBC's five radio networks are an example. It is given six sets of spectrum allocations per area (including local radio) and, by striving for minimum overlap between stations, the BBC satisfies the maximum number of licence fee payers.

  2.4  In the newest form of licensing, digital radio, control of up to 10 formats in one area rests with one "owner"—the multiplex operator. The 1996 Broadcasting Act charges the multiplex operator with providing a combination of services which will attract the maximum number of listeners. Positioning the services for minimum overlap satisfies the largest audience. Attracting one listener with two services is a waste of production resources and valuable spectrum, when those two services with proper targeting should serve two distinct listeners—the strategic imperative coincides with the public interest of maximising listener choice.

  2.5  Sensible relaxation of ownership rules would result in a greater variety of formats, with "niche" formats being supported by an owner's mainstream stations as a way of providing a comprehensive range of choices to listeners. Therefore the Government's vision of a dynamic and competitive media market can be combined with the consumer benefits produced through more liberal radio ownership controls.

  2.6  In a converged regulator such as OFCOM, the degree of ownership control must be aligned from sector to sector. To allow ITV companies the competition law regime proposed in the White Paper, whilst continuing to restrict radio ownership, would place great strain on OFCOM's ability to regulate in a consistent manner between sectors.

2.7  The new system

  Nationally, we believe that radio ownership should be governed purely by competition law: in their submissions prior to the White Paper, the radio industry and its regulator, the Radio Authority, were unanimous in this view. Keeping the interests of the consumer at the heart of the legislation, audience share (including the BBC) is the most appropriate measure of influence. Such a regime would imply a threshold of a 25 per cent share of listening before an investigation by the Competition Commission.

  2.8  Locally, numerical controls should be placed on the number of stations under single ownership, with the limit moving on a sliding scale related to the total number of stations (national, regional and local, including the BBC) available in the area. In smaller local markets, where there might be 17 stations in all, the limit would be four stations under a single owner (an increase of one over the current limit). In medium sized city markets (with 21 or more stations) this would rise to five stations in common ownership, and in the bigger cities (23 or more stations) the ceiling would be six stations under one owner. This is in line with the mechanism proposed by the Radio Authority: we have extended it (see table below) to take account of the increased station numbers which will be brought about by digital radio.

Stations in Market
Ownership Threshold
17 or more
21 or more
23 or more
25 or more
27 or more
29 or more
31 or more
33 or more
35 or more

2.9  Cross-media Ownership

  GWR Group is a pure radio company, specialising in radio broadcasting and directly related activities such as web sites and the Classic FM Magazine. We believe that cross-media ownership issues should be decided by competition law, interpreted by the competition division of OFCOM. In each case OFCOM will be considering the effect on readers, viewers and listeners of the concentration of ownership in an area: in this the "Share of Voice" is the most appropriate measure (share of viewing, share of listening, share of readership, etc.) as it includes the effect of the BBC. Each form of media consumption should 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.

2.10  Licence renewal

  GWR welcomes the prospect (5.11.1) of OFCOM negotiating with current local providers for "renewal of a licence if it is justified by their level of performance". The problem remains, however, of how to effect the renewal of national analogue licences, especially in the light of the removal of format controls (5.11.2). This could result in Classic FM—which provides a major consumer benefit to its 6 million listeners—being replaced by a non-classical service which bid slightly more for the licence under the current "cash bid" system. This would disenfranchise a large number of classical music listeners: to avoid this the analogue national radio licences must be extended by OFCOM to run parallel with the digital national radio licences. Whilst it may have been appropriate to auction licences initially as a means of selecting those willing to take the risk in establishing a service, the service has now provided itself to be successful and embedded in the cultural heritage of the UK. It would not serve the public interest to allow the licence and format to be removed simply by competitive cash bid.

2.11  Licence duration

  GWR supports the proposal (5.11.3) to "extend analogue licence periods to equate to those for digital licences". This will encourage further investment in digital radio, which in its early stages is being funded by cross-subsidy from income from analogue licences. The harmonisation of licence periods will contribute to the creation of the dynamic market which government wants.


3.1  Spectrum availability

  Commercial radio offers, at no cost to the public, a diverse range of high quality services. For analogue transmissions, coverage is practically universal but for digital radio a clear policy of government support for spectrum availability is required. On the current frequency allocations, many areas—particularly along the south coast—will have to wait a number of years before digital radio is available to them, depriving them of the range of choice and quality of output of digital radio. The White Paper commits (2.7.1) to the "timely availability of spectrum to meet growing demands" and this principle must be adhered to in digital radio spectrum allocations. We urge the Government to begin to release L-Band spectrum, currently earmarked for digital radio from 2007, as early as 2003 to allow all local analogue radio to upgrade to digital and to allow the development of broadcast services which will complement mobile telephony and thereby allow their spectrum to be used more efficiently. We believe that use of L-Band is entirely possible and a joint study should be undertaken immediately to re-assess the timing for this spectrum.

3.2  Digital radio and universal Internet access

  Digital radio can assist in the objective of achieving universal Internet access by 2005. The new generation of digital radio devices such as the Psion Wavefinder turn PCs into radio receivers, with the data capacity of digital radio (5.11.3) producing text, graphics and pictures on the PC screen. Using the data capabilities of digital radio in this way introduces users to the benefits of the Internet with no connection costs. Radio is seen as the most friendly medium, and through new types of receiving devices listeners who do not wish to have a computer in their home can sample the Internet "experience" through an established relationship of trust with their preferred radio station. Additional spectrum, as outlined in 3.1, would enable universal access to be achieved more rapidly.

3.3  Digital radio switchover

  The White Paper asserts (5.11.3) that "switchover to digital listening is . . . not an early prospect". The Christmas 2000 sales figures for digital radio receivers were impressive, with the number of receivers in use doubling to 25,000 in the space of two months. Sales continue to increase as new products come to the market and prices fall. Digital One projections forecast at least 50,000 receivers in use by the end of 2001, and government should define at the earliest opportunity the criteria for digital switchover. The factors affecting the decision will be similar to those used for digital TV, and would include transmission coverage and market penetration of receivers.

  The timescale is longer than that for TV, but 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 has been announced, manufacturers and retailers have reacted positively, bringing forward production and marketing plans.

3.4  The value of spectrum

  The White Paper (2.7.3) proposes that "spectrum used by broadcasters should be valued". GWR welcomes the promise of full consultation with the industry and would emphasise the public service contribution made by stations such as Classic FM and GWR Group's local radio stations. The Classic FM "Do More With Music" strand encompasses Music Teacher of the Year, support for National Orchestra Week and Opera Week, the Foundation for Youth Music and many other activities centered on bringing new audiences to classical music and encouraging participation at all levels. GWR's local stations place themselves at the centre of their communities, acting as both a conduit and a catalyst for local initiatives in economic and community development. The "Reading Buddies" campaign, originated in Peterborough in 1999, is now rolling out to all GWR stations to encourage businesses to twin with local schools to increase literacy levels. The "2smart4drugs" initiative on Essex FM has diverted countless young people from a life of drug dependency, and the charitable funds raised by the stations exceed £2 million pounds a year. In periods of extreme weather—most recently the floods which affected many parts of the country—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. If spectrum valuations are to consider the public service content of what is broadcast, GWR's stations are making a significant contribution in this respect.

  National broadcasters such as Classic FM already make revenue-related levy payments—in Classic FM's case this is 14 per cent of revenue, together with an annual index-linked levy of £1 million. In assessing any spectrum valuation, account must also be taken of these payments to the Treasury by the industry.

3.5  One to one or one too many?

  The use of spectrum for broadcasting achieves the Government's universal access objective in a way which mobile communication systems (one to one use of that spectrum) could never achieve. Of the 35 million people who listen to broadcast radio in the UK between 6am and 9pm each day, limited mobile telephone network capacity means that less than 1 per cent could achieve a mobile telephone connection to receive the same information. Also, those calls would be charged, whereas broadcasts are received free of charge. So, the value of spectrum must be considered in terms of the numbers of people who benefit from its use, in addition to the public service nature of its use.

3.6  Access radio

  The White Paper (4.5) seeks views on the concept of "Access Radio"—new third tier stations which would not be funded by advertising or sponsorship, using Internet distribution or very low power FM spectrum. GWR believes that such stations would serve interest groups whose needs are unmet by BBC and commercial stations, and would provide access to the airwaves for those who cannot find a niche in mainstream broadcasting. As one of the largest employers in the industry GWR Group supports third tier radio as a source of potential talent already: through our relationship with the Student Radio Association, a better funded and more diverse third tier would provide even more people with a stepping stone to a career.

  3.7  Therefore GWR supports the creation of a "third sector" of stations, but the stations must be truly complementary to existing provision: they must cover communities (of interest or of geography) that currently lack coverage, and must gain their funds from sources that are distinct from those which fund the other two sectors. Hence "Access" stations must not accept advertising or sponsorship from any source, nor should they be funded by a levy on the commercial stations' income, which would be accepting advertising at one remove. A third sector of stations should attract a third sector audience and be funded from a third set of sources—government and European funds, charitable trusts, the Lottery, and voluntary listener subscription. Such mechanisms work well in other countries, and would serve a useful purpose here.

  3.8  These funding mechanisms should also be available for new public service programmes and projects on existing independent national radio and independent local radio services. Public service projects are already an integral part of many stations' output—Classic FM Families, which guided first-time concert goers through performances all over the country, is an example. Backing from new funding sources would increase the number of such initiatives and add to the richness and choice available to listeners.


4.1  Content regulation

  GWR welcomes the move (5.11.1) 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 success of its services. Content regulation in the future must be rigorously consumer-focused, and must be the minimum required to maintain the spirit of the programme plans which, in the case of local commercial services, led to the licence being awarded.

4.2  Consistent regulation of the BBC

  Consistency of approach across sectors underpins the White Paper, and consistent regulation of the BBC must figure in this. The new DCMS BBC Public Service Approvals process provides a useful structure for bringing BBC content under consistent, independent regulation.

  4.3  Currently independent radio services run to tight "formats" imposed by the Radio Authority, whilst BBC services are approved—on much looser definitions—by the Secretary of State. OFCOM should provide independent regulation of both commercial and BBC content, to ensure that services do not overlap and that the widest range of services is provided. The recently introduced DCMS guidelines for assessing BBC public service channel proposals provide an excellent starting point, in ensuring "that the value to the public of the service is proportionate to its likely impact on the market. The Secretary of State will consider . . . the likely impact of the proposed service on commercial services already in the market and on potential future services." The channel definitions provided by the BBC under this system give insufficient detail at present, but the current system could easily be improved to provide a similar degree of programming detail as is found in Radio Authority licence applications. The definition could then be used to consider the factors outlined in the quote above, to decide whether the new channel would add to listener or viewer choice.

  4.4  Under the current system, the Secretary of State examines the evidence and makes the decision on whether a new BBC channel should go ahead. Under OFCOM, it would be appropriate for that assessment to be carried out by the regulator, with the decision resting with the OFCOM Board.

  4.5  OFCOM sprang from a desire for consistency across the converged communication industries: it must also provide consistency between the BBC and commercial sectors.

4.6  Formats

  Formats should be revised (5.11.1) as new stations come into the market—especially in digital radio. Over the course of a licence changes in public taste and in the choice of stations available will require format adjustments to maintain and increase listener choice.

4.7  Co-regulation

  GWR commends the suggestion (6.8.1) that co-regulation—self-regulation by the industry to codes of practice developed in partnership with the regulator—should be expanded. This mode of working can be extended to cover "light-touch" content regulation in many areas, as proposed below.

4.8  Format evolution

  All of GWR's stations go through an annual programme planning process—reviewing market conditions, analysing changes in listener tastes, and planning new programme content to keep the output fresh and entertaining for listeners. From this process—already in place—we would produce an annual statement of programme plans for OFCOM to consider. This statement of intentions could then, 12 months later, be used to review achievements and as a starting point for a new statement of programme plans for the 12 months ahead. Using this existing internal process as a basis for co-regulation would avoid the fossilisation of formats and would achieve a smooth evolution of formats.


  The Communications White Paper lays a forward-looking foundation for flexible converged regulation for the future. For independent radio to take its place as a medium of the 21st century, the Communications Bill must set out a new radio ownership regime based on competition law, to allow the radio industry to grow to provide new programme services and to invest further in digital radio. Radio is the oldest of the broadcast media, but the one best able to flourish alongside new media such as the Internet. But in a global communications environment which is changing at unprecedented speed, swift action needs to be taken if consumers' long-term needs are to be met and protected, and if Britain's radio industry is to be enabled to provide real choice and quality in the developing digital world.

  The Communications Bill has the potential to revolutionise radio's contribution to the communications revolution—GWR Group stands ready to lead the industry into that future.

February 2001

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