Select Committee on Culture, Media and Sport Minutes of Evidence

Memorandum submitted by SMG plc (continued)



  As members of the CRCA, we endorse many of the points they raise in their submission, but we would like to focus on six issues, in order of importance.

The role of the radio regulator within OFCOM

  We are concerned that radio interests will become subsumed by those of television and telecoms. There is a need for a distinct radio regulator within the overarching structure of OFCOM to ensure radio solutions for radio issues.

The relationship of the BBC to OFCOM

  BBC Radio should be regulated on the same basis as commercial radio with the Governors regulated by OFCOM. The BBC should be subject to the same format regulation as commercial radio.

Radio ownership

  We believe that competition rules are the most effective means of ensuring plurality of ownership while allowing UK media companies to develop. However, should a transitionary system of ownership regulation be desired, we believe that turnover is the most effective measure of media market power as detailed in SMG's Cross-Media Ownership Submission. If there is a desire to retain radio sector specific regulation to ensure plurality of ownership, we suggest a transparent numerical formula which can effectively replace all earlier controls on radio ownership.

Spectrum efficiency

  We support all measures to increase the efficient management of broadcast frequencies especially on FM. We do not support spectrum pricing as we believe it is incompatible with format regulation. We support the freeing up of new capacity on the FM band for commercial radio, particularly for the possibility of creating wider access to independent national radio.

Digital Radio

  We recommend a switchover mechanic to speed up the process of analogue to digital transfer.

Access Radio

  We strongly urge that Access Radio is not commercially funded, and is subject to the same content regulation as commercial radio.


  1.0.1  SMG Radio is the radio division of SMG and was created in 2000 following the acquisition of the Ginger Media Group by SMG. Virgin Radio formed the largest part of Ginger Media, with a network predominantly broadcast on 1215am.

  1.0.2  Virgin Radio was part of the Virgin Group until December 1997, when it was merged into a new parent company called Ginger Media Group, part owned by Virgin, Apax Venture Capital and Chris Evans, where it sat alongside Evans' own Ginger Productions and our online company, Ginger Online.

  1.0.3  SMG holds a minority stake in Scottish Radio Holdings, as well as in Switchdigital, the second London digital multiplex. As part of our interest in Switchdigital, SMG Radio produces the Groove, a classic soul service. The Groove is now available both on digital radio and as an Internet audio stream.

  1.0.4  SMG Radio is also part of the DRG Multiplex Consortium and is applying for regional digital multiplex licences around the UK. SMG Radio has also just applied for the analogue FM regional licence for South and West Yorkshire, with plans for further analogue applications over the next few years.

  1.0.5  In addition to Virgin Radio's web site streaming, SMG Radio is developing new Internet radio brands and creating commercial joint ventures with third parties to develop online radio brand extensions. In 1999, Virgin Radio took part in trials to test the viability of 3G mobile Internet radio broadcasting. Later this year, in a similar exercise, we will be working with the world's first commercial 3G network to create a 3G—Digital Radio hybrid network.

  1.0.6  As Virgin Radio, we have a board seat at both the trade body, CRCA and the Radio Advertising Bureau and, subject to our detailed submission presented here, we broadly support the views expressed by these organisations.

  1.0.7  The White Paper emphasises the economic forces of spectrum scarcity and the responsibilities of broadcasters to make the most efficient use of this resource. Regulation has traditionally focused on content within broadcasting, but technical developments have allowed greater access for new entrants, which is permitting more of an orthodox economic analysis of the sector.


  2.0.1  We note the Government's proposal to create a single regulator in OFCOM and hope that should this take place it may serve to unite and clarify a series of regulatory relationships within one body. We believe that communication industries are fundamentally commercial markets and should ultimately be the responsibility of one Government department. There is also the need for special sectoral considerations and content regulation, as well as regard for taste and decency, all of which should fall within the overarching powers of OFCOM. (8.6.2 and 8.11.4 The New Organisational Framework).

  2.0.2  We strongly believe there should be a unique and distinct department within OFCOM, to administer radio regulation. We support the Radio Authority's belief that "radio problems should have radio solutions". We are apprehensive that radio interests will lose out to television and telecoms whose market power considerably outweigh that of the radio industry.

  2.0.3  Regulation for radio should cover two areas: diversity of content and commercial competition regulation. The latter of these is covered by competition regulation, which falls to the OFT and Competition Commission, and our views are expressed elsewhere in this submission while we feel content regulation requires a suitably empowered department within OFCOM.

  2.0.4  Commercial radio has now grown to an annual turnover of over half a billion pounds a year, while in 1990 that figure was £137 million. Radio's share of advertising spend has grown across the last decade from just over 2 per cent to nearly 6 per cent, with overall radio listening increasing from 38 per cent to 46 per cent. In order for this growth to continue we call for vertical sectoral regulation of radio within OFCOM and do not believe that convergence necessitates that media and telecommunications sectors be treated as one overall market in all matters.


  3.0.1  We strongly believe that the BBC should be subject to independent regulation through OFCOM, and be politically independent. Regulating the BBC and commercial radio together would ensure the widest possible diversity of listening choice, proper and transparent use of public resources and a level playing field for competition. We also believe that the continual separation of both regulation and legislation for BBC services with its commercial competitors is anomalous and untenable.

  3.0.2  We support overall relaxation of format restrictions but would call for basic format restrictions to be applied fairly to BBC Radio. As a national commercial station we pay a licence fee and turnover related fees to secure our licence. The BBC has no current format restrictions and can act in a competitive manner such as the recent re-positioning of Radio 2. The White Paper recommends dropping all format restrictions for the three national commercial stations. Whilst we appreciate the flexibility to operate in a commercial market, we would recommend that the current formats remain and instead that the national BBC Radio services subscribe to broad format restrictions. This would ensure diversity of service and enable the BBC to focus on its core public service remit.


  4.0.1  Should the Government be minded to retain some form of cross-media ownership regulation, as opposed to moving to competition rules, we believe such regulation should follow a transparent assessment of turnover as the most reliable indicator of market power. We refer to the SMG Cross-Media submission, which advocates a percentage-based ceiling on market dominance both overall in the UK and within a given market sector. (4.7 Maintaining Diversity and Plurality).

  4.0.2  We believe reforms to the current radio ownership limits are vital to the future of the radio industry. We welcome the replacement of the points system with a more effective and transparent method that combines flexible ownership parameters with concurrent commercial competition regulation.

  4.0.3  In the absence of a comprehensive cross-media market assessment based on turnover, we consider that separate sectoral regulation to ensure plurality of ownership and diversity of editorial voice on a local market level should be transparent, simple and practical. We understand there is a desire to retain a mechanism to ensure plurality of ownership. We broadly support the numerical system proposed by the Radio Authority and the CRCA but feel strongly that any numerical formula should take account of all services available to an applicable marketplace, including BBC, commercial and digital radio.

  4.0.4  We believe that the current restrictions on ownership of more than one national station should be relaxed. We believe the formal distinction between national and local radio is unfair, since consumers receive both types of service at the point of consumption.


  5.0.1  We welcome the opportunity to promote greater efficiency in the use of spectrum by broadcasters, particularly with regard to FM where this currently helps to promote the widest access to commercial radio channels. We appreciate the need to create some form of evaluation of spectrum, but we do not agree with spectrum pricing since commercial radio already pays spectrum dues in the form of positive content regulation for local stations and annual licence payments for national stations. (8.4 The New Organisational Framework).

  5.0.2  Specifically, we are opposed to the auctioning and trading of spectrum between parties. This could only exist in an environment where there were no format restrictions. In this event, diversity of output could not be upheld.

  5.0.3  SMG Radio is pleased that the White Paper endorses "the widest access to commercial radio channels" and we hope that more opportunities will emerge with new spectrum licensed for broadcast as well as spare spectrum unlocked by more efficient management of the FM band.

  5.0.4  In view of the requirement for widest access to commercial radio channels, we are very keen to discover if there is any mechanic to maintain such access in the light of external factors. As with many other sectors, consumer preferences can alter over time. SMG Radio's major asset is currently providing national radio programming on 1215am, at a time when listening to music on am radio is declining globally. With such factors out of the control of licensees, we are keen to safeguard the widest public access to independent national radio. We feel that the principle of widest access presents grounds for candidates to be evaluated when spare spectrum is identified on the FM band.

  5.0.5  In section 8.4.2, the White Paper addresses the independent review of spectrum management announced in the Pre-Budget Review. SMG Radio strongly endorses a thorough audit of the radio broadcasting spectrum, particularly a thorough examination of broadcasting use of Band II (88-108MHz). SMG Radio hopes that this audit will create new capacity for commercial broadcasting on the FM band.


  6.0.1  SMG Radio is enthusiastic about the opportunity for digital development of the radio spectrum to permit a greater diversity of choice and services. We therefore welcome any form of legislative encouragement for the deployment of digital radio. (5.11.3 Securing Quality)

  6.0.2  We would strongly recommend that the transfer from analogue to digital would be accompanied by a definite commitment for analogue switchover. We accept that this transfer will be slower than with cellular telephones and television owing to application pricing models.

  6.0.3  We appreciate there is concern about fixing a date for switchover. We would however, urge the Government to consider a switchover mechanic or a formula for the consideration of a mechanic when penetration reaches a certain level. This would convey commitment from the Government and increase enthusiasm for Digital Radio on the part of consumers and importantly, manufacturers.


  7.0.1  Access Radio could be a valuable element in society. SMG Radio welcomes this third tier of radio broadcasting principally on the basis that it provides an opportunity to satisfy demand for specialist interests. Access Radio could also provide a fertile training ground for the next generation of radio professionals and stars. (4.5 Maintaining Diversity and Plurality).

  7.0.2  We are, however, wary of the dangers of Access Radio becoming a threat to the industry. There should be a clear separation from any form of commercial funding since this could become backdoor small scale commercial radio providing unfair competition for existing small scale commercial radio stations.

  7.0.3  If the proposed "access radio fund" is set up, we believe this fund should not come from additional payment set upon existing commercial stations. The fund could come from Lottery grants or be taken from the existing payments by the three national stations. (4.5.3)

  7.0.4  Similarly, we are wary of syndicated sustaining services or consolidation of Access Radio stations, which could provide a commercial route into regional radio advertising. As a national radio station, we welcome fair competition, but like smaller scale commercial radio operators, we would be wary of any form of commercial competition, which operated in a different or subsidised environment.

  7.0.5  We feel Access Radio should be subject to the same regulation as commercial radio with regard to matters of balance, political impartiality, and programming content.

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