Memorandum submitted by the Commercial
Radio Companies Association
The Commercial Radio Companies Association (CRCA)
is the trade body for UK commercial radio. It represents commercial
radio to Government, the Radio Authority, copyright societies
and other organisations concerned with radio. It manages the Radio
Advertising Clearance Centre which clears national and special
category advertisements prior to broadcast. CRCA also jointly
owns Radio Joint Audience Research Ltd (RAJAR) with the BBC and
has been instrumental in the formation of the new Digital Radio
Development Bureau, a company owned by UK digital radio multiplex
CRCA supports the submissions made by those
with commercial radio interests who were invited to give oral
evidence. These are BIPA (of which CRCA is a founding member),
CRCA members Emap Radio and GWR, and Virgin Radio.
This memorandum seeks to assist the Committee's
deliberations regarding the development and regulation of radio:
the regulation of public service broadcasting by OFCOM; and media
and cross-media ownership.
Our recommendations flow from CRCA members'
desire to broadcast high quality, distinctive information and
CRCA supports the views of BIPA regarding the
future regulation of audio-visual content on the Internet and
the remarks made by Virgin, GWR and Emap regarding the need for
the Government to enable OFCOM to do more to encourage consumer
take-up of digital radio. This note concentrates on consistency
of content regulation; the benefits of liberalising commercial
radio and cross-media ownership restrictions; and proposals in
the White Paper regarding "Access Radio".
We recommend that OFCOM should regulate both
commercial and BBC radio content, to ensure that services do not
overlap unduly and that the best and widest range of services
is provided in the public interest.
The White Paper says that the UK has benefited
from "having a mixture of publicly owned, publicly regulated
and purely commercial broadcasters" (5.3.12). Undoubtedly,
the competition between these sectors improves performance. CRCA
submits, however, that the main and most beneficial difference
between the UK public and private sectors is the way in which
the two are funded. BBC Radio can and should provide programmes
of the highest quality precisely because it is generously publicly
funded and unencumbered by commercial considerations. It should
have no need to maximise ratings success. Its programme producers
and managers should not be influenced by commercial considerations
when making their plans. Commercial radio broadcasters, on the
other hand, must consider, when planning their output, the environment
in which advertisers wish their messages to appear and must target
the demographic groups that advertisers wish to use radio for.
This difference between production influences should be maintained.
Certainly, our European colleagues regard the UK system as the
most desirable and regret that public and private funding differences
have been irrevocably eroded and blurred in almost every other
major European country.
No system is entirely perfect, however. Over
the years, UK broadcasting legislation has created, on the one
side, a highly regulated, vertically segregated, commercial media
sector and, on the other, the BBC, a large, self-regulated, publicly-funded,
cross-media corporation. The disadvantage of this structure is
that, unless it is carefully controlled, the BBC can weaken or
stifle commercially-funded competition. Its content resources
can become so vast and its services so numerous that private companies
are unable to compete with it. This situation will be made worse
if the BBC is encouraged both by Government and senior ex-commercial
management to supplement its public revenues with commercial ones.
This has the undesirable effect of creating an environment in
the UK where some communications services unnecessarily become
mainly the preserve of the publicly funded corporation and the
BBC's UK competitors are enfeebled. It is not in the interests
of the UK economy, citizens or consumers to allow the BBC to become
an unrestrained elephant in the marketplace. CRCA submits that
this danger can be overcome by independent regulation of the BBC
The White Paper seeks to provide "a more
level playing field that is fair between different broadcasters,
taking account of their differing missions and funding sources"
(5.4.1). It intends to achieve this by the creation of OFCOM and
yet (5.6.7) will maintain "the link between the legal responsibility
and authority of the BBC Governors for delivering the BBC's remit...
(including) interpreting the Charter and setting the strategy
to deliver the BBC's remit and responsibilities". In paragraphs
5.8.6 and 5.8.7, it is made clear that the "backstop powers
of the BBC will remain with the Secretary of State for Culture,
Media and Sport, and with Parliament, through Charter Review.
The Secretary of State will also retain the power to approve new
BBC licence fee-funded services and material changes to existing
services." OFCOM "will, however, give formal advice
to the Secretary of State on the, often important, market impact
of both proposals for new BBC public services and for material
changes to existing ones, before he reaches a final decision".
At time of writing, the CRCA is preparing commercial
radio's response to proposals made to the DCMS Secretary of State
by the BBC for the provision of five new publicly funded digital
radio services. Thus, the UK publicly funded broadcaster must
already in part justify its proposed activities to an external
regulator. However, we think that the time is now right to arrange
that, in future, this external regulation should be at arm's length
from Government. We submit that as media and communications converge,
only a regulator with responsibility for, and an overview of,
all broadcasting and telecommunications services and systems stands
the best chance of ensuring good value, choice and quality for
consumers and citizens.
We note that there is no intention to inspect,
examine or restrict any plans the BBC may have for launching commercially-funded
services either alone or as a joint venture with others. The BBC
is thus being encouraged to seek commercial funding despite recent
generous additions to the licence fee. We do not see the public
benefit of this sort of BBC commercial activity and neither can
we see how clear separation between public and commercial activities
can be achieved when both use the BBC brand, BBC expertise and/or
promotional exposure on BBC publicly funded services.
CRCA does not seek further relaxation in the
requirements of "local radio programme formats" (White
Paper 5.11.1). We regard their maintenance as useful positive
In our submission in advance of the White Paper
we asked that any new regulator should only need to re-advertise
radio licences where it felt that the incumbent licensee was performing
unsatisfactorily in some way. This remains our view and we are
pleased that OFCOM may be empowered to negotiate with a current
licensee "for renewal of a licence if it is justified by
their level of performance".
Safeguarding the interests of radio listeners
The intimate nature of radio and the multiplicity
of radio services targeted at very different audiences with different
expectations will be important factors which OFCOM will need to
bear in mind when considering radio.
The Regulation of Advertising
We note that the Government considers the maintenance
of strong regulatory back-up powers essential (6.8.4) in the event
that any industry-based approach might fail. We accept this and
look forward to discussing with OFCOM how a co-regulated advertising
regulation mechanism might work along the lines covered in paragraph
The New Organisational Framework
In our submission in advance of the White Paper
we proposed that regulation of radio should be administered by
a unique department or organisation within a single overarching
regulator, and should not be coupled to regulation of television
broadcasting. This remains our view.
CRCA believes change in ownership regulation
is vital to secure the commercial radio industry's future. We
seek ownership deregulation so that commercial radio can grow
and provide listeners with greater content diversity.
Commercial radio services face competition for
listeners both from each other and the BBC. They face competition
for revenue from each other, television, local and national press,
outdoor (posters), cinema and magazines. Radio's share of display
advertising is currently 5.9 per cent. Thus it is a small player
and needs to grow if it is to hold its own against both traditional
and new media.
CRCA proposes that nationwide ownership controls
should be left to competition regulation. We suggest the competition
regulators can be left to decide the number of national services
that a single owner may control.
CRCA proposes that local ownership rules should
be governed by a numerical formula. We favour a numerical formula
rather than local competition regulation for the following reasons:
Regulation by a numerical formula
is simple, transparent and fairly "hands free". Simplicity
is beneficial to business investment and planning.
Regulation by the competition authorities
occasionally relies on defining "no well-defined market"
(Yarrow, July 2000) and is therefore sometimes cumbersome and
subjective to delays.
A thorough examination of our argument for relaxing
local ownership rules is given in Annex A
to this memorandum.
A Numerical Ownership Formula for Local Radio
The White Paper says regulation must "be
capable of being adapted quickly to changing market conditions.
Rather than having detailed rules set out in primary legislation,
the regulator will have the responsibility to develop and maintain
the necessary rules within the statutory framework" (8.10.1).
In these circumstances, a numerical formula can be altered reasonably
quickly in the light of circumstances. The CRCA board is still
discussing what the minimum number of local radio station owners
in a market should be. We will inform the Committee of the outcome
of those deliberations by means of an amended version of this
memorandum in due course.
How a Local Radio Market Might be Defined
The points system that currently governs commercial
radio ownership of stations is based on potential not actual audience.
Potential audience is calculated by measured coverage area (MCA).
In discussing "Radio Ownership" (4.7.2),
the White Paper points to the greater accuracy of audience share
statistics these days. This refers to the research conducted on
behalf of both BBC and commercial radio by the jointly owned company
Rajar Ltd. It is worth noting that Rajar researches a station's
total survey area (TSA) and reflects a station's share of listening
in that area. Rajar data is therefore, to a degree, a measurement
of actual influence while the raw population figure of an MCA
is not. Potential influence is not the same as actual influence.
This difference lies at the heart of the unfairness inherent in
the current "points system" where, for example, Jazz
FM is given the same points value as the more "popular"
However, even time spent listening to a radio
service and the size of audience spending that time do not in
themselves necessarily reflect genuine or important "influence".
Is the speech-based LBC, for example, more or less influential
than the various styles of popular music services provided by
Capital, Virgin, Magic or Heart in London? On balance, therefore,
we recommend that a numerical formula needs to be founded on a
reliable and non-disputable basis and believe that the Radio Authority's
MCAs provide this.
Furthermore, we recommend that the assessment
of the number of stations in a local market should be based on
the largest station (in coverage terms) involved. The market covered
should include those stations that share more than 50 per cent
of the potential audience.
CRCA does not seek single medium ownership rule
protection. Should the Government be concerned about undue influence
that might result from cross-media ownership consolidation, then
we recommend (with slight amendment) the sliding scale system
recommended by the IPPR in future.radio.uk.
The White Paper "seeks views on extending
the diversity of radio services through Access Radio" (4.5).
We wish to draw the Committee's attention to
the valuable contribution provided by small-scale commercial radio
services to the communities they serve. We note that the value
of these services was firmly endorsed in the submission made by
the Radio Authority prior to the White Paper that raised the prospect
of "Access Radio".
We assume that the rationale for an additional
tier of local radio is to improve on the contributions and provisions
made by small-scale, local commercial radio stations. We suggest
that, if they have content shortcomings, then these must be, at
least in part, caused by the stations' need to behave commerciallyto
appeal to a wide audience and embrace as much of the community
as possible in order to attract revenue. If this is the case,
then it follows that "Access Radio" services are not
expected to be commercially viable as their audiences would be
too small to attract sufficient revenue. If a service is not commercially
viable then it requires alternative methods of funding and a service
that enjoys alternative funding should not be allowed to undermine
the commercial viability of small-scale commercial services. To
allow "Access Radio" to be funded by advertising or
sponsorship revenue would lead "Access Radio" services
to behave in a way that would severely undermine the distinction
between themselves and small-scale commercial services. At the
same time, it would imperil existing small-scale broadcasters'
survival by drawing revenue from an already well-stretched market.
It cannot be Government's intention that, in an attempt to provide
additional radio services that it believes the market does not
provide, the consequence is to threaten the survival of small-scale
commercial radio services. We propose that "Access Radio"
should not be funded by commercial revenues of any sort.
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