Saturday, 4 September 2010

Back to the future of radio – the FM band

Help seemed to have arrived for those consumers who are confused by the contradictory messages they are receiving about DAB radio, digital switchover and the future of FM/AM radio. The government created a ‘hot topic’ web page that addresses these issues in the form of a ‘FAQ’. Does it help clarify things?

The government FAQ states:
“We support 2015 as a target date for digital radio switchover” but, in the next sentence, it says that 2015 is “not the date for digital radio switchover”
“FM will not be ‘switched off’ … and will continue for as long as it is needed and viable” but then it fails to explain the reason the government is calling it ‘switchover’
“We believe digital radio has the potential to offer far greater choice and content to listeners” but then it asserts that “quite simply the listener is at the heart of this [switchover] process”
“11 million DAB sets [have] already [been] sold” but, in the next sentence, it deliberately confuses ‘DAB radio’ with ‘digital radio’ which, it states, “accounts for around a quarter of all radio listening” [DAB accounts for only 16% of all radio listening]
“Car manufacturers have committed to fit DAB as standard in all new cars by 2013” but it does not explain that only 1% of cars currently have DAB radio
“Some parts of the country are not served well by DAB” but it then admits that “switchover can only occur when DAB coverage matches [existing] FM [coverage].”

Well, that makes everything crystal clear now. Switchover is not switchover. 2015 is the date but is not the date. It is the government that is insisting upon digital ‘switchover’ but it is a consumer-led process. Almost no cars have DAB now but, in 2+ years’ time, magically they all will. In parts of the UK, DAB reception is rubbish or non-existent, but ‘switchover’ will not happen until somebody spends even more money to make DAB coverage as good as FM … even though FM is already serving consumers perfectly well.

Sorry, what was the point of DAB?

While the UK government ties itself in increasingly tighter knots trying to explain the unexplainable, and to justify the unjustifiable, most of the rest of the world carries on regardless, inhabiting reality rather than a fictional radio future. In May 2010, a meeting in St Petersburg of the European Conference of Postal & Telecommunications Administrations considered the future usage of the FM radio waveband [which it refers to as ‘Band II’] in Europe. Its report stated:

“Band II is currently the de facto analogue radio broadcasting band, due to its excellent combination of coverage, quality and low cost nature both in terms of current networks available and receivers in the market. It is well suited to local, regional and national programming and has been successfully used for over forty years now. FM receivers are part of our daily lives and millions of them populate our households. FM radios are cheap to manufacture and for the car industry FM still represents the most important medium for audio entertainment.”

Its report concluded that:
• “Band II is heavily used in all European countries
• For the current situation the FM services are still considered as satisfactory from the point of sound quality but the lack of frequencies hinders further development
• There are no wide-spread plans or strategies for the introduction of digital broadcasting in Band II
• No defined final switch-off dates are given so far.”

Two paragraphs in the 28-page report seemed to sum up the present UK situation:

“The FM band’s ability to provide high-quality stereo audio, the extremely high levels of receiver penetration and the relative scarcity of spectrum in the band combine to make this frequency band extremely valuable for broadcasters.”

“As FM in Band II is currently, and for the foreseeable future, the broadcasting system supporting the only viable business model for radio (free-to-air) in most European countries, no universal switch-off date for analogue services in Band II can be considered.”

In the UK, we have just seen how “extremely valuable” FM radio licences still are to their owners. Global Radio was prepared to promise DAB heaven and earth to Lord Carter to ensure that a clause guaranteeing automatic renewal of its national Classic FM licence was inserted into the Digital Economy Act 2010. It got what it wanted and therefore avoided a public auction of this licence. Then, when expected to demonstrate its faith in the DAB platform, Global sold off its majority shareholding in the national DAB licence and all its wholly-owned local DAB licences.

Now the boot is on the other foot. Having succeeded in persuading the government to change primary legislation to let it keep commercial radio’s most valuable FM licence for a further seven years, Global Radio has now had to argue to Ofcom that analogue licences will become almost worthless in radio’s digital future. Why? In order to minimise the future Ofcom fee for its Classic FM licence. The duplicity is breathtaking.

When it last reviewed its fee for the Classic FM licence in 2006, Ofcom reduced the price massively because, it explained, it took

“the view that the growth of digital forms of distribution meant that the value associated with what was considered to be the principal right attached to the licence – the privileged access to scarce analogue spectrum – was in decline.”


In 2006, Ofcom had published a forecast for the growth of digital radio platforms which has since proven to have been wildly over-optimistic. It had predicted that 42% of listening would be digital by year-end 2009, whereas the outcome was 21%. In 2006, as a result of the steep decline it was forecasting in analogue radio’s usage, Ofcom reduced the cost of Classic FM’s licence fee by 95% from £1,000,000 to £50,000 per annum (an additional levy on the station’s revenues was also reduced from 14% to 6% per annum). The losers were UK taxpayers – the licence fees collected by Ofcom are remitted to the Treasury. The winners were Classic FM’s shareholders, who were gifted a cash cow by Ofcom bureaucrats who misunderstood the radio market.

Fast forward to 2010, and Ofcom is undertaking yet another valuation of how much Classic FM (plus the two national AM commercial stations) will pay during the seven years of its new licence, following the expiry of the current one in September 2011. Has Ofcom apologised for getting its sums so badly wrong in 2006? Of course not. Will it make a more realistic go of it this time around? Well, the signs are not good.

In its consultation document on this issue, Ofcom has repeated the same errors it made in other recent publications about the take-up of digital radio. In Figure 1, Ofcom claims that analogue platforms’ share of all radio listening has fallen from 87% in 2007 to 76% in 2010. This is untrue. As noted in my previous blog entry, listening to analogue radio has remained remarkably static over this time period. Ofcom’s graph has completely ignored the existence of ‘unspecified’ platform listening, the volume of which has varied significantly in different surveys. The graph below plots the actual numbers from industry RAJAR data.


Exactly the same issue impacts the accuracy of Figure 3 in the Ofcom consultation, which purports to show that analogue listening to Classic FM fell from 86% to 72% between 2007 and 2010. Once again, this must be factually wrong. Once again, the volume of ‘unspecified’ listening to Classic FM has simply been ignored and the decline of analogue listening to Classic FM has probably been overstated by Ofcom.

Confusingly, the platform data for Classic FM cited in Figure 3 differ from data in a different Ofcom document [Figure 3.34 on page 33 of The Communications Market 2010] which state that, in Q1 2010, 65% of listening to Classic FM was via analogue, 26% was via digital and 9% was unspecified. In Figure 3, the values for the same quarter are stated as 72%, 28% and 0% respectively. It is impossible for both assertions to be correct.

These inaccuracies have the impact of painting a quite different picture of Classic FM’s transition from analogue to digital listening than the market reality. These matters are not academic. They will have a direct and significant impact on the perceived value of the Classic FM licence over the duration of its next seven-year period. Sensible decisions about the value of the station’s licence cannot be made on the basis of factually inaccurate market data published by Ofcom.

Undeniably, Ofcom is between a rock and a hard place:
• An admittance that, in 2006, Ofcom got its digital radio forecast and its sums badly wrong and, as a result, has already lost the Treasury millions of pounds in radio licence fees, would require humility (and humiliation)
• Not admitting that, in 2006, Ofcom got it wrong would necessitate it to now fix the Classic FM licence fee at the same low rate as in 2006, or even lower, denying the Treasury millions more in lost revenue between 2011 and 2018
• Increasing the cost of Classic FM’s licence fee would be a tacit admittance by Ofcom that its entire DAB ‘future of radio’ policy is simply not becoming reality and that FM spectrum will still remain “extremely valuable for broadcasters”.

In 2006, the low valuation of Classic FM’s licence fee was built upon a top-down bureaucratic strategy which insisted that the UK radio industry was ‘going digital’, whether or not consumers wanted to or not. Now, it is even more evident than it was then that consumers are not taking up DAB radio at a rate that will ever lead to ‘digital switchover’ (whatever that phrase might mean).

However, reading the Ofcom consultation document, it is also evident that the regulator remains wedded to its digital radio policy, however unrealistic:

“We consider that this [Digital Radio] Action Plan is relevant when considering future trends in the amount of digital listening since it represents an ambition on behalf of the industry and Government to increase the amount of digital listening in the next few years.”

In the real world, Classic FM’s owner understands precisely what the international delegations who met in St Petersburg also knew – FM will remain the dominant broadcast platform for radio. Only the UK government and Ofcom seem not to accept this reality, still trying to go their own merry way, while the rest of Europe has already acknowledged at this meeting that:

• The FM band is “extremely valuable for broadcasters”
• The FM band is “currently, and for the foreseeable future, the broadcasting system supporting the only viable business model for radio (free-to-air) in most European countries”
• “No universal switch-off date for analogue services in Band II can be considered.”


[thanks to Eivind Engberg]

5 comments:

alex jenkins said...

it would appear that the purpose of DAB is to Create revenue and to control unlicenced broadcasters.
the latter is something authority has failed to do since the begining of radio.

Attempts to stifle offshore broadcasters failed miserably for 23 years, when ultimatly the might of the British and Dutch governments resorted to boarding the MV Ross Revenge and smashing the transmitters. Radio Caroline continues to broadcast, now via satellite.
Unlicenced broadcasting on land has now reached a point where it can only be descibed as anarchy in many cities.
The FM band (2) is heavily populated by a pleathora of unlicenced broadcasters playing out a variety of music genre.

The broadcast platform is unimportant, content is what wins the day for the unlicenced operations. They are more in touch with thier audience thna the commercial stations, who have a very tight playlist, my local commercial AM station uses 1500 songs ( and claims to play the "Best Music from the 50's to Today" ) how boring and repeditive does that sound.

I present the daily "Morning Mix" at Celtic Music Radio, we are on 1530kHz AM in Glasgow and we are attracting a useful audience both on the AM frequency and at www.celticmusicradio.net DAB is far to expensive for us to concider. Our audience tune in because of our programming not because we are on a particular platform.

There are several unlicenced stations through out the UK who choose AM as thier medium and are proving very popular in thier areas.
In Ireland the Government closed all AM transitters down, now there are several unlicenced transmitters providing popular programming on AM with out any hassle from the authorities.

Until owning an analouge radio is made illegal there will be listeners out there in vast numbers. they should not be desertedand FORCED to look elsewhere for thier radio entertainment.

Terry Purvis said...

There's an interesting set of comments here in the Guardian about the quality of DAB receivers and reception. Overall they are very negative and from what I read the sets themselves do not last for many years.

What the public who have invested their hard earned money in buying the hardware really think about DAB is frightening.

Any attempt to make DAB the primary transmission system will end up being a costly mistake which could well have disastrous consequences for the commercial side of the industry and more importantly the listener.

Grant, what reaction have you had from Ofcom about your clear exposure this fiasco they are perpetrating? I find it incredulous that supposedly intelligent people could be party to what is so obviously flawed.

JPW said...

The FM band, in the way that it has been organised in the UK, is fine if you only want to listen to a limited number of radio stations.

It would appear that some people wish to support limited choice and stop the move of national and regional stations to DAB that will leave the FM band free for local commercial and community radio stations.

Currently, listening choice is limited because the FM national networks use over 10 MHz out of the 20 MHz of the FM/VHF band (88 – 108 MHz) in order to reach over 95% of the UK population.

For instance along the East Riding coast of Yorkshire the only stations I can receive on AM/FM are 13 stations including BBC Humberside, Classic FM, Radio 5Live, Viking FM and Yorkshire Coast Radio. However on my mini portable DAB/FM set and my DAB/FM/AM car radio I can receive 44 stations on DAB including 11 from the BBC and stations such as Absolute80s, LBC, Premier Christian Radio, Smooth Radio, and the Leeds-based Yorkshire Radio.

DAB has started to allow specialist stations to find space to broadcast across wide swathes of the country.

Many countries have adopted different variations of the Eureka 147 standard for digital radio. France has adopted DMB, while Denmark, Norway, Switzerland and the UK use DAB. Other countries such as Australia, Germany and Malta have gone for DAB+. Radio manufacturers are producing radios that pick-up the transmissions from DAB/DAB+/DMB as well as FM.

Back in the 60s I listened to Radio 270, the Scarborough off-shore station, and then to Radio 1 on 247 metres on my LW/MW portable radio and my car radio. Then in the 70s I had to replace them with FM radios in order to listen to four of the BBC’s five radio networks as well as commercial pop music stations that were starting to spring up across Yorkshire.

During the House of Lords committee stage debate on the Digital Economy Bill, on Wednesday 3 February 2010, Bishop Nigel McCulloch, Lord Bishop of Manchester, spoke for the retention of FM for local radio when he said, “The limitations of DAB for local and community stations are well acknowledged by Ofcom. Indeed, it is already planning for small-scale commercial and community stations to stay on FM in the medium term as the most appropriate technology for those stations in terms of both coverage and cost. The vacation of FM band space by the removal of national and large local stations would free up more capacity for smaller stations. Ofcom sees this as a natural staging post in radio's digital evolution.” He then went onto say, “The future of local radio - which is so crucial to forging community cohesion and identity, and promoting local social action and democracy - should not be left to chance. That must mean embracing a multi-platform ecology which creates a pathway towards digital broadcasting for local radio, retaining space for them on FM until such time as a digital platform offers them the right environment to continue what they do best.”

Free-to-air Radio is certainly going to be multi-platform with national and larger stations on DAB and smaller local stations staying on FM. The number of listeners to AM radio is dropping with two large stations, Gold and Absolute Radio’s national service, already having over 50% of their listeners tuning in via digital radio.

My reception of DAB broadcast stations has been fine in many parts of the country as I have travelled from the Black Country to Wiltshire and from Hertfordshire to Yorkshire. It should be remembered that the first FM networks started in 1955 and it took many years, over 25 years, for the service to reach the whole country. What we need is for Ofcom and government to get Digital Radio UK and the radio industry to get the roll-out of robust DAB transmission across all of the country quicker than it took to roll-out the national FM networks!!

I for one do not wish to have my choice limited by people who appear to be only interested in listening to the current limited choice of stations available on AM and FM or radio via their computers.

MB said...

I have to agree with JPW.

It's all very well having FM chips in mobile phones, but what happens when a major story breaks and all the rolling news coverage is on Radio 5 Live, or you feel like listening to Test Match Special (without going to the shipping forecast at a vital moment) or (this week) US Open tennis commentary.

On its own FM is an incomplete radio system. There is a lot of appointment-to-listen content to be found on 6 Music & 5 Live Sports Extra that you won't find on your FM radio.

Personally I'm looking forward to the NFL commentary starting this weekend on Sports Extra.

Anonymous said...

I have been told that Guernsey will never get DAB radio. Jersey do but I believe only for BBC National nor National Commercial or Local Commercial or BBC.

Mind you we screwed over on the amount of freeview channels avaliable after DSO but thats another issue :)