The Digital One DAB radio multiplex - fixing 'market failure'... ten years too late

Digital One is the owner of the UK’s first and only national commercial radio DAB multiplex. If you produce commercial radio content that you wish to make available nationally on the DAB platform, you have to go to Digital One and agree a price and a contract. That price is set by Digital One, not by Ofcom or any other regulatory body. Digital One is the national DAB ‘gatekeeper’ and it decides what commercial radio brands we hear and what we don’t hear on DAB. It would be hard not to consider Digital One’s operation monopolistic.

Furthermore, Digital One is part of a vertically integrated business. Its controlling shareholder is Global Radio (formerly GCap Media, formerly GWR Group), the UK’s largest commercial radio group. In this way, Digital One/Global Radio’s business is an end-to-end operation that includes: generating radio content (‘stations’), some of which are carried on the DAB platform; selling advertising space around that content, some of which is carried on the DAB platform; owning the national DAB platform in the UK; and owning the ‘gatekeeper’ role for other radio content providers wanting access to that national DAB platform. (This ‘gatekeeper’ role was bestowed upon the DAB multiplex owner, rather than Ofcom, by the 1996 Broadcasting Act.)

Does Digital One’s business work in the interests of a competitive broadcasting sector or the listening public? Is this not a case where some kind of intervention by the regulator is appropriate? Within Ofcom’s own definition of ‘market failure in traditional broadcasting’, one of the main six reasons it uses to justify regulatory intervention is where:
“Restricted access to spectrum makes entry impossible on market grounds and, without competition, the ability of the market to deliver the most efficient solution is impaired”.

Ofcom then explains this issue in more detail:
“A tendency towards monopoly/oligopoly. Economies of scope and scale are inherent in broadcasting and will tend to encourage the concentration of ownership in large, often vertically-integrated companies. The result of an unregulated market might therefore be reduced competition, less choice for viewers and either higher prices or lower quality than would be available in a competitive market”.

Is this not exactly what has happened with the national commercial radio DAB platform? Digital One seems to have operated its ‘gatekeeper’ monopoly over the platform in a way that that has reduced competition, offered less choice to listeners, and maintained high carriage prices. The end result? After a decade of operation, there is only one radio station that has elected to contract with Digital One to be carried on its DAB platform of its own volition. There is enough bandwidth on the multiplex for a clutch more national stations, but that capacity remains unused.

Digital One was awarded a 12-year DAB licence in June 1998 to operate the “first and only national commercial digital multiplex licence”. It promised to pay the regulator a licence fee of £10,000 per annum. However, until very recently, if you had approached Digital One and asked the cost of putting a radio station on its multiplex, you would have been expected to pay more than £1 million per annum. Furthermore, if your proposed content competed directly with that of Digital One/Global Radio’s own digital radio stations, carriage might not have been offered, even at that price.

Therefore, it proves somewhat surprising to see today that Digital One issued a press release and published an advertisement inviting “expressions of interest from companies ready to contract and launch digital radio stations in 2009” on its DAB multiplex. It is even more surprising to learn that “capacity is available for mainstream stations, as well as more specialist channels appealing to a diversity of tastes and interests”. And it is shocking to read that “Digital One is reviewing its charges for capacity” and that “it is anticipated that prices will initially be set below Digital One’s 2008 rate card, in order to provide an incentive for approved applicants to invest in high quality services….”

The appropriate time to have published such a ‘call for content’ was June 1998, immediately after Digital One was awarded the DAB multiplex licence by the regulator. Perhaps then the sad story of the DAB platform’s slow development in the UK would have turned out differently. By now, Digital One might have fostered a broad range of audio content on the national DAB platform provided by a variety of producers, creating a ‘compelling consumer proposition’ that could have motivated the public to purchase DAB radios in significant numbers. But, unfortunately, it did not turn out that way and now, after a decade, DAB remains barely off the starting blocks.

Instead, for a decade, Digital One has clung on to the notions that:

• its monopoly over the DAB infrastructure is valuable in itself, even if the capacity is mostly unused (is a rail network valuable without trains?)
• its ‘gatekeeper’ role enables it to push its own digital services to listeners, at the expense of competitors and potential competitors
• high carriage fees for external users will quickly put them out of business
• listeners will lap up its own controlling shareholder’s content on the DAB platform, however little is invested in its production (one computer + 100 CDs = digital radio station)
• ‘control’ of a broadcast platform is alone sufficient to create a profitable monopolistic business

It hardly inspires confidence in the Digital One DAB platform that Global Radio’s predecessor, GCap Media, closed three of its own digital-only stations carried on its platform last year, and sold Planet Rock to an entrepreneur with no other radio interests. Neither is it a good advertisement for Digital One that its platform “providing coverage to 90% of the population of Great Britain” only succeeds in securing a peak half-hour audience of 79,000 adults for its last remaining digital-only audio contractor, Planet Rock.

Digital One’s licence for the “first and only national commercial digital multiplex licence” will expire on 14 November 2011. Would I sign a contract with a company that has unashamedly hogged the UK DAB national multiplex for its own selfish ambitions since 1998, but now suddenly wants to offer me capacity on its multiplex, just as its own life is expiring? My attitude would be: so you’ve screwed up almost a decade of your 12-year monopoly and lost everything but your shirt in the process, but now, on your deathbed, you want me to pay you good money for carriage on a platform that you yourself have helped ruin?

Digital One’s announcement today reminds me of those grocery stores that put cans of food in a 10p bargain bin that are not only damaged, but are also only a few days away from their expiry date. You expect me to buy these? I guess we will see if there is somebody out there desperate enough to take the bait. I can think of many radio formats unavailable on AM/FM that should have a national platform in the UK. Would any of them work on DAB? Ten years ago, yes, they might have done. Now, no. The DAB platform has proven to be a failure with consumers, and Digital One has played a very large part in making it so. And yet, Digital One has decided now to advertise its newfound enthusiasm for “enhanced choice, variety and innovation” on its DAB platform.

A case of: too much, too little, too late…….