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Phase 1 : developing a new framework

1.1 What is radio?

Radio is everywhere. It wakes us up in the morning and accompanies us around the house - in the bedroom, in the shower, in the kitchen - entertaining and informing us. It helps us get to work, advising us of traffic problems and calming our nerves as we commute, in the car or on public transport. For some of us, it keeps us going through the day, either at work or at home, providing company, entertaining us and making us think. At the end of the working day it helps us get home again. Only then does television, radio’s younger sibling, take over in the battle for our attention.

Radio has been around for over 80 years and, despite the arrival of new technologies, from television to computers and the internet, radio still plays a major role in our lives today. Every week, 90% of the population tunes into radio for at least five minutes and listening is on the increase. On average, we each listen to 22.9 hours of radio a week - almost as much time as we spend watching television.

But our relationship with radio is different from that with television. Radio is a secondary medium; we usually listen to it while we are doing other things - getting ready, commuting or working. That doesn’t mean, however, that we take it less seriously than television. Radio is a personal medium, which many of us feel very passionately about and we have a strong sense of ownership of the stations we listen to.

Now, the radio we have grown up with is changing. Digital technology means that not only are there more stations than ever to choose from, but we can listen to them in new ways - via our televisions, on the internet, on our mobile phones - as well as on the more traditional portable sets, hi-fis, boom-boxes and car radios. And the services digital radio can offer could change the medium forever - we are only at the start of the revolution, but already digital radio can offer much easier navigation between stations, the ability to pause and rewind live radio, the opportunity to listen at a time of our own choosing to programmes we have missed, the ability to download and store songs on our MP3 players or to see information about the track or programme we are currently listening to. This is only the beginning; future services could include video clips and much enhanced text services. In this way, radio is at the forefront of the media and technology convergence which has been talked about for so long.

As well as the growth of digital radio, we are about to see the explosion of a new tier of radio, community radio, which could offer radio for those groups in society which are not well served by the current offering, by providing innovative services which are less attractive to the commercial sector. It will also offer the opportunity for anyone who wishes to become much more involved in making radio programmes to do so and will offer a training ground for the next generation of talent. There will be room for experimentation and the level of success may vary; but many stations will be successful and, in years to come, will become a vibrant element in a radio system which embraces UK-wide, national, regional, local and community stations, each playing their own part in delivering variety and quality to radio listeners in the UK.

1.2 The radio industry

The radio industry as a whole is in a healthy state - the number of analogue stations in the UK has grown from 218 ten years ago to 326 today. UK radio industry revenues (including BBC funding) are £1.1bn a year, up from £0.6bn ten years ago, and the latest listening figures are over 8% higher than five years ago.

However, the radio industry in the UK is changing rapidly:

• digital radio (including DAB) is growing in importance as new stations launch and listening on the new platforms grows - there are now 210 stations broadcasting on DAB digital radio, 85 on digital satellite television, 30 on digital terrestrial television and thousands available over the internet;
• the Communications Act 2003 paved the way for consolidation both within the industry and across media;
• radio is spearheading the drive towards convergence as it becomes available on new devices and becomes integrated with data services; and
• community radio has been given the go-ahead and could have a significant impact on radio listening and the radio industry.

These changes will undoubtedly bring benefits for consumers, the radio industry and the UK.

But all is not plain sailing:

• increasing competition will put pressure on existing analogue commercial stations, particularly the smaller ones; and
• while digital radio as a whole is starting to make an impact, take-up of the DAB digital radio platform has been slower than the industry would have liked.

1.3 Ofcom’s statutory duties and regulatory principles

Our review needs to be based upon Ofcom’s statutory duties and principles.

Ofcom’s principal statutory duty is “to further the interests of citizens in relation to communications matters; and to further the interests of consumers in relevant markets, where appropriate by promoting competition”.

With respect to radio, Ofcom has a specific duty, as required by legislation, to ensure “the availability throughout the UK of a wide range of television and radio services which (taken as a whole) are both of high quality and calculated to appeal to a variety of tastes and interests.”

In addition, the Communications Act 2003 introduced a new duty on Ofcom in relation to localness in analogue radio. Ofcom must carry out its functions in the manner it considers is “best calculated to secure that:

• programmes consisting of or including local material are included in such services but, in the case of each such service, only if and to the extent (if any) that Ofcom considers appropriate in that case; and
• where such programmes are included in such a service, what appears to Ofcom to be a suitable proportion of them consists of locally-made programmes.”

Ofcom is also obliged to draw up guidance as to how it considers that these requirements should be satisfied and earlier this year we published an interim set of those guidelines, on which we consulted.

Having regard to its statutory duties, Ofcom has defined its mission as furthering the interests of citizen-consumers as the communications industries enter the digital age.

In order to achieve this mission, Ofcom aims to follow regulatory principles which state that we will:

• regulate with a clearly articulated and publicly reviewed annual plan, with stated policy objectives;
• intervene where there is a specific statutory duty to work towards a public policy goal which markets alone cannot achieve;
• operate with a bias against intervention, but with a willingness to intervene firmly, promptly and effectively where required;
• strive to ensure our interventions will be evidence-based, proportionate, consistent, accountable and transparent in both deliberation and outcome;
• always seek the least intrusive regulatory mechanisms to achieve our policy objectives;
• research markets constantly and aim to remain at the forefront of technological understanding; and
• consult widely with all relevant stakeholders and assess the impact of regulatory action before imposing regulation upon a market.

To do this, we will:

• balance the promotion of choice and competition with the duty to foster plurality, informed citizenship, protect viewers, listeners and customers and promote cultural diversity;
• serve the interests of the citizen-consumer as the communications industry enters the digital age;
• support the need for innovators, creators and investors to flourish within markets driven by full and fair competition between all providers; and
• encourage the evolution of electronic media and communications networks to the greater benefit of all who live in the United Kingdom.

1.4 The purpose of this review

There are two immediate priorities for this review to address:

One is the requirement for us to review the development of digital radio. Section 67 of the Broadcasting Act 1996 requires the Secretary of State to keep under review the development of digital radio, for the purpose of considering for how long it would be appropriate for sound broadcasting services to continue to be provided in analogue form. The Act requires the review to look at:-

1. the provision in the UK of radio multiplex services;
2. the availability in the UK of digital sound programme services and the availability there in digital form of national services (within the meaning of Part III of the Broadcasting Act 1990) and the sound broadcasting services of the BBC; and
3. the ownership or possession in the UK of equipment capable of receiving the services referred to in sub-paragraph (ii) (above) when broadcast or transmitted in digital form.

The Broadcasting Act 1996 also requires the review to look at the likely future extent of such provision, such availability and such ownership or possession.

Ofcom was asked by the Secretary of State to report to her on these matters by 31st October 2004. We duly presented that report, which is incorporated into this review in section 7 . While the statutory review was framed in terms of DAB digital radio and this remains the primary focus of the report, other platforms such as digital television and the internet now offer digital radio and we consider them within the review.

The other immediate priority is the requirement set out in section 314 of the Communications Act for Ofcom to produce guidance as to how we consider that the requirements for local material and local production in commercial radio should be met. We address these issues in section 6.

Beyond these two immediate priorities, in preparing this review it became clear that these two aspects of the radio market cannot be considered in isolation. The analogue and digital radio sectors are very closely related, being operated largely by the same companies and sharing some of the same content, so it does not make sense to review digital radio without considering the analogue market. In addition, the major role played by the BBC in radio, accounting for over half of total radio listening and almost half of total radio funding, means that any review which considered only commercial radio would be deficient in its understanding of the factors which influence industry and audience behaviour.

These factors, together with the changes taking place in the industry in general, suggested the need for an overarching review of the future direction of the UK radio industry.

This review, therefore, considers the whole radio market, both the commercial sector and the BBC, and both the analogue and digital sectors. It aims not only to address the immediate priorities but also to raise some questions about where radio is headed in the long-term, including:

• whether there are particular public purposes for radio that require intervention in the market (either through the public or commercial sectors) and how these are best delivered;
• whether digital radio is likely to change this picture - recognising that digital radio is still at a very early stage of its development; and
• what the long-term strategic aims of regulation of the radio market should be.

We have structured this review into two main phases:

• Phase 1 addresses our immediate priorities as required by statute - consideration of localness in analogue commercial radio and a review of the development of digital radio.

It goes on to begin the debate about the rationale for intervention in the market and asks whether a clear set of public purposes can be identified for radio. It suggests a strategic framework for regulation in radio and explains how commercial radio, community radio and restricted service licences (RSLs) fit into that overall strategy. It concludes by setting out our plans for further licensing of radio services, including the possibility of new medium wave licences;

• Phase 2, next year, will aim to reach conclusions on the proposals in phase 1, following consultation, and will try to answer some of the questions raised about the longer-term, particularly as regards the public purposes of radio and how they are best delivered.

Overall, the review aims to set out, for consultation, a regulatory framework which balances the needs for healthy competition, range and quality, valued services which meet public purposes and the provision of local services, and facilitates moves towards a digital future for radio.

In drawing up this review, we have already held informal discussions with many industry players, but the initial findings and proposals of this review are now presented for formal consultation.

Our key questions for this consultation are listed at the end of this report. We look forward to a healthy debate.

• Radio - Preparing for the future [pdf]
• Appendix A [pdf]
  Full print version
• Radio - Preparing for the Future: Phase 1: Developing a New Framework. [pdf]
  Appendix B: results of audience research
• Appendix C [pdf]
  Full print version
• Appendix D [pdf]
  Full print version
• Appendix E [pdf]
  Full print version
• Appendix F [pdf]
  Full print version
• Plain English Radio Review
• Welsh Radio Review [pdf]
  Full print version

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