28 June 2001

Following detailed discussions with the radio industry, the Radio Authority has now developed and refined the proposals for the new rules to apply to radio ownership which it is proposing to Government to form part of the forthcoming Communications Bill. The Authority has been pleased to achieve a substantial measure of agreement with the Commercial Radio Companies Association (CRCA), representing radio licensees, and believes that these new rules are now sufficiently advanced to present no impediment to amendment to the radio ownership regime.

2. The Communications White Paper, ‘A New Future for Communications’ observed that Government intended to "consider the possibility of devising a simple fairer regime for radio ownership to replace the current radio points system, or revoking the scheme completely" ( 4.7).

3. The Authority originally proposed, and with support from the industry maintains, that the existing points system should be abolished in respect of UK-wide ownership. The existing ownership points scheme, limiting the number of radio licences that may be held by one company within the UK as a whole, has served its purpose. Under the new legislation it should be left entirely to the Competition Authorities, taking advice from OFCOM as necessary, to determine the appropriate limits on the accumulation of radio interests on a UK-wide basis.

4. The White Paper also urged that any new system should be "one which is simpler and fairer while still protecting the objectives of plurality and diversity" (4.7.2). The Authority has discussed and revised its original proposals together with CRCA and the radio industry. As now, it is clear that in a new legislative environment the Competition Authority will still apply competition rules to mergers and acquisitions in local markets. However, the Authority agrees with Government that it is in the public interest for the plurality of ownership and diversity in the sources of news, information and opinion to be preserved within individual local and regional areas. The proposed new rules are designed to meet the Authority’s expressed objective that, in each area with a well developed choice of radio services, there should be a minimum of three owners of local radio stations in addition to the BBC.

5. Any rules to ensure plurality and diversity are necessarily complex. The Authority believes that transparency is greatly assisted by having a clear formula and avoiding public interest tests which are by their nature discretionary and therefore less transparent. Further, the proposed new system is based on a simple formula using data freely available on-line and where simple ‘box filling’ can be used to test any proposed ownership arrangement.

6. The new system will apply in localities with three or more local licences. As now, there will be no restriction on one person owning two licences in a locality, although the Authority believes that any system concerned with ‘voice’ should be wave-band neutral, which represents a further liberalisation. The rules will apply in localities with three or more licences, although a ‘grandfather clause’ will be needed to avoid discriminating against existing holdings.

7. Overlapping areas will continue to be defined as at present, namely where the measured coverage area of one service contains 50% or more of the adult population of the measured coverage area of another a person will be deemed to ‘own’ a licence for the purpose of the rules if he/she has a shareholding which confers control, or has a material influence in that licence. It shall be for OFCOM to provide the necessary determination of what constitutes ‘material interest’.

8. Where someone wishes to acquire a licence in a qualifying area, the following procedure is recommended:

• the licence in question (licence X) is assigned a value of 4 points;

• every other local licence with coverage of 75% or more of the adult population served by licence X is assigned a value of 4 points also. This is regardless of whether that licence itself covers an area similar to, or larger than, that of licence X although any coverage outside the area served by licence X is not taken into account;

• every other local licence with coverage of between 25% and 75% of the adult population served by licence X is assigned a value of 2 points. Again, any coverage outside the area served by licence X is not taken into account;

• every other local licence with coverage of between 5% and 25% of the adult population served by licence X is assigned a value of 1 point;

• any local licence with coverage of less than 5% of the adult population served by licence X is not counted in assigning point values;

• the aggregate number of points assigned to the licences counted in these steps is therefore calculated;

• any person may own licences with a points value of up to 45% of the total included in this calculation

9. The Authority and CRCA have tested this formula in a range of existing localities. We find that it satisfactorily delivers the principle of three owners, plus the BBC, of local radio licences. Although we do not anticipate other than the broad principles being included on the face of the Communications Bill, in order to allow OFCOM the ability to develop the formula as circumstances evolve over time, we believe that this ownership regime will satisfactorily deliver both substantial liberalisation and the Government’s stated policy objectives of local plurality and diversity.

10. The Authority continues to discuss with CRCA the rules which might apply in respect of INR analogue licences, and digital radio services. Here again, the Authority is keen to ensure that the new ownership regime is as liberal and transparent as possible, whilst providing necessary protection for plurality and diversity of ownership. In respect of INR licences, the Authority continues to take the view that the principle of three owners of commercial radio licences supports the existing legislation, whereby a person may not hold more than one INR licence. For digital radio, we are working to establish a similar formula to that applying for analogue radio services locally and nationally, again to give force to the principle of at least three owners of such services in any locality.

11. For completeness, it may be helpful to set out here the Authority’s proposals, already made to Government, regarding the formulae to govern cross-media ownership between radio and newspapers and radio and commercial television (as set out by the Authority in its response to the White Paper dated 14 February 2001).

• no newspaper with more than 50% of a local market in terms of circulation should be able to own an analogue radio station in that market unless there exist at least two other analogue ILR radio stations – not so owned – except in areas with only two ILR stations where one may be owned by the newspaper;

• a newspaper should not be able to own a local digital multiplex in that area unless there is at least one other multiplex not so owned;

• no UK-wide newspaper should be able to own an analogue INR station or a national digital multiplex;

• no company should be able to own both a national commercial television licence and an analogue INR licence;

• no company should be able to hold a regional commercial television licence and an analogue ILR licence for the same area unless there exist at least two other analogue ILR stations not so owned, nor own a local digital multiplex in that area;

12. Subject to those rules, there should be no limitation on cross ownership between radio and newspapers, or radio and independent television, except those which apply to the concentration of radio licence or multiplex ownership itself, as are set out above.

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