28 February 2001

The Radio Authority is now in a position to respond to the invitation in paragraph 4.5 of the White Paper, "A New Future for Communications", to express views on the extending of diversity of radio services through ‘Access Radio’. To assist its own considerations, and with the agreement and participation of Government officials, the Authority organised a one-day Seminar on Access Radio on Monday, 12 February, which was attending by 160 people from all sides of the radio industry, community radio and other interested parties. The Authority will be publishing a full report on that Seminar in the next few days.

2. Subsequent to our submission to DCMS and DTI in June 2000, where we proposed the introduction of a separate tier of radio which we designated 'Access Radio', the Authority has enjoyed the benefit of a further range of representations and views. Taking account of these, the observations made in the White Paper, and discussion at the 12 February Seminar, the Authority now offers the following views on the five key issues which are relevant to the possible introduction of this new sector of radio. In the final section of this submission, we offer further observations about the practicality and timing of pilot experiments.

A Separate Access Radio Sector?

3. The Authority has considered again whether it is necessary to establish a separate sector of Access Radio. We are proud of our record in establishing small-scale Independent Local Radio (ILR) stations, and also of the work which has been done since the beginning of the last decade to institute and extend the Restricted Service Licence (RSL) scheme, both to short-term and long-term services. Many of these services would in other countries be called ‘community radio’. We are aware that our wish to give further encouragement to the growth of non-profit- distributing radio services, and public participation in (and access to) radio generally, might be achieved by further extending the RSL schemes. It would also be possible to amend section 105(a) of the 1990 Broadcasting Act to ease the financial criteria to which the Authority must have regard in awarding ILR licences.
4. On balance however we consider that the objectives of enhanced diversity of format and plurality of voice, greater public participation and the closer identification of non-established radio with schemes for social inclusion and social regeneration (aims which we believe Government shares) will be better served by establishing a separate sector of Access Radio. This would allow a distinct approach to be taken to stimulating and administering these services. A separate licensing regime could be put in place, better suited to the needs of such applicants than either the complex statutory scheme required for ILR licence awards or the entirely discretionary basis for RSLs. Such licences could be more effectively ring-fenced from the private sector; many of the more experimental licences awarded by the Radio Authority within the ILR system have drifted into commercial radio. A separate Access Radio sector, strictly not-for-profit, would also allow separate funding models to be introduced without compromising the rules applying to ILR services.
5. An inescapable risk in any OFCOM structure is that less salient media receive less attention. We will be arguing strongly for radio as a whole to be adequately protected against the risk of being submerged by television and telecommunications. Treating Access Radio as a separate sector, and an exciting new venture, will also allow the much smaller scale community based ventures to have an identity of their own, rather than be seen to be sustained merely by crumbs falling from the OFCOM table.

Platforms

6. Given the acute shortage of radio broadcasting spectrum, especially on FM, we had anticipated that the discussion about platforms for Access Radio might have been particularly prolonged. In the event, it now seems common ground that even on the present allocation of FM spectrum there should be the opportunity to establish perhaps half a dozen very small area coverage FM Access Radio stations in most urban areas, and rather more opportunity in more peripheral parts of the UK. The Authority hopes that further work on Government’s FM Spectrum Review will also identify the possibility of introducing still more services within the BBC national FM sub-bands. That, taken together with resources which exist on AM, should provide a reasonable spread of free-to-air broadcast opportunities for Access Radio, although not in any sense approach full coverage of the UK. In due course, we expect that Internet and other telephony delivered platforms will be attracting more widespread patronage and will be well-suited to Access Radio. Currently the economics of FM and AM are far more favourable than for systems using telephony networks. Similarly, there is the prospect of small-scale digital radio coverage when L-Band spectrum is released.
7. Making decisions about the allocation of spectrum between the BBC, ILR and Access Radio should be a matter for OFCOM. This gives greater emphasis to the Authority’s recommendation that all frequency planning should be undertaken by a single body within OFCOM, rather than by potentially competing teams in the Radio Authority and the BBC which is now the case. The considerable and established success of RSL licences in involving substantial numbers of people in making radio persuades the Authority to recommend that in any future allocation of small-scale FM frequencies OFCOM should continue to give priority to RSLs. Short-term licences remain the best way of providing the maximum possible access, with the widest range of structure and financial models, for the largest number of people, to radio and the electronic media generally.

Funding Access Radio Services

8. There are three options for funding Access Radio services. The sector could either be wholly supported by public funds; or allowed to compete unrestricted in the commercial market; or a mixed funding solution could be adopted. The Radio Authority rejects the first two options, both because they seem unlikely to work in practice and because they would confuse the clear distinction which exists at present between publicly funded BBC services and commercially funded ILR. The Authority therefore recommends that Access Radio should be enabled to fund itself from both public funding and commercial support. Public funding would come through subscription, local fundraising and from the proposed Radio Fund. (See paragraphs 10 - 12 below). The White Paper envisages (paragraph 4.9.3) that the present restriction on local authority funding might be removed. The Radio Authority supports this proposal, if the monies thus released would be channelled through a Radio Fund rather than going direct to a station operator. We retain strong reservations however about allowing local authorities to fund local broadcasting in an unmediated way, because of the ever-present risks of undue political influence and interference.
9. With regard to commercial funding of Access Radio, the Radio Authority believes that it is important not to set up this third sector as a potential competitor to ILR. It therefore proposes that Access Radio stations should be limited to drawing commercial revenues only from their local area. We anticipate that spot advertising would not be allowed, but that, as is the case with public service broadcasting in the United States, sponsorship by local companies would be allowed, carefully administered. It may be appropriate, as in other countries, to place a ceiling on the percentage of its revenue that an Access station may draw from commercial sources. We think it unlikely that Access Radio stations would represent real competition for the majority of ILR services. However, we recognise the genuine threat that such new services might pose to small-scale radio stations, especially in rural areas. Some small-scale ILR stations might wish to 'convert' to Access Radio and this should be made possible. In addition, we recommend that OFCOM should be given a duty to have regard for the existing local broadcasting ecology in making decisions where and on what terms to license Access Radio stations.

The Radio Fund

10. The Radio Authority repeats its recommendation that a Radio Fund should be established. We envisage that this would provide mainly start-up funding, but that in circumstances to be decided by the administrators of the Fund some on-going revenue support might be offered. We believe that funding support for radio stations from the Radio Fund should be given only to Access Radio licensees. However, we can envisage that the Fund might also support independent producers in order to generate socially valuable programming, and that it should also have the freedom to make grants to matters such as the maintenance of archives, which would benefit radio as a whole.
11. A number of sources of revenue for the Radio Fund have been canvassed. If Access Radio services are to be allowed (limited) opportunities to raise commercial revenue, the Radio Authority believes that a levy on ILR stations' revenue would be inappropriate. The best source of revenue generated from within the commercial sector lies in the cash bids and percentage of qualifying revenue paid by the INR licensees, which is currently remitted to the Consolidated Funds.
12. In summary therefore, we recommend that the sources of revenue for the Radio Fund should be the following:

• Central or local Government funding, with special emphasis upon social inclusion and local area regeneration;
• Lottery funding;
• Revenue drawn from the cash bids and the percentage of qualifying revenue paid by independent national radio licensees, currently remitted to the Consolidated Funds;
• Charitable foundations (it is of note that the Gulbenkian Foundation has indicated its likely support);
• Social funds, including for example the Gaelic Broadcasting Fund;
• European funds, including the European Social Fund which currently supports short-term radio projects in the UK
• Donations.

13. There is an obvious need to ensure a proper separation between those awarding licences, whom we assume will be in the Radio Broadcasting Division of OFCOM, and the grant allocators. The Radio Fund might be administered by a separate function within OFCOM, assuming that substantial and effective Chinese walls could be put in place. Alternatively, the Fund might be housed with an outside body. If it were to be within OFCOM, Government could be confident that a common set of standards were being applied, but it would be more difficult to establish and be seen to establish independence between licensing and funding. If the Fund were outside OFCOM, independence would be clear but consistency would be jeopardised. There is also the difficulty of finding an appropriate body to take on the administration of the Radio Fund without imposing high charges on the Fund for these functions. On balance, the Radio Authority recommends that efforts should be made to find an external body to take on responsibility for the Radio Fund, and OFCOM should be required to put in place proper co-ordinating arrangements to ensure consistency.

14. The Access Radio sector will include only non-profit distributing services. We recommend that a definition of such radio services should be established, ensuring that services within the Access Radio sector are both de facto and de jure non-profit-distributing and confirming the social purpose, in line with the White Paper’s intention to "extend the diversity of radio services."

15. A new licensing regime will need to be established. We recommend that, subject to the over-riding requirement of a not-for-profit sector, OFCOM should be given full scope to decide upon the length and other terms of licences, although the length of licences would not in any event exceed twelve years. Licences would carry a clear public service remit, and would be non-transferable. The regulator should also be given the duty of considering the position of local broadcasting as a whole in each locality in deciding where and on what terms to award Access Radio licences. (See above paragraph 9).

16. The detailed administration of Access Radio should be carried out within the anticipated Radio Broadcasting Division of OFCOM. Although there are some overlaps between local television and local radio services, they are very largely distinct in terms of the resources they require and the nature of services involved. There is a close relationship between ILR and Access Radio services which will need to be managed skilfully by those with a view of radio as a whole. Given the general agreement that Access Radio over the Internet will remain, at least for some time, a relatively insignificant platform compared with free-to-air broadcasting, it seems unlikely that technical convergence should be a conditioning factor in deciding the administrative arrangements within OFCOM. However, we hope that OFCOM will be given the freedom to change its own internal management structures as and when the impact of convergence increases.

Restricted Service Licences

17. The Radio Authority wishes to be sure that nothing which is done to introduce Access Radio should jeopardise the established success and relevance of short term RSLs. We therefore recommend that these should continue on the present basis. If Government accepts that Access Radio should be established on a mixed funding pattern, then it might be possible to accommodate long-term RSLs within this sector. In any event, we envisage that the administration of these services would be in common between RSLs and Access Radio and it would be for OFCOM to put in place the most appropriate administration at any given time.

18. In the June 2000 submission, the Radio Authority proposed that "once the direction of Government policy becomes more clearly known the Authority would propose to initiate a range of pilot experiments to cover as many aspects as possible of the proposed Access Radio sector, while accepting that new funding arrangements could not be in place and that any licensing would have to be regarded as temporary pending the establishing of a permanent structure". That remains our view. The Authority strongly recommends that Government should at an early stage give an indication whether or not it wishes to proceed with Access Radio. If so, the Authority will structure a range of experiments, which will need to be carefully researched and monitored, in order to establish a clear potential approach which OFCOM will be able to adopt when the legislation is passed. There are a number of potential operators of experimental services who are keen to go ahead, and they may be able to find funding for such pilots. The Radio Authority would itself propose to fund the administration of the pilot licences, but would seek external funding and input for the necessary research and monitoring. We hope that Government might be able to contribute in this last respect.