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'34 Facts About DAB Radio Switchover' by Grant Goddard

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Analysis of available market data to demonstrate that a UK government decision in December 2013 to implement DAB digital radio switchover will be a practical impossibility, written by Grant Goddard in September 2013 for UKRD Group Ltd.

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'34 Facts About DAB Radio Switchover' by Grant Goddard

  1. 1. 34 FACTS ABOUT DAB RADIO SWITCHOVER Grant Goddard September 2013 www.grantgoddard.co.uk
  2. 2. 34 Facts About DAB Radio Switchover Page 2 ©2013 Grant Goddard 1. 67% of new radio receivers purchased in the UK are analogue (and cannot receive DAB) 2. The DAB platform accounts for only 14% of listening to local radio stations, making DAB switchover impractical for 30m local radio users 3. 80% of listening on the DAB radio platform is to stations that already broadcast on analogue FM/AM radio 4. 93% of consumers are already satisfied with the existing choice of radio stations in their area 5. UK unit sales of DAB radio receivers peaked in 2008 and have since been in decline 6. The average retail price of a portable DAB radio receiver is three times that of a portable analogue radio receiver 7. Only 19% of radio users are likely to buy a DAB radio receiver in the next 12 months 8. Half of UK consumers who are unlikely to buy a DAB radio receiver feel they "had no need for the service" 9. The low 3% to 5% take-up of DAB radio receivers in vehicles renders DAB radio switchover impractical as 21% of radio listening is in cars 10. Consumer take-up of DAB radio is unevenly distributed by region, age, socio- economic group and ethnicity in the UK 11. Consumer organisations have expressed serious concerns about government proposals for DAB radio switchover 12. DAB radio is unavailable on any mobile phone or smartphone retailed in the UK, although FM radio is available on 56% of phones 13. DAB radio consumer take-up has stalled, whilst listening to radio via mobile phones is growing rapidly 14. A DAB radio receiver is the platform with the lowest take-up for consumers to access digital radio 15. DAB coverage of UK households and roads, particularly for local radio stations, is far below that achieved by FM 16. The DAB radio platform offers a choice of relatively few additional radio stations, particularly outside London 17. The DAB radio system offers insufficient licensed spectrum to accommodate all existing local commercial radio stations 18. The DAB radio system discriminates against small, local commercial radio station in terms of transmission costs 19. The DAB radio system discriminates against small, local commercial radio station in terms of suitable coverage areas 20. Belated planned improvements to local DAB transmitter coverage will prove costly and still not achieve parity with FM
  3. 3. 34 Facts About DAB Radio Switchover Page 3 ©2013 Grant Goddard 21. Continuation of simultaneous transmission of radio stations on FM/AM and on DAB incurs significant costs, particularly for small local stations 22. Renewal of local commercial radio licences for only 7 years reduces the certainty for owners and impacts their ability to invest long-term 23. Not one digital-only broadcast radio station has yet reported an operating profit and many have closed 24. The existing FM radio transmission system achieves 99% UK population coverage, is robust and cost-effective 25. There is no proposed alternative use for FM radio spectrum, and therefore no 'digital dividend' to be gained by UK citizens 26. Switch-off of existing BBC and commercial radio transmitters on FM would enable pirate radio stations to flourish 27. After FM radio transmissions were launched in the UK in 1955, it took several decades for FM take-up to surpass AM radio 28. The main criterion for a government decision about DAB radio switchover does not measure DAB radio listening 29. Digital radio take-up data cited in Digital Britain were altered to make DAB radio switchover appear more quickly attainable 30. The government's Impact Assessment of DAB radio switchover failed to consider several significant costs 31. A new cost/benefit analysis intended to inform the government decision about DAB radio switchover is not being produced independently 32. Industry forecasts of anticipated consumer take-up of DAB radio all proved to be very over-optimistic 33. DAB radio is an 'interim' technology from the 1980s that was already outdated when introduced to UK consumers in 1999 34. The Communications Minister receives more correspondence from consumers complaining about DAB radio than about any other issue
  4. 4. DAB RADIO SWITCHOVER FACT no. 1 67% of new radio receivers purchased in the UK are analogue (and cannot receive DAB) Ofcom reported in 2013 that:1  67% of new radio receivers sold are analogue and do not incorporate DAB. 2 However, these data exclude radios purchased by UK consumers that are incorporated within mobile phones and smartphones. The outcome of adding sales of mobile phone that incorporate radios (56% of the total 30m units sold per annum) to the data is that approximately:3  19 million devices with analogue radios are purchased in the UK per annum  2 million devices with DAB radios are purchased in the UK per annum. Additionally, most newer models of DAB radio also include FM reception. As a result, the number of devices with analogue radio purchased annually in the UK outnumbers DAB radios by at least ten-to-one. The impact on the household stock of radios is even more significant over time because, according to Ofcom:  Portable radios have a life expectancy of a decade or more  70 million working analogue radios purchased by UK consumers during the last 12 years alone are still available for use in homes.4 1 Ofcom, Communications Market Report 2013, 1 August 2013, Figure 3.54, p.251 2 ibid. 3 source: RAJAR, MIDAS 9 [in DCMS, Report On Role Of Other Digital Platforms: Digital Radio Action Plan Report, February 2013, para.3.2.1, pp.10-11 http://www.telegraph.co.uk/technology/mobile-phones/9808813/O2-to-abandon-mobile-chargers.html 4 Ofcom, The Communications Market: Digital Radio Report, 17 October 2012, para.3.3, p.10 34 Facts About DAB Radio Switchover Page 4 ©2013 Grant Goddard
  5. 5. DAB RADIO SWITCHOVER FACT no. 2 The DAB platform accounts for only 14% of listening to local radio stations, making DAB switchover impractical for 30m local radio users 5 Ofcom analysis of RAJAR audience data in Q1 2013 reported that:6  Only 21% of listening to local commercial radio stations was via digital platforms  Only 18% of listening to BBC local radio stations was via digital platforms. RADIO LISTENING VIADAB PLATFORM (% share of listening) 0% 5% 10% 15% 20% 25% 30% 35% Q22008 Q32008 Q42008 Q12009 Q22009 Q32009 Q42009 Q12010 Q22010 Q32010 Q42010 Q12011 Q22011 Q32011 Q42011 Q12012 Q22012 Q32012 Q42012 Q12013 All Radio National Commercial Radio BBC Network Radio Local Commercial Radio BBC Local Radio 7 However, DAB is only one of the available digital radio platforms:8  Only 13% of listening to local commercial radio stations was via DAB radio  Only 14% of listening to BBC local radio stations was via DAB radio. The proportion of listening to local radio via DAB is only half that achieved by national commercial radio (32%) and BBC network radio (28%) and has been growing more slowly. The outcome is that migration of local radio listening (commercial and BBC) has made insufficient progress for DAB radio switchover to be a realistic proposition for the more than half of the UK population that uses local radio.9 5 Ofcom, Communications Market Report 2013, 1 August 2013, Figure 3.60, p.248 6 ibid., para.3.3.3, p.248 7 source: RAJAR, Q2 2008 to Q1 2013 8 source: RAJAR, Q1 2013 9 ibid. 34 Facts About DAB Radio Switchover Page 5 ©2013 Grant Goddard
  6. 6. DAB RADIO SWITCHOVER FACT no. 3 80% of listening on the DAB radio platform is to stations that already broadcast on analogue FM/AM radio In 2011, research company Ipsos MORI commented:10  “18.5 million adults are DAB owners, yet only an estimated 12.6 million are confirmed listeners. What are the other 6 million doing with their DAB sets? Further investigation shows that there are only 7.4 million listeners to digital-only stations, of which under half (3.3m) comes from DAB listening. This suggests that around three quarters of all DAB listeners are tuning to stations readily available on a traditional analogue transistor”. In 2013, RAJAR radio audience data demonstrated that:11  Only 20% of listening via digital platforms is to digital-only radio stations  The remaining listening via digital platforms is to radio stations that are already broadcasting on analogue. Radio 5 Live Radio 4 Extra Local Radio Asian Network 1Xtra 5 Live Extra 6 Music Radio 2 Radio 1 Radio 4 Radio 3 World Service 12 Digital-only radio stations have failed to attract significant audiences:13  The BBC's five digital radio stations launched in 2002 and have been marketed extensively on television, analogue radio and in the press  These five digital radio stations collectively attract only 7% of UK listening to BBC radio in 2013. The outcome has been that the lack of consumer appeal of digital-only radio stations offered by the DAB platform has failed to drive take-up to anticipated levels. 10 http://www.ipsos-mori.com/newsevents/blogs/mediactlightbites/632/Does-the-nation-love-their-DAB-radio.aspx 11 analysis of RAJAR, Q2 2013 data [digital-only radio stations as % of digital radio listening] 12 source: RAJAR, Q2 2013 13 source: RAJAR, Q2 2013 34 Facts About DAB Radio Switchover Page 6 ©2013 Grant Goddard
  7. 7. 34 Facts About DAB Radio Switchover Page 7 ©2013 Grant Goddard DAB RADIO SWITCHOVER FACT no. 4 93% of consumers are already satisfied with the existing choice of radio stations in their area The technological constraints of the analogue television broadcast system had limited viewers to a choice of four or five different stations. Pent-up consumer demand for a wider range of channels led to widespread take-up of new satellite, cable and digital television platforms. The same drivers have not existed for the analogue radio broadcasting system. Ofcom research found that:  14 analogue radio stations are available to the average UK consumer (in London, 29 stations are available)14  93% of UK consumers are satisfied with the choice of available radio stations in their area15  69% of UK consumers listen to only one or two radio stations in an average week.16 As a result, there appears to be little unfulfilled consumer demand for additional radio stations offered by the DAB platform. Ofcom research found that what consumer demand did exist for new radio stations was for those providing local content:17  "When respondents were offered the option of more local radio stations or more national radio stations, twice as many opted for new ‘local’ rather than ‘national’ services. Respondents voiced an even stronger preference for local presenters, rather than nationally networked presenters, to be heard on local radio". However, the regulatory strategy adopted for DAB radio envisaged that new national digital radio stations would drive consumers to the platform, thus ignoring the results of consumer research. The outcome has been that:  New national radio stations launched on the DAB platform have failed to attract significant audiences18  No new commercial radio station launched on the DAB platform has yet proven financially successful. 14 Ofcom, Communications Market Report: English Regions, 2009, Figure 4.1, p.83 15 Ofcom, Communications Market 2010, 19 August 2010, Figure 3.42, p.224 16 Ofcom, Nations & Regions Communications Market, May 2008 17 John Myers, An Independent Review Of The Rules Governing Local Content On Commercial Radio, p.50 [source: Ofcom, Radio: Preparing For The Future, Appendix A, October 2005, Figure 19, pp.28-9] 18 source: RAJAR, Q2 2013 [1.5% share of listening achieved by BBC 6Music is the largest]
  8. 8. DAB RADIO SWITCHOVER FACT no. 5 UK unit sales of DAB radio receivers peaked in 2008 and have since been in decline UK sales of DAB radio receivers peaked at 2,080,000 units in 2008. In the four subsequent years, unit sales have been below 2 million.19 Ofcom noted in August 2013 that:20  "DAB radio set sales, many with analogue capability, remained flat at 1.9 million sets for the fourth year in succession …"  "But although set sales have fallen, there are now many more ways of listening to radio – listening opportunities have evolved through easy access via other devices". 21 UK adults' claimed access to a DAB radio receiver at home slowed to 44% in 2013.22 Ofcom commented in August 2013:23  "The rate of take-up growth in DAB ownership has slowed"  "While this may be due to the recession affecting the consumer electronic market in general, it is possible that listeners are realising that DAB sets are not the only way to access digital radio, and are using other devices"  "While the internet, digital television and smartphones are all multifunctional devices, DAB [receiver] sets serve only a single purpose; this may explain the slowing rate of take-up". Consumer interest in purchasing DAB radio equipment appears to have subsided, unsurprising as the technology was launched 14 years ago. 19 source: GfK data 20 Ofcom, Communications Market Report 2013, 1 August 2013, Para.3.3.4, p.250 21 ibid., Figure 3.19, p.228 22 source: RAJAR/Ipsos MORI/RSMB 23 Ofcom, Communications Market Report 2013, 1 August 2013, Para.3.1.4, p.228 34 Facts About DAB Radio Switchover Page 8 ©2013 Grant Goddard
  9. 9. DAB RADIO SWITCHOVER FACT no. 6 The average retail price of a portable DAB radio receiver is three times that of a portable analogue radio receiver The retail price of DAB radio receivers was relatively high when the platform was launched in the UK in 1999. Consumers were promised that prices would fall considerably as DAB take-up grew. 24 However, Ofcom noted in 2012 that the average price of a portable DAB radio receiver has stalled at £50 to £60 in recent years, much higher than an equivalent analogue radio. Meanwhile, the cost of the average DAB car radio has increased in recent years to £117.25 DCMS found that the average price of a portable analogue radio in 2011 was £17, three times less than the average price of a DAB portable radio.26 Ofcom's latest estimate is that UK consumers own 101m to 120m radio receivers (excluding FM radio in mobile phones). It estimates that only 12% to 15% of these are presently DAB.27 If consumers were required to replace all their existing analogue radios with new DAB radios, they would collectively have to spend at least £4bn.28 Additionally, households would have to scrap around 100m working analogue radios. 24 Ofcom, The Communications Market: Digital Radio Report, 17 October 2012, Figure 8, p.9 25 ibid., para.3.2, p.9 26 DCMS, Cost-Benefit Analysis Of Radio Switchover: Methodology Report, 2 July 2012, p.15 27 Ofcom, The Communications Market: Digital Radio Report, 17 October 2012, Figure 10, p.12 28 calculation: 85% x 101m x £52 34 Facts About DAB Radio Switchover Page 9 ©2013 Grant Goddard
  10. 10. DAB RADIO SWITCHOVER FACT no. 7 Only 19% of radio users are likely to buy a DAB radio receiver in the next 12 months 29 Ofcom research found that:30  Two-thirds of consumers without a DAB radio receiver say they are unlikely to buy one during the next 12 months  "only 19% of non-DAB listeners are likely to buy a DAB radio in the next 12 months, the same level as last year". Government-commissioned research found that those who are less likely to purchase a DAB radio during the next 12 months are:31  Aged 18 to 29  Aged 60 and over  In the working class socio-economic groups  From urban areas  Those who listen to fewer radio stations  Those who believe that a DAB radio receiver is too expensive at the present time. 29 Ofcom, Communications Market Report 2013, 1 August 2013, Figure 3.56, p.252 30 ibid., para.3.3.4, p.251 31 London Economics, Digital Radio Switchover: Consumer Research To Inform The Cost Benefit Analysis, April 2011, p.38 34 Facts About DAB Radio Switchover Page 10 ©2013 Grant Goddard
  11. 11. DAB RADIO SWITCHOVER FACT no. 8 Half of UK consumers who are unlikely to buy a DAB radio receiver feel they "had no need for the service" 32 Ofcom research found that:33  "Of the 49% of respondents who said they were unlikely to buy a DAB [radio receiver] set, the most frequent reason, cited by half of respondents, was that they felt 'no need for the service' (48%)"  "This was followed by being 'satisfied with existing services' (36%)". Research commissioned by the government found that:34  "… the most common reason for not buying a [DAB] digital radio was that consumers are happy with the existing analogue service"  "Pensioners were especially likely to say that they are happy with their current analogue radio"  "… a high proportion of those who do not have a [DAB] digital radio also believe that digital radio is too expensive at present (81% either agree or strongly agree with this statement)"  "… almost 60% of pensioners are 'very unlikely' to or 'certainly not' going to purchase a [DAB] digital radio in the next year"  "The [over 70s] focus group also found that having a greater number of stations is not very attractive … Respondents are loyal to three or four particular stations and are not very interested in moving to more niche channels". 32 Ofcom, The Communications Market: Digital Radio Report, 17 October 2012, Figure 29, p.25 33 ibid., para.5.1, p.25 34 London Economics, Digital Radio Switchover: Consumer Research To Inform The Cost Benefit Analysis, April 2011, p.viii, para.2.4.2, p.15 & para.2.4.3, p.17 34 Facts About DAB Radio Switchover Page 11 ©2013 Grant Goddard
  12. 12. DAB RADIO SWITCHOVER FACT no. 9 The low 3% to 5% take-up of DAB radio receivers in vehicles renders DAB radio switchover impractical as 21% of radio listening is in cars Ofcom's most recent analysis of DAB radio take-up in vehicles noted:35  "In 2011, we [had] estimated that the take-up of DAB tuners in cars stood at little over 1%"  "We broadly estimate [in 2012] that take-up of DAB tuners in vehicles is between 3% and 5%, but this figure is the subject of some uncertainty". The government's DCMS noted:36  "DAB take-up for car and commercial vehicle radios has been substantially behind that for household radios …"  "… penetration levels in the first quarter of 2012 [were] at 3% of the total vehicle parc"  "Digital conversion of radios in the existing vehicle parc has thus far been slow to take- off". 37 The considerable expense (average price: £117 for receiver, plus labour charges) of replacing a working FM/AM radio in an existing car with a DAB radio is considered to be a significant barrier to improving consumer take-up.38 Ofcom noted:39  "Although the average price for car DAB sets fell dramatically between 2007 and 2008, it has increased over the last two years after a period of stability to stand at £117 …" Listening in vehicles accounts for 21% of total radio listening in the UK. The outcome is that the low take-up of DAB receivers in cars presents a major stumbling block to DAB radio switchover.40 35 Ofcom, The Communications Market: Digital Radio Report, 17 October 2012, para.3.3, pp.10-11 36 DCMS, Cost-Benefit Analysis Of Radio Switchover: Methodology Report, 2 July 2012, p.12 37 Ofcom, The Communications Market: Digital Radio Report, 17 October 2012, Figure 8, p.9 38 ibid. 39 ibid., para.3.2, p.9 40 Ofcom, The Communications Market: Digital Radio Report, 17 October 2012, Figure 3.53, p.250 34 Facts About DAB Radio Switchover Page 12 ©2013 Grant Goddard
  13. 13. DAB RADIO SWITCHOVER FACT no. 10 Consumer take-up of DAB radio is unevenly distributed by region, age, socio-economic group and ethnicity in the UK A government-commissioned report found that, amongst internet users:41  "… the extent of [DAB] digital radio ownership varies between different groups"  "In particular, those in the working class and lowest grade socio-economic groups and those under the age of 30 are less likely to own a [DAB] digital radio"  "Conversely, over 60% of those in the middle and upper middle class socio-economic groups own a [DAB] digital radio"  "Those of white British origin are more likely to own a [DAB] digital radio than other ethnicities"  "Those living in urban areas are slightly more likely to own a [DAB] digital radio than those in rural areas"  "… the typically higher prices of [DAB] digital radios may be dissuading those with lower incomes from purchasing them". An Ofcom report confirmed some of these findings:42  "Households in the DE socio-economic group are the least likely to say they can access digital radio services in the home (56%) …"  "… households in the AB socio-economic group are the most likely to say they can do so (73%)". 43 In terms of location, Ofcom reported that:44  "DAB [radio receiver] set take-up was highest in south-east England: Surrey (54.4%), Hertfordshire, Bedfordshire and Buckinghamshire (49.8% and London (49.6%)"  "[DAB radio receiver] set ownership was lowest in the Scottish Borders (25.8%), Northern Ireland (26.2%) and Cumbria (27.6%) …" 34 Facts About DAB Radio Switchover Page 13 ©2013 Grant Goddard
  14. 14. 45 For digital radio consumer usage, Ofcom reported that:46  "53% of radio listeners living in AB [group] households claimed to have listened through a digital radio platform …"  "those in the DE group were least likely to listen weekly on a digital device (39%)". The outcome is that the present availability and usage of DAB radio is unevenly distributed within the UK by region, age, socio-economic group and ethnicity. 41 London Economics, Digital Radio Switchover: Consumer Research To Inform The Cost Benefit Analysis, April 2011, pp.vii & 6 42 Ofcom, The Consumer Experience Of 2012, January 2013, para.5.3.5, p.55 43 Ofcom, The Communications Market: Digital Radio Report, 17 October 2012, Figure 14, p.16 44 ibid., para.3.4, p.14 45 ibid., Figure 18, p.18 46 ibid., para.4.1, p.18 34 Facts About DAB Radio Switchover Page 14 ©2013 Grant Goddard
  15. 15. 34 Facts About DAB Radio Switchover Page 15 ©2013 Grant Goddard DAB RADIO SWITCHOVER FACT no. 11 Consumer organisations have expressed serious concerns about government proposals for DAB radio switchover Ofcom's Communications Consumer Panel noted:47  "Given the current rate of take-up, the Panel has significant reservations about the possibility of [DAB radio] switchover in 2015."  "… there should be no decrease in the consumer experience as a result of the switch from FM to DAB"  "There should be no consumer detriment as a result of DAB switchover". The government's Consumer Expert Group concluded:48  "The [government] take-up criterion should compare like-for-like listening platforms and measure DAB listening only"  "A digital switchover date should only be announced when no more than 30 per cent of listening remains on analogue"  "The target date for a digital switchover should be revised upwards as 2015 is realistically far too early for the necessary preparation to be put in place for consumers"  "A switchover date cannot be announced until there is a solution to in-vehicle conversions …" Consumer Focus concluded:49  "The case for switching to digital radio has not been made, from the consumer perspective"  "Consumer Focus is not convinced of the consumer benefits of switching to digital radio". Which? concluded:50  "Our main concern about digital radio switchover relates to use of in-car radios"  "From a reception point of view, it's certainly the case that in-car DAB suffers from patchy reception at the moment …" Voice Of The Listener & Viewer concluded:51  "VLV considers that the wrong technology has been chosen. DAB is 1990s technology that the rest of Europe has superseded"  "We consider that there should be in excess of 80% of the population listening regularly to DAB broadcasts (i.e. listeners not households) before switchover can begin, a similar number to those that had made the move to digital at the start of TV switchover". 47 Communications Consumer Panel, Communications Consumer Panel Response To Ofcom Consultation: An Approach to DAB Coverage Planning, [undated], p.1 48 DCMS Consumer Expert Group, Digital Radio Switchover: What Is In It For Consumers?, 14 September 2010, Summary of Recommendations, pp.8-10 49 House of Lords, Select Committee On Communications, Digital Switchover Of Television And Radio In The United Kingdom, Report With Evidence, 29 March 2010, pp.117 & 120 50 ibid., p.206 51 ibid., p.203
  16. 16. DAB RADIO SWITCHOVER FACT no. 12 DAB radio is unavailable on any mobile phone or smartphone retailed in the UK, although FM radio is available on 56% of phones In 2006, a mobile phone model (the 'Lobster') incorporating DAB radio was launched in the UK by Virgin Mobile and BT. The companies' market research for the device noted that:52  "DAB digital radio on mobiles is an essential success criteria for a market making the [DAB radio] switchover". However, sales were poor and the product was abandoned by 2007. Since then, not a single model of mobile phone or smartphone has been marketed in the UK that incorporates DAB radio. However, the majority of mobile phones in the UK include FM radio, according to RAJAR data:53  56% of mobile phone owners have a mobile capable of receiving FM radio  36% of mobile phone owners have a mobile capable of receiving radio streamed via the internet  35% of mobile phone owners use their mobile phone to listen to live radio. Approximately 30 million mobile phones per annum are sold in the UK. These unit sales far exceed the 5.8 million traditional radio receivers sold in the UK in 2012.54 Growing consumer take-up of smartphones is increasing users' access to radio/audio services:55  43% of smartphone owners have downloaded a radio 'app'. The outcome is that the DAB radio platform remains completely unavailable on mobile phones and smartphones. This fact, combined with very low DAB in-car take-up, implies that DAB radio usage outside of the home/workplace must be minimal. 52 Dominic Stowbridge, Insights Following The UK Launch Of The First Mobile Phone With DAB Radio, presentation, October 2007. p.14 53 source: RAJAR, MIDAS 9 [in DCMS, Report On Role Of Other Digital Platforms: Digital Radio Action Plan Report, February 2013, para.3.2.1, pp.10-11] 54 http://www.telegraph.co.uk/technology/mobile-phones/9808813/O2-to-abandon-mobile-chargers.html Ofcom, Communications Market Report 2013, 1 August 2013, Figure 3.54, p.251 55 RAJAR, MIDAS 9 [in DCMS, Report On Role Of Other Digital Platforms: Digital Radio Action Plan Report, February 2013, para.3.2.1, pp.10-11] 34 Facts About DAB Radio Switchover Page 16 ©2013 Grant Goddard
  17. 17. DAB RADIO SWITCHOVER FACT no. 13 DAB radio consumer take-up has stalled, whilst listening to radio via mobile phones is growing rapidly 56 Ofcom market research found that, between 2009 and 2013:57  Consumer take-up of DAB radio increased only marginally from 23% to 25% of adults  Consumer take-up of listening to radio via the internet increased from 15% to 22%  Consumer take-up of listening to radio via mobile phones doubled from 10% to 20%. Ofcom noted that "in the past year alone, radio listening on a mobile phones has jumped from 13% in 2012 to 20% in 2013".58 59 Ofcom's 'technology tracker' market research found that:60  Take-up of DAB radio equipment had declined from its peak of 40% in 2009  Smartphone take-up had accelerated rapidly since 2011 to 51% of individuals. 56 Ofcom, Communications Market Report 2013, 1 August 2013, Figure 3.13, p.223 57 ibid., para.3.1.4, p.223 58 ibid. 59 ibid., Figure 1.3, p.24 60 ibid., para.1.3.3, pp.23-34 34 Facts About DAB Radio Switchover Page 17 ©2013 Grant Goddard
  18. 18. DAB RADIO SWITCHOVER FACT no. 14 A DAB radio receiver is the platform with the lowest take-up for consumers to access digital radio 61 Ofcom research demonstrated that:62  DAB radio receivers have the lowest take-up of all available platforms for consumers to receive digital radio (44% of households)  Smartphone take-up is 51% in 2013 and growing rapidly. The stalled consumer take-up of DAB radio receivers (growth of 1 percentage point per annum in 2013) has been counterbalanced by the rapid take-up of smartphones (growth of 12 percentage points per annum in 2013) capable of accessing radio via broadband and/or 3G/4G.63 A report by DCMS published in 2013 noted that:64  "Over half of all UK households have three or more internet-enabled devices"  "Over 600,000 internet radios have been sold to date in the UK"  "52% of households have a games console … Gaming devices are the second most popular type of internet-enabled device"  "… 208,000 internet radios were sold in the year July 2011 to June 2012. This was a 37.5% increase on the previous year"  "… IP-delivered audio and radio will continue to grow strongly". 61 Ofcom, Communications Market Report 2013, 1 August 2013, Figure 3.20, p.228 62 ibid., para.3.1.4, p.228 63 ibid. 64 DCMS, Report On Role Of Other Digital Platforms: Digital Radio Action Plan Report, February 2013, para.3.1, pp.8-9 34 Facts About DAB Radio Switchover Page 18 ©2013 Grant Goddard
  19. 19. DAB RADIO SWITCHOVER FACT no. 15 DAB coverage of UK households and roads, particularly for local radio stations, is far below that achieved by FM 65 66 Ofcom research found that:67  Local radio achieves 93-98% coverage of households on FM, whilst DAB achieves only 66%  Local radio achieves 92-96% coverage of roads on FM, whilst DAB achieves only 43%  National commercial radio achieves 91-98% coverage of households on FM, whilst DAB achieves only 85%  National commercial radio achieves 87-90% coverage of roads on FM, whilst DAB achieves only 64%. In some sizeable UK markets, Ofcom found that local DAB transmitters achieved coverage considerably below these national averages:68  In Sussex, local DAB covers 54% of households and 31% of roads  In Kent, local DAB covers 50% of households and 61% of roads  In Essex, local DAB covers 58% of households and 40% of roads  In Cardiff, local DAB covers 49% of households and 40% of roads  In Berks/N. Hants, local DAB covers 58% of households and 46% of roads  In Norfolk, local DAB covers 50% of households and 32% of roads. 65 Ofcom, The Communications Market: Digital Radio Report, 17 October 2012, Figure 1, p.4 66 ibid., Figure 2, p.5 67 ibid. 68 Ofcom, An Approach To DAB Coverage Planning, 22 June 2011, Annex B 34 Facts About DAB Radio Switchover Page 19 ©2013 Grant Goddard
  20. 20. DAB RADIO SWITCHOVER FACT no. 16 The DAB radio platform offers a choice of relatively few additional radio stations, particularly outside London Ofcom reported that, in September 2012:69  219 stations were broadcasting on DAB radio. 70 However, Ofcom noted that, of these 219 radio stations:71  114 stations were relays of existing local analogue commercial stations within their service areas  32 stations were relays of existing BBC local stations  13 stations were relays of existing local analogue commercial stations beyond their service areas  5 stations were relays of existing BBC national networks  3 stations were relays of existing national analogue commercial radio stations. That leaves a considerably smaller number of radio stations that are exclusive to DAB:  37 local commercial radio stations  9 national commercial radio stations  6 BBC national networks (1 part-time). The outcome is that the average UK household is offered between 30 and 45 stations in total by DAB radio, of which only:72  15 are national stations exclusive to DAB (1 part-time)  1 is a local station exclusive to DAB. Potential purchasers of DAB radio receivers have to determine whether the relatively high cost proves worthwhile for access to the limited number of new radio stations on the platform. 69 Ofcom, The Communications Market: Digital Radio Report, Figure 4, p.6 70 ibid., 17 October 2012, Figure 5, p.6 71 ibid. 72 Ofcom, The Consumer Experience Of 2012, January 2013, para.4.1.4, p.25 34 Facts About DAB Radio Switchover Page 20 ©2013 Grant Goddard
  21. 21. 34 Facts About DAB Radio Switchover Page 21 ©2013 Grant Goddard DAB RADIO SWITCHOVER FACT no. 17 The DAB radio system offers insufficient licensed spectrum to accommodate all existing local commercial radio stations The licensed spectrum for radio stations to broadcast on the DAB radio transmission system is significantly less than had been originally planned by the regulator. This is because:  Channel 4 Television returned to Ofcom in 2008 the licence it had been awarded to operate a national DAB radio multiplex for ten radio stations, citing "lack of demand"73  The Digital Economy Act 2010 allowed the merging of adjacent local DAB radio multiplexes to create larger service areas for the broadcast of a smaller number of radio stations74  MXR Limited announced in 2012 that it would not apply to Ofcom for renewal of licences for its five regional DAB radio multiplexes that had served an aggregate population of 17m for ten years because "there is reducing demand for carriage".75 The outcome is that the present DAB radio transmission system offers insufficient licensed spectrum to accommodate all existing local commercial radio stations, a problem that is particularly acute in large cities. The government's current DAB digital switchover plan envisages that around 90 (30%) of the presently licensed 300 local commercial radio stations will not migrate from analogue to DAB transmissions.76 A report commissioned by Ofcom suggested that:77  "… the majority of analogue stations that don't already simulcast on DAB [would be] requiring additional [DAB] multiplex slots or be forced to close." The lack of licensed DAB capacity prevents complete switchover from FM/AM to DAB broadcasting for existing local radio stations being an achievable objective. 73 Analysys Mason, Final Report For Ofcom: Opportunity Cost Of The Spectrum Used By Digital Terrestrial TV And Digital Audio Broadcasting, 12 March 2013, para.6.2, p.103 74 DCMS, Digital Britain Report: Impact Assessment, June 2009, p.117 75 http://radiotoday.co.uk/2012/09/regional-mxr-digital-multiplexes-to-close/ 76 Analysys Mason, op cit., para.6.3.3, p.111 77 ibid., para.6.2, p.103
  22. 22. 34 Facts About DAB Radio Switchover Page 22 ©2013 Grant Goddard DAB RADIO SWITCHOVER FACT no. 18 The DAB radio system discriminates against small, local commercial radio station in terms of transmission costs For small, local commercial radio stations, the costs of DAB transmission already prove to be significantly higher than the costs of their existing FM transmissions. The number of small commercial radio stations in the UK is significant. Digital Britain reported that, in 2009:78  59% of local commercial radio stations served populations of less than 500,000  42% of local commercial radio stations served populations of less than 250,000. Small local stations are already the most likely within the sector to achieve marginal profitability. Ofcom reported that, in 2006, before the recession:79  Average profits of a station serving populations of 100,000 to 200,000 were £65,000 per annum  Average losses of a station serving populations of 50,000 to 100,000 were £20,000 per annum. Analysis of radio station company accounts found that, in 2007:80  69% of stations serving populations of less than 250,000 were unprofitable  62% of stations serving populations of less than 500,000 were unprofitable. Ofcom has acknowledged "the large cost differential between FM and DAB":81  "Small-scale FM stations spend circa £10,000 per annum on FM transmission, which is many times less than the current DAB network carriage costs, even for a low quality monophonic digital service"  "Existing local [DAB radio] networks serve relatively large geographical areas and the associated costs of carriage on them are very high when compared to the operating costs of a single 100W ERP FM transmitter"  "… these [small scale] broadcasters (who currently provide valuable local services) ideally should not be excluded from the future radio broadcasting landscape – particularly at a time of consolidation by both the BBC and the commercial operators, who previously had both generated more locally-focused content". The government's DCMS estimated in 2009 that commercial radio spent £31.7m per annum on DAB transmission costs.82 A 2009 analysis commissioned by the commercial radio sector concluded:  "Commercial radio has taken on obligations with respect to DAB which are costing the industry ~£27m pa (net); for many stations, particularly small local stations, these costs move them from profitability to a loss-making position".83 78 John Myers, An Independent Review Of The Rules Governing Local Content On Commercial Radio, April 2009, Figure 6, p.24 79 Ofcom. The Future Of Radio: Consultation, 17 April 2007, p.38, Figure 17. 80 GCap Media plc. The Future of Radio: The Next Phase – Response From GCap Media, [undated], p.3. 81 Ofcom, Small Scale DAB, 5 August 2013, para. 8.1, pp.22-23 82 DCMS, Digital Economy Act: Impact Assessments, November 2009, p.164 83 Ingenious Consulting, Commercial Radio: The Drive To Digital, January 2009, p.4
  23. 23. DAB RADIO SWITCHOVER FACT no. 19 The DAB radio system discriminates against small, local commercial radio station in terms of suitable coverage areas The DAB transmission system for local radio in the UK was initially designed in the 1990s to be a patchwork of local service areas. By 2010, due to "failings in the existing [DAB] multiplex framework", the Digital Economy Act enabled adjacent local DAB areas to be amalgamated into much larger service areas, many covering more than one county.84 85 The government's Impact Assessment for Digital Britain acknowledged that:86  “Merging [DAB] multiplexes will reduce the overall capacity available for DAB services, therefore reducing the potential for new services”  “Reduced capacity on local multiplexes might result in some services losing their current carriage on DAB”. However, the government admitted that:87  "No specific assessment has been made of the impact of the radio provisions set out in the draft Digital Economy Bill on [small] local commercial stations remaining on FM after the digital radio switchover". The outcome is that the new, larger DAB local multiplex service areas prove too large, and therefore too costly, for use by small local commercial radio stations. Ofcom's analysis found that:88  For 22% of local FM stations, the coverage of the local DAB multiplex is more than five times the size of their existing service areas  For 8% of local FM stations, the coverage of the local DAB multiplex is more than ten times the size of their existing service areas. Ofcom has acknowledged that:89 34 Facts About DAB Radio Switchover Page 23 ©2013 Grant Goddard
  24. 24. 34 Facts About DAB Radio Switchover Page 24 ©2013 Grant Goddard  "Many such [small stations] do not currently have a [DAB] digital radio [transmission] option that would preserve the localness of their coverage area …"  "Existing local [DAB radio] networks serve relatively large geographical areas …"  "Few small [radio] broadcasters find the larger [DAB] multiplexes attractive, particularly at a time when many stations are struggling to break even"  "… DAB is currently an unsuitable replacement technology for these small-scale FM broadcasters, for the future to be a predominantly digital one …" 84 DCMS, Digital Britain: Final Report, June 2009, para.26, p.97 85 Ofcom, DAB Coverage Planning: Report To Government, 2 May 2012, Figure 3.1, p.16 86 DCMS, Digital Britain Report: Impact Assessment, June 2009, p.117 87 House of Commons, Written Answers To Questions, 21 January 2010, Mr Sion Simon 88 Ofcom, FM & AM Stations Within Planned Multiplex Areas, spreadsheet, August 2013 [Ofcom's analysis chose to exclude regional FM stations, London stations, the Channel Islands & the West coast of Scotland] 89 Ofcom, Small Scale DAB, 5 August 2013, para. 8.1, pp.22-23
  25. 25. 34 Facts About DAB Radio Switchover Page 25 ©2013 Grant Goddard DAB RADIO SWITCHOVER FACT no. 20 Belated planned improvements to local DAB transmitter coverage will prove costly and still not achieve parity with FM Since the consumer launch of DAB radio in 1999, some users have reported that reception is poor or impossible, particularly from local DAB radio transmitters. The regulator only addressed the issue of inadequate DAB reception in 2011. Ofcom reported that the coverage achieved by the existing 171 local DAB transmitters was:90  66% of households  43% of roads. Ofcom determined that:91  The number of local DAB transmitters will need to be tripled to 551 to improve coverage of households by 28% In particular local markets, Ofcom determined:92  In Manchester, an eight-fold increase in DAB transmitters was necessary to increase household coverage by 49%  In Tyne & Wear, a five-fold increase in DAB transmitters was necessary to increase household coverage by 32%  In Lancashire, a seven-fold increase in DAB transmitters was necessary to increase household coverage by 99%  In Wolverhampton & Shropshire, a six-fold increase in DAB transmitters was necessary to increase household coverage by 77%. Even if the number of local DAB transmitters were tripled to 551, some areas could still not achieve coverage comparable to FM:93  In Essex, coverage would improve to 76% of households and 58% of roads  In Norfolk, coverage would be 83% of households and 76% of roads  In Leicestershire, coverage would be 86% of households and 54% of roads  In Dorset, coverage would be 84% of households and 60% of roads. The costs related to these improvements to local DAB coverage have not been published. Ofcom noted:94 "The robustness of our DAB planning criteria carries a cost in terms of the number of transmitters that need to be built. We will need to do further work ..." 90 Ofcom, The Communications Market: Digital Radio Report, 17 October 2012, Figure 1, p.4 91 Ofcom, An Approach To DAB Coverage Planning, 22 June 2011, Annex B 92 ibid. 93 ibid. 94 ibid., para.1.25, p.3
  26. 26. 34 Facts About DAB Radio Switchover Page 26 ©2013 Grant Goddard DAB RADIO SWITCHOVER FACT no. 21 Continuation of simultaneous transmission of radio stations on FM/AM and on DAB incurs significant costs, particularly for small local stations The regulatory plan for DAB radio switchover envisaged that, for a limited time period, radio stations would broadcast on their existing analogue FM/AM frequency and additionally on DAB. Broadcast legislation was introduced in 1996 that offered local commercial radio stations an automatic eight-year licence extension if they commenced broadcasting additionally on the DAB platform. Many stations accepted his offer, anticipating that the time period of dual transmissions would end after only a few years, in line with industry forecasts of rapid listener migration from FM/AM to DAB.95 For local commercial radio stations, the cost of additionally broadcasting on DAB radio has been much greater than the cost of its existing broadcasts on FM. For some stations, the cost of DAB has been a multiple of many times their existing analogue transmission charges.96 Slowing consumer take-up of DAB radio has meant that the period of simultaneous transmissions is lasting considerably longer than had been indicated. During the same period that DAB transmissions have increased station costs, the impact of the recession has reduced commercial radio sector revenues substantially.97 The outcome is that many local commercial radio stations have been painted into a financially painful corner by the regulator's 'carrot and stick' DAB radio policies:  Past acceptance of automatic licence renewals (commonly by a radio station's previous owner) requires stations to continue broadcasting on DAB  Cessation of broadcasting on DAB incurs the rescinding of a station's licence  Continued broadcasting on both FM/AM and DAB subsumes a significant proportion of station revenues  DAB transmissions provide almost no incremental commercial return because only 13% of local commercial radio listening is attributed to the DAB platform98  The regulator's planned improvements to local DAB multiplexes risk uncontrolled increases to the cost of DAB transmission contracts in future years. DCMS has estimated that the additional cost to the radio industry (BBC and commercial) of broadcasting on both analogue and DAB platforms is £38.9m per annum.99 A report commissioned by the commercial radio sector estimated that the net cost to it of the DAB platform was £27m per annum.100 95 Broadcasting Act 1996, c.55 Part III, Section 94 96 Analysis of specific costs not possible because radio station transmission contracts with Arqiva include a confidentiality clause 97 source: Radio Advertising Bureau [commercial radio sector revenues declined by 34% in real terms between 2004 and 2013] 98 source: RAJAR, Q1 2013 99 DCMS, Digital Britain Report: Impact Assessment, June 2009, pp.110 & 114 100 Ingenious Consulting, Commercial Radio: The Drive To Digital, January 2009, p.4
  27. 27. 34 Facts About DAB Radio Switchover Page 27 ©2013 Grant Goddard DAB RADIO SWITCHOVER FACT no. 22 Renewal of local commercial radio licences for only 7 years reduces the certainty for owners and impacts their ability to invest long-term The Digital Economy Act 2010 granted Ofcom powers to automatically renew the analogue licences of commercial radio stations, those that are broadcasting on DAB, for a further seven years. The Act also introduced a two-year termination clause into all existing radio licences.101 The seven-year renewal period applies specifically to those stations that had already been granted an earlier twelve-year extension to their licence because they had been broadcasting on DAB.102 The government's Small Firms Impact Test for the Digital Economy Act noted:103  "The preferred option detailed above is not expected to impose a greater regulatory burden on small firms"  "The extension of the licence renewal regime will also benefit small firms, which are broadcasting on digital and analogue, by providing business certainty and the ability for business planning over a longer period"  "… the proposal to insert a two-year termination clause in all new licences may have a negative impact on those small businesses which are not broadcasting on [DAB] digital"  "It could be argued these businesses, which are not now or are expected in the future to broadcast on DAB, are unnecessarily disadvantaged by the increased licence uncertainty of the termination clause". However, the practical impact of the 2010 legislation was to reduce, rather than to 'provide', "business certainty and the ability for business planning over a longer period".104 The implementation of successive renewal periods for analogue radio licences has only proven necessary because of the slower than anticipated consumer take-up of DAB radio. The introduction of a shorter renewal period and a new termination clause (even for local stations not broadcasting on DAB) effectively penalises small local radio stations for consumer disinterest in the DAB radio platform. Local commercial radio stations require certainty for their licences across a realistic business cycle and within a regulatory framework for radio that is focused upon the citizen/consumer. Small local radio stations should not be punished for dwindling consumer interest in DAB and their licence extensions should revert to the previously offered 12-year period. 101 Digital Economy Act 2010, c.24, Section 32 102 http://licensing.ofcom.org.uk/radio-broadcast-licensing/analogue-radio/amend-licence/renewal-procedure 103 DCMS, Digital Economy Act: Impact Assessments, November 2009, pp.171-172 104 ibid.
  28. 28. 34 Facts About DAB Radio Switchover Page 28 ©2013 Grant Goddard DAB RADIO SWITCHOVER FACT no. 23 Not one digital-only broadcast radio station has yet reported an operating profit and many have closed It is estimated that the cost to the UK radio industry of content and transmission for the DAB platform has exceeded £1bn since it was launched publicly in 1999.105 For the BBC, these costs are paid by the Licence Fee. For commercial radio, DAB has cost the equivalent of one year's sector revenues diverted away from its core analogue radio business.106 Since pursuing the DAB platform, the UK commercial radio sector has been transformed from a very profitable industry populated by UK public companies into a loss-making industry populated largely by privately held companies, the two largest controlled overseas. The impact on listeners has been that:  Many local commercial radio stations that had produced genuinely local content have been replaced by national 'brands'  Many local commercial radio stations' contributions to local democracy through local news, local information, phone-ins and debates have been considerably diminished. Not a single commercial digital radio station launched on the DAB platform has yet reported an operating profit:  A dozen digital radio stations launched on the national DAB platform have closed, including those launched by ITN, Bloomberg, Saga and NME magazine  Many more digital radio stations that had launched on local DAB platforms have closed  Potential advertisers have little interest in the small audiences delivered by DAB radio  "Incremental revenue from DAB-only stations is negligible at ~£130k per bespoke station".107 It is indicative that Global Radio, the largest UK commercial radio group which had owned the greatest proportion of DAB radio assets:  Sold or closed all its digital radio stations broadcasting on DAB  Sold or chose not to renew the majority of its DAB radio multiplex licences  Refused to participate in four successive industry campaigns to promote DAB radio to consumers.108 A Parliamentary select committee heard evidence that Global Radio was party to an agreement that endorsed the government's policy of DAB radio switchover in principle in return for legislation in the Digital Economy Act 2010 that automatically renewed its most profitable radio licence, Classic FM, (amongst others) to avoid an auction process.109 105 source: estimate from BBC Annual Accounts and commercial radio cost data 106 ibid. 107 Ingenious Consulting, Commercial Radio: The Drive To Digital, January 2009, p.13 108 http://www.mediaweek.co.uk/news/1144413/Global-Radio-continues-stand-off-digital-radio/ 109 http://www.publications.parliament.uk/pa/ld/lduncorr/uccom200110ev1.pdf , pp.52-53
  29. 29. 34 Facts About DAB Radio Switchover Page 29 ©2013 Grant Goddard DAB RADIO SWITCHOVER FACT no. 24 The existing FM radio transmission system achieves 99% UK population coverage, is robust and cost-effective After the UK's first FM radio transmitter was switched on in 1955, FM transmitters were built at locations across the UK over a fifty-year period. The present situation is that:110  FM radio provides coverage of 99% of the UK population for the BBC networks  99% coverage is achieved using FM transmitters at 230 sites. A report commissioned from Deloitte by the BBC Trust reported that:111  In 2007/8, BBC transmission costs were £12.3m to achieve 99% population coverage for four radio networks using 230 transmitter sites  In 2007/8, DAB transmission costs to achieve 86% coverage were £6m using 96 transmitter sites  DAB transmission costs to achieve 90% coverage would be £11m per annum using 230 transmitter sites  DAB transmission costs to achieve "levels similar to those of FM radio" would be "up to £40m per annum" and use "approximately 1,000" transmitter sites. The outcome is that, in order to achieve coverage equivalent to that of the present FM transmission system, DAB radio proves to be more costly. Neither the BBC nor commercial radio owns its own transmission systems. The UK's dominant transmission supplier, Arqiva, has already informed some local radio stations that charges for DAB transmission will be increased in order to fund the improvement or extension of DAB reception. DAB radio switchover seeks to replace the present cost effective, robust FM transmission system that achieves near universal coverage with a more costly, less robust digital system that requires many more transmitter sites to achieve equivalent coverage. Although Ofcom has recently undertaken an exercise to determine the number and location of necessary additional DAB transmitters, it has not considered the associated costs:112  "The decision to build out DAB coverage to a certain level before switching off FM services requires an evaluation of costs and benefits that can only be made as a matter of public policy". 110 Deloitte, BBC Trust: The BBC's Efficient And Effective Use Of Spectrum, December 2007, para.6.9, p.36 111 ibid., Figure 24 & para.7.18, p.40 112 Ofcom, An Approach To DAB Coverage Planning, 22 June 2011, para.6.2, p.25
  30. 30. 34 Facts About DAB Radio Switchover Page 30 ©2013 Grant Goddard DAB RADIO SWITCHOVER FACT no. 25 There is no proposed alternative use for FM radio spectrum, and therefore no 'digital dividend' to be gained by UK citizens The motivations for switching the UK television system from analogue to digital broadcasting included:  The re-purposing of former UHF television spectrum for other communication purposes  Potential revenues to The Treasury from auction of parts of this spectrum to commercial companies. However, these potential benefits are not present for the FM radio spectrum because:  No alternative use of FM spectrum has been proposed  No potential revenue streams for The Treasury from auctions exist. Ofcom Chief Executive Ed Richards confirmed this:  "One of the profound differences [of radio switchover] with television [switchover] of course is that, in the case of television, you couldn’t extend Freeview digital television without turning off the analogue spectrum, and that’s a profound difference. One of the other differences, of course, is that the value of the spectrum released by analogue switch-off in television is extremely high".113 An independent report by a UK spectrum consultancy noted:  "In the case of an assessment of moving to digital radio, the circumstances are different [from television] for the following reasons: the relevant [FM] spectrum is unlikely to have as much value in alternative uses (certainly not in relation to UHF spectrum) …"114 Ofcom published a statement in 2011 which suggested a future use of analogue FM radio spectrum for 'White Space Devices' which could "deliver innovative applications such as mobile broadband in very sparsely populated areas".115 However, a subsequent Ofcom consultation exercise on 'White Space' in 2012 limited itself to considering UHF television spectrum.116 113 Ed Richards, speech to Radio 3.0 Conference, London, 21 May 2009 114 Plum Consulting, Impact Assessment Framework, August 2009, para.5.2, p.24 115 http://media.ofcom.org.uk/2011/07/06/ofcom-considers-future-of-fm-radio-band/ 116 Ofcom, TV White Spaces, 22 November 2012
  31. 31. DAB RADIO SWITCHOVER FACT no. 26 Switch-off of existing BBC and commercial radio transmitters on FM would enable pirate radio stations to flourish For forty years, operators of unlicensed pirate radio stations have used FM frequencies to transmit from the tops of tower blocks with relatively low-power transmitters. Pirate radio's ability in cities to transmit its programmes with clarity over long distances is presently constrained by the presence of high-power BBC and commercial radio transmitters on the majority of frequencies within the FM radio band. 117 If these high-power transmitters were switched off, pirate radio operators would suddenly have access to considerable amounts of empty FM spectrum, instead of having to squeeze their stations in between licensed broadcasters. Because FM radio receiver ownership is almost universal in the UK, the outcome could be a huge upsurge of both pirate radio broadcasting and pirate radio listening. The impact would be significant upon both BBC and commercial radio services. Ofcom has acknowledged this potential outcome:  "[Ofcom Chief Executive] Ed Richards explained that White Space Devices offered a solution that could safeguard the interests of the radio industry by making it less likely that it was backfilled with new commercial and pirate radio stations".118  “This approach not only would spur on technological innovation but it could also further restrict the opportunity for pirates to fill in the gaps caused by careful spectrum planning”.119 117 Ofcom, Illegal Broadcasting: The Impact On Local Communities, [undated], p.4 118 http://media.ofcom.org.uk/2011/07/06/ofcom-considers-future-of-fm-radio-band/ 119 ibid. 34 Facts About DAB Radio Switchover Page 31 ©2013 Grant Goddard
  32. 32. 34 Facts About DAB Radio Switchover Page 32 ©2013 Grant Goddard DAB RADIO SWITCHOVER FACT no. 27 After FM radio transmissions were launched in the UK in 1955, it took several decades for FM take-up to surpass AM radio A study by Dr Stephen Lax, at the University of Leeds, of the introduction of radio transmission systems in the UK noted:120 “The introduction of FM was itself no straightforward matter of replacing its AM forebear, and neither have innovations in radio technology in the half century that followed been unproblematic. It is in the context of this history that the emergence of DAB should be studied." "Following a UK launch in 1955, the BBC rolled out the FM service relatively quickly: by the end of 1959, most transmitters had been upgraded and 96.4% of the population was within range of the signals; but, even ten years later, when coverage was over 99%, the corporation noted that only one third of households had any form of FM receiver. A similarly slow rise in the popularity of FM continued in the US: although FM services had begun there on the VHF band some ten years earlier than in the UK, it was not until after 1979 that FM finally achieved a higher share of listening than AM." "[In 1974], [BBC director of engineering James] Redmond expressed puzzlement at the slow adoption of FM, even for fixed reception in the home. Despite its superior sound quality, he noted that ‘changeover has been slower than anticipated.’ …. [One] reason was the simulcasting of radio programmes on FM and on AM, rather than offering new programmes on the new service: listeners would only be able to hear on FM what their AM receivers already gave them." "This history serves as an illustration of how an apparently self-evidently superior technology pursued as a solution to a problem of audio quality did not automatically find favour with listeners, who […] were apparently prepared to put up with inferior sound and were less inclined to adopt FM while it offered little new programming or competition with television in the evening." "A mismatch is revealed between the broadcasters’ and engineers’ beliefs as to what was important to listeners, and the preferences and priorities of the vast majority of those listeners themselves." The strategy for the launch of DAB radio in the UK should have been informed by the documented experiences of this earlier attempt to convince listeners to switch to the FM broadcast platform. 120 Dr Stephen Lax, A Vision For Radio: Engineering Solutions For Changing Audiences – From FM To DAB [in anthology: Brian O'Neill (ed.), Digital Radio In Europe: Technologies, Industries And Cultures, Intellect, 2010, pp.67-84]
  33. 33. DAB RADIO SWITCHOVER FACT no. 28 The main criterion for a government decision about DAB radio switchover does not measure DAB radio listening A conflation of the terminology 'DAB radio' and 'digital radio' was inserted into the government's radio switchover policy during the Digital Economy Act. 'Digital radio' comprises radio received by these platforms & devices:  Digital broadcast o DAB radio o Digital broadcast TV (Freeview) o Digital satellite TV (Sky)  IP-delivered digital radio/audio: o Digital cable TV (Virgin Media) o Desktop & laptop computers o Internet-connected mobile phones & smartphones o Tablets, E-readers & games consoles o Connected dashboads in vehicles. Thus, DAB radio is only one of several digital platforms on which listeners can experience 'digital radio'. The government's primary criterion to implement switchover from analogue to DAB radio is when:121  "50 per cent of all listening is to digital". The criterion should sensibly be defined as "50 per cent of all listening is to DAB" in order to reflect the fact that it is the DAB broadcast platform alone that is intended to replace the existing FM/AM broadcast platforms. Usage of other digital platforms is not growing because of DAB, but as a result of a much wider migration of content consumption from broadcast platforms (including FM/AM and DAB) to IP-delivered platforms. 122 Ofcom data show that DAB radio usage has stalled in recent years and that total 'digital radio' take-up is growing as a result of increasing internet and mobile phone listening.123 121 DCMS, Digital Radio Action Plan: Version 9, June 2013, p.1 122 Ofcom, The Communications Market: Digital Radio Report, 17 October 2012, Figure 3.13, p.223. 123 ibid. 34 Facts About DAB Radio Switchover Page 33 ©2013 Grant Goddard
  34. 34. DAB RADIO SWITCHOVER FACT no. 29 Digital radio take-up data cited in Digital Britain were altered to make DAB radio switchover appear more quickly attainable A key graph in the government's 2009 'Digital Britain' report outlined two forecast growth paths for digital radio listening. 124 However, the historical RAJAR data cited for digital radio's share of listening in 2005 and 2008 were altered to make the two future growth paths seem more plausible:125  The 2005 year-end figure was 11.0% (not 7%)  The 2006 year-end figure was 12.5%  The 2007 year-end figure was 16.6%  The 2008 year-end figure was 18.3% (not 20%). The impact was that the historical trend of digital radio listening was made to appear to be growing considerably faster than it was in reality. The correct data would have produced a considerably shallower sloping line between 2005 and 2008. This prompted the mistaken conclusion that Digital Britain's prime 50% criterion would be achievable by 2013.126 As a result, the proposed timescale for DAB radio switchover that has been pursued by government and the radio industry since 2009 was founded upon a statistical falsehood. The prospect of DAB radio switchover in 2015 was always impossible, given the reality of the slow consumer take-up of DAB radio that was hidden from view by distorted data cited in the Digital Britain report. 124 DCMS/BIS, Digital Britain: Final Report, June 2009, Figure 6, p.93 [NB: the key was mistakenly reversed] 125 source: RAJAR 126 source: RAJAR ['Total digital share of listening' was 33% at year-end 2012, compared to the 38% to 43% that had been forecast by Digital Britain. The DAB platform's share of listening was 21%] 34 Facts About DAB Radio Switchover Page 34 ©2013 Grant Goddard
  35. 35. 34 Facts About DAB Radio Switchover Page 35 ©2013 Grant Goddard DAB RADIO SWITCHOVER FACT no. 30 The government's Impact Assessment of DAB radio switchover failed to consider several significant costs In 2009, the government published an Impact Assessment that accompanied its proposals in Digital Britain for DAB radio switchover. The costs and benefits were evaluated as:127  Benefit: cost saving to national broadcasters of licence extensions  Benefit: cost saving of co-location and increased networking  Benefit: cessation of dual transmissions on DAB and analogue  Cost: to government of not auctioning national analogue stations  Cost: DAB to multiplex owners of re-structuring coverage areas. However, an independent report by a London spectrum consultancy identified "specific problems in relation to [this] analysis of digital radio [switchover]":128  "The counterfactual is assumed to be analogue plus digital transmission, whereas an alternative might be analogue plus the internet delivery coupled with WiFi and mobile wireless.  It is not obvious why the radio industry itself could not make a decision about whether or not to adopt digital radio given that the value of the spectrum to other users may be negligible.  Estimated benefits appear to include the benefits of a separate and independent policy decision in relation to co-location of stations to reduce costs. The costs and benefits of each independent decision should be considered and assessed separately.  Government revenue foregone is counted as a cost to government and a benefit to the radio broadcasters, whereas the net impact of foregone revenue is the impact on the deadweight loss of taxation.  The estimated benefit after dual transmission on analogue and DAB ceases may include fixed common costs such as site and mast costs which are a significant part of overall costs and would not be saved when dual transmission ends (assuming the sites themselves continue in operation).  The costs of extending the digital radio transmission network to match existing coverage levels are not included, yet they are estimated to be substantial.  The costs to consumers of purchasing new radios for their homes and cars are not included  The costs in terms of possible loss of coverage to those currently receiving analogue coverage in remote areas is not included." It is apparent that several significant costs associated with DAB radio switchover were neither considered, nor evaluated, by the government as part of its Digital Britain strategy. The impact was that the benefits of DAB radio switchover were made to appear more substantial than the associated costs. 127 DCMS, Digital Britain Report: Impact Assessment, June 2009, p.110 128 Plum Consulting, Impact Assessment Framework, August 2009, para.5.2, pp.24-26
  36. 36. 34 Facts About DAB Radio Switchover Page 36 ©2013 Grant Goddard DAB RADIO SWITCHOVER FACT no. 31 A new cost/benefit analysis intended to inform the government decision about DAB radio switchover is not being produced independently Although DAB radio was launched publicly in 1999 in the UK, it was not until 2008 that the government commissioned a cost/benefit analysis of its DAB radio switchover policy from Ofcom. Ofcom commissioned the cost/benefit analysis from PricewaterhouseCoopers, whose report concluded with major caveats:129  "The results suggest that there are relatively few up-sides to the estimates, and several significant downside risks"  "The results suggest that there is a very long pay-back from the Digital Radio Working Group policy 'investment' – the Net Present Value turns positive after 2026"  "… the [radio] industry and consumers may fail to see the benefits of digital radio over the longer term". The government made public this report one year after its production, and only in a redacted form. Then, the Digital Britain report published in 2009 promised:130  "… we will conduct a full Impact Assessment, including a Cost/Benefit Analysis of Digital Radio Upgrade". However, in 2010, the government's DCMS noted:131  "Fundamental to the information provided to Government as part of the [Digital Radio] Action Plan will be a comprehensive Cost Benefit Analysis on the proposals for digital [radio] switchover"  "Government is conducting the modelling of the costs and benefits in-house" The outcome is that the government itself is presently producing a new cost/benefit analysis to inform its own impending decision about DAB radio switchover. This removes the independent perspective that could have been provided by commissioning a further report externally. Work on this second cost/benefit analysis was scheduled to commence in 2011, although the report has not yet been published.132 129 PWC, Cost Benefit Analysis Of Digital Radio Migration, 6 February 2009, p.3 130 DCMS/BIS, Digital Britain: Final Report, June 2009, para.15, p.94 131 DCMS, Research Specification: Digital Radio Switchover: Consumer Research To Inform The Cost Benefit Analysis, December 2010, p.2 132 DCMS, Digital Economy Act: Impact Assessments, November 2009, p.172
  37. 37. DAB RADIO SWITCHOVER FACT no. 32 Industry forecasts of anticipated consumer take-up of DAB radio all proved to be very over-optimistic Sector forecasts of DAB radio consumer take-up during the last decade all:  Proved to be extremely over-optimistic  Wrongly assumed that take-up would transform from 'linear' to 'exponential'. COMMERCIAL RADIO LISTENING VIADIGITAL PLATFORMS FORECAST & ACTUAL (% share of listening) 5.0% 11.0% 14.0% 18.1% 19.0% 19.7% 24.0% 28.2% 32.6% 16% 50% 30% 0% 10% 20% 30% 40% 50% 2004 2005 2006 2007 2008 2009 2010 2011 2012 actual (RAJAR year-end) RadioCentre target (Jan 2007) 133 RADIO LISTENING VIADIGITAL PLATFORMS FORECAST & ACTUAL (% share of listening) 12.5% 16.6% 18.3% 20.9% 25.0% 29.1% 34.3% 50% 90% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 actual (RAJAR year-end) Ofcom forecast (November 2006) 134 CUMULATIVE DAB RECEIVER SALES FORECAST & ACTUAL (million @ year-end) 2.7 4.4 6.5 8.5 10.5 12.5 1.3 0 5 10 15 20 25 2004 2005 2006 2007 2008 2009 2010 actual 2004 DRDB forecast 2005 DRDB forecast 2006 DRDB forecast 2007 DRDB forecast 135 133 source: RAJAR & RadioCentre 134 source: RAJAR & Ofcom 135 source: Digital Radio Development Bureau & GfK 34 Facts About DAB Radio Switchover Page 37 ©2013 Grant Goddard
  38. 38. 34 Facts About DAB Radio Switchover Page 38 ©2013 Grant Goddard DAB RADIO SWITCHOVER FACT no. 33 DAB radio is an 'interim' technology from the 1980s that was already outdated when introduced to UK consumers in 1999 DAB radio is a European broadcast technology whose development began in 1981 at the Institut fur Rundfunktechnik in Germany, inspired by the launch of the compact disc the previous year. The first test transmission took place in 1985 in Germany.136 The DAB radio project became known as 'Eureka 147' after it secured European Commission funding in 1987. It received support from many public broadcasters in Europe, including the BBC.137 In 1991, DAB radio was demonstrated in the UK for the first time to delegates attending The Radio Festival in Birmingham. New Scientist magazine reported then that DAB radio could be up and running in the UK “by the mid-1990s”.138 Although DAB was adopted as an international standard in 1993, some countries (most notably the United States) adopted their own digital terrestrial radio technology systems which were incompatible with DAB.139 In 1995, the BBC switched on the first DAB radio transmitter for engineering tests. DAB radio was launched to the UK public in 1999. By then, €500m had been spent on developing DAB technology in Europe.140 However, numerous issues impacted consumer demand for DAB radio in the UK:  DAB radio was merely an 'interim' technology that acted as a bridge between an analogue past and a digital future, similar to compact discs, video CD-Rs and DAT  The belated UK launch of DAB in 1999 coincided with growing consumer take-up of broadband which offered a much wider choice of audio content  The 'mp2' transmission codec used for DAB radio in the UK was outdated, having been developed in 1989, and is less spectrum efficient than successors141  DAB never became a globally used broadcast system (unlike FM and AM), so that globally manufactured devices (such as mobile phones, smartphones, hi-fi equipment and car radios) did not incorporate DAB radio  Sales of 'radios' that access nothing other than broadcast transmissions are in long- term decline, in favour of multi-functional devices that deliver audio, video and data. The outcome is that the UK is still struggling to implement a DAB radio technology that dates back more than thirty years. The appeal to the 1980s consumer of a DAB radio device that delivered a handful of new radio stations is no longer enticing in 2013. Deloitte had forecast in 2009:  “The enduring appeal of analogue radio, combined with the growing power of internet radio, may ultimately lead many consumers to sidestep DAB technology altogether”.142 136 Brian O'Neill (ed.), Digital Radio In Europe: Technologies, Industries And Cultures, Intellect, 2010, p.47 137 ibid., p.32 138 Barry Fox, Radio Sans Frontieres, New Scientist, 20 July 1991 139 ibid., p.37 140 ibid., p.49 141 http://en.wikipedia.org/wiki/MPEG-1_Audio_Layer_II 142 http://www.deloitte.com/view/en_gb/uk/64bfd4070020e110VgnVCM100000ba42f00aRCRD.htm
  39. 39. 34 Facts About DAB Radio Switchover Page 39 ©2013 Grant Goddard DAB RADIO SWITCHOVER FACT no. 34 The Communications Minister receives more correspondence from consumers complaining about DAB radio than about any other issue A media trade magazine reported in 2010:143  "A meeting between radio executives and communications minister Ed Vaizey about DAB radio ended in stalemate yesterday, as a number of local radio groups consider running an anti-DAB ad campaign.  At the meeting, Vaizey told radio executives he received more correspondence from angry consumers about DAB radio than any other issue in his portfolio". If the government were to announce DAB radio switchover and the ending of FM radio broadcasts for many radio stations, it would be likely to provoke a citizen campaign directed at the government, the regulator and the broadcasters. As a previous example, the BBC had announced in 1991, without prior public consultation, that Long Wave transmissions of Radio Four would be terminated. Radio Four would have continued to broadcast on FM and AM Medium Wave. The 'Save Radio Four Long Wave' campaign, supported by broadsheet newspapers, persuaded the BBC to reverse its decision within months. Radio Four still broadcasts on Long Wave to this day.144 A switch-off of FM radio broadcasts would have a substantial impact on listeners because:  Only 24% of all radio listening is via the DAB platform145  Only 21% of commercial radio listening is via the DAB platform146  Only 14% of local BBC radio station listening is via the DAB platform147  Only 13% of local commercial radio station listening is via the DAB platform148  Only 3% to 5% of vehicles have DAB radios.149 A switch-off of FM radio broadcasts would have a substantial impact on broadcasters because:  The BBC is required by its Charter & Agreement to provide universal reception within the UK of its national radio networks150  Radio stations would lose significant volumes of listening because it is unlikely that listeners would replace all existing household and car radios with DAB receivers  Revenues of the commercial radio sector would diminish because its revenues are directly correlated with the volume of listening  The market valuation of UK commercial radio businesses is predicated largely upon the scarcity of their FM broadcast licences – returning these FM licences to Ofcom would require their valuations to be written down to zero.151 143 Maisie McCabe, Radio Groups Plan Anti-DAB Campaign, Media Week, 1 December 2010 144 http://www.independent.co.uk/news/uk/radio-4-fans-claim-victory-1558092.html 145 source: RAJAR, Q2 2013 146 ibid. 147 source: RAJAR, Q1 2013 148 ibid. 149 Ofcom, The Communications Market: Digital Radio Report, 17 October 2012, para.3.3, pp.10-11 150 DCMS, Broadcasting: An Agreement Between Her Majesty's Secretary Of State For Culture, Media & Sport and the British Broadcasting Corporation, July 2006, para.12, p.6 151 DAB broadcast radio stations have no scarcity value because licences are not awarded competitively

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