Commercial radio: "so keen to hold back the BBC?"

House of Lords Select Committee on Communications
Inquiry on Governance & Regulation Of The BBC [excerpt]
22 March 2011 @ 1515

Baroness Deech: Listening to you, I am a bit puzzled about why you are so keen to hold back the BBC. Can’t Virgin Media and the local commercial radio stations stand on their own two feet? Why have they got to hold back the BBC?

Mr Andrew Harrison [chief executive officer, RadioCentre]: I would not characterise it at all as wanting to hold back the BBC; I would characterise it as wanting a level playing field for the commercial sector to compete. The truth is that, in radio, the BBC is hardly held back. It has 55% national market share, it has the vast majority of national FM spectrum and it has a huge raft of local radio stations, so it is hardly held back. We seek the opportunity to build our own commercial businesses, entrepreneurially and innovatively, without facing the elephant in the room that, every time we try to do something new, there is a BBC service that pops up to squash it before it has time to be established.

Mr Andrew Barron [chief operating officer, Virgin Media]: With great respect, I think we are in slightly different places. I would argue that Virgin Media is one of the companies pushing the BBC forward in many instances.

[This is an uncorrected transcript of evidence taken in public and webcast on http://www.parliamentlive.tv. Any public use of, or reference to, the contents should make clear that neither Members nor witnesses have had the opportunity to correct the record.]

Q: Who is the government commissioning to produce an objective report on the costs & benefits of DAB radio switchover? A: The government

For two decades, the British government has pursued a policy to replace analogue radio broadcasting with DAB digital radio broadcasting. Why? The real reasons might as well be lost in the mists of time (or maybe were never made public). However, this has not stopped the government and its civil servants continuing to pursue the same digital radio switchover policy since the 1980s, despite overwhelming evidence that the surrounding media landscape has changed beyond recognition in the interim.

Because the government policy to replace AM and FM radio with DAB radio had never been decided on the basis of consumer demand, commercial necessity or global standards, it was unnecessary for officials to produce a document that justified it logically. When a government decides that a particular policy is necessary, it can make legislative change happen without recourse to the consumer market outside of Parliament or the Ministries. Politics and the real world do not inhabit the same space.

In the case of DAB radio switchover, the government made no effort to produce a cost/benefit analysis until 2008, when PricewaterhouseCoopers [PWC] was commissioned by Ofcom. However, the resulting 91-page report did not provide the solid, positive argument for DAB radio switchover that the government had desired. So the PWC report was hidden from the public for a year, eventually to be released and trivialised by civil servants [see blog entry Feb 2010].


In contrast to the government’s unbridled enthusiasm for DAB, the PWC report felt that “the [radio] industry and consumers may fail to see the benefits of digital radio over the longer term.” It concluded that “there are relatively few up-sides to the estimates and several significant downside risks” from its cost/benefit analysis of DAB radio switchover [see blog entry Jul 2010].

The House of Lords Select Committee on Communications, in a report on digital radio switchover in March 2010, expressed its dissatisfaction with the government’s attempt to bury the evidence from this PWC report:

“We strongly regret that the cost benefit analysis carried out by PricewaterhouseCoopers was not published at the time it was delivered to Ofcom and the Department for Culture, Media & Sport in February 2009.”

The government responded that “technical difficulties” had prevented the report’s publication for nearly a year. As excuses go, it would probably have been better for the government not to have responded at all.

After this embarrassing debacle over the PWC report, the government must have wanted to commission a further report that would conclude what PWC had not: that DAB radio switchover is a wonderful thing and that there are sensible economic arguments to justify forcing it upon the British public.

In June 2009, the government’s Digital Britain report promised: “We will conduct a full Impact Assessment, including a Cost/Benefit Analysis of Digital Radio Upgrade.”

In January 2010, Ofcom’s Peter Davies offered evidence to the House of Lords Communications Committee that another report would be done:

Baroness McIntosh of Hudnall: “What about your own impact assessment?”

Mr Davies: “We haven’t done an impact assessment yet.”

Baroness McIntosh of Hudnall: “But you have been asked to – correct?”

Mr Davies: “At some point in the future. I think the Digital Britain report said that we would be asked to do one, but we haven’t been asked to do one yet. Obviously we would need to do that and we would need a much fuller cost-benefit analysis before any final decision was taken.”

In June 2010, the government stated:

“We agree that a full impact assessment is an essential part of informing the Government’s decision on whether and when to move from a primarily analogue to a digital radio landscape. Work has already begun to collect the evidence needed to support an impact assessment and analysis should begin shortly.” [emphasis added]

Here we are now, in January 2011, and there remains no sign of the long promised cost/benefit analysis of DAB radio switchover, despite the new government continuing to pursue the digital radio switchover policy of the previous government. However, in December 2010, a document from the Department for Culture Media & Sport [DCMS] (marked “UNCLASSIFIED”) disclosed:

“The Government launched a joint Government and industry Digital Radio Action Plan on 8 July 2010. This Action Plan sets out the process for providing ministers with the information and assurances necessary to make a decision on whether and how to proceed with a Digital Radio Switchover. … Fundamental to the information provided to Government as part of the Action Plan will be a comprehensive Cost Benefit Analysis on the proposals for a digital switchover. … Government is conducting the modelling of the costs and benefits in-house. This research will provide robust evidence of potential costs and benefits to consumers of digital switchover to be incorporated into the Government’s Cost Benefit Analysis.”

So the government has confirmed that the government decision on digital radio switchover will be informed by a government cost/benefit analysis of digital radio switchover that utilises government modelling of the costs and benefits. It appears that, in the case of DAB radio switchover, the government has decided to be judge, jury and executioner too. This smacks more of ‘big brother’ than of the Conservatives’ much touted ‘big society.’

The unclassified DCMS document hinted that the earlier PWC report had not produced the desired results:

“A similar piece of work was carried out by PricewaterhouseCoopers in 2008 to inform the work of the Digital Radio Working Group into the future of digital radio and the potential for switchover. That Cost Benefit Analysis raised a number of caveats, chief among which were the gaps in research into consumer behaviour and willingness to pay. Although the radio ecology has changed since that Cost Benefit Analysis was produced, the document provides useful insights and the recommendations made by PricewaterhouseCoopers on further research remain valid.”

So what will be in the government’s new cost/benefit analysis report? The latest version of the government’s Digital Radio Action Plan explained:

“1.4 IMPACT ASSESSMENT
Carry-out an impact assessment of the options and timings of the Radio Switchover. This will include, but not limited to, the following:
· the costs and benefits of any interventions to enable the switching the migration of all national and large local radio stations to DAB and alternative uses for the analogue spectrum vacated after the Radio Switchover;
· the rural impact of implementing the Digital Radio Switchover;
· Impact on energy consumption of a Switchover; and
· Environmental impact of analogue receiver disposal following Switchover.”

Interesting to see that neither the ‘consumer’ nor the ‘listener’ are mentioned here. For this workstream, the “first report to Ministers” is not scheduled until Q4 2011. It is evident that there is little urgency to execute this new cost/benefit analysis or for it to make a significant contribution at this juncture to any government re-evaluation as to whether to proceed with DAB radio switchover. If a cost/benefit analysis were a genuine priority, why was:
· the PWC report buried in February 2009 for a year
· a new cost/benefit analysis promised by Digital Britain in June 2009 but not prioritised subsequently
· the government saying in June 2010 that “work should begin shortly” on the analysis
· a “first report” of this work now not scheduled to be presented until Q4 2011?

If the government’s DAB radio switchover policy were but a minor issue within the DCMS Ministry, all this deceit, delay and manipulation might be considered trivial. It is not. In December 2010, Minister Ed Vaizey admitted that he receives more correspondence from angry consumers about DAB radio than about any other issue within his portfolio.

So why are we witnessing such a continued lack of government transparency on the DAB radio switchover issue, despite prime minister David Cameron’s commitment in November 2010 to make the UK “the most open and transparent government in the world”?

Cost/benefit analysis of DAB radio: Murdoch rushes in where governments fear to tread

Governments have had plenty of practice, over many years, of hiding reports from the electorate. In some cases, they might justify this as a matter of national security or military expedience. However, it is hard to understand how the UK government thought it could justify hiding from the public a cost/benefit analysis of digital radio switchover it had commissioned and then, a year later, have believed the matter had been successfully buried. But so it was, until the House of Lords Communications Committee intervened in early 2010.

On 6 February 2009, PricewaterhouseCoopers [PWC] delivered a 91-page report entitled ‘Cost Benefit Analysis of Digital Radio Migration’ to Ofcom. It contained a number of serious reservations that any benefits would arise from switchover to DAB radio, even by the year 2030:

“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 [DRWG] policy ‘investment’ – the Net Present Value [NPV] turns positive after 2026. This result assumes that the existing multiplex licences are extended to 2030, as per the DRWG recommendations. Without the licence extension or any other policy instruments that provide clarity on the long term future of commercial radio, the industry and consumers may fail to see the benefits of digital radio over the longer term. Our analysis suggests that the NPV is negative should either of these two proposals not be implemented.” [emphasis added]

Since then, parliamentary policy has failed to provide “clarity on the long term future of commercial radio,” as evidenced by last week’s wholly ambivalent government statement about digital radio switchover. As a result, just as PWC predicted, industry and consumers increasingly “fail to see the benefits of digital radio over the longer term.”

The PWC report, and its verdict that digital radio switchover offers almost no benefits, remained hidden from public view from February until November 2009, when an appendix to the government’s Digital Economy Bill mentioned it casually. That citation raised questions: what was this PWC report, and why could not the public see it?

When the House of Lords Select Committee on Communications convened in January 2010 to consider the digital switchover issue, it asked those same questions of the Ofcom officers it invited to present evidence:

Baroness McIntosh of Hudnall: We understand that you commissioned a report from PWC last year into the costs and benefits of digital switchover in radio, but you didn’t publish it. We know, therefore, what we have learned from the Department for Culture, Media & Sport about what it said. It appears that it found, for example, that the benefits could – and I emphasise the word “could” – outweigh the costs by £437 million after 2026, but that conclusion is hedged about with quite a lot of caveats to do with what would have to happen in order for that good outcome to eventuate, and that if those things didn’t happen, then quite quickly you would get into a position where the costs would outweigh the benefits. Can you tell us a bit about that report? In particular, can you tell us why you haven’t published it? Do you think that, given what it appears to say – I choose my words carefully – about the constraints on potential for benefit, that it should have been available to inform the Government’s digital policy? ….. [edited]

Mr Peter Davies [Director of Radio Policy & Broadcast Licensing, Ofcom]: We were asked to commission it by the Government. We then commissioned it from PWC with a lot of input from various government departments and then submitted it to the Secretary of State.

Chairman: So you decided not to publish it.

Mr Stewart Purvis [Partner for Content & Standards, Ofcom]: …. [edited] On this particular occasion, it was decided in conjunction with the Department that work would be sent to the Department. Perhaps the most important thing is for Peter to respond to your characterisation of the work, but, in a sense, we have not hidden the piece of work. Indeed, I think it is now available to you. Is that right?

Baroness McIntosh of Hudnall: In, as they say, a redacted form.

Chairman: Just to be absolutely clear, the Department asked you to commission the work from PWC. Is that what you are saying?

Mr Purvis: They asked us to commission the work. Did they ask us specifically from PWC?

Mr Davies: Not specifically from PWC.

Chairman: The Department said to Ofcom, “Ofcom, you go and commission this particular work.” Is that the position?

Mr Davies: Yes.

Chairman: You then got the work which then came back to you and then you sent it to the Government and the Government said, “We’re not going to publish this in full.”

Mr Davies: I think they have certainly made it available to various groups. I think consumer groups have had it for some time.

Chairman: Fine. There will be no problem, therefore, in this Committee having the full report. …. [edited]

Baroness McIntosh of Hudnall: The thing that is slightly troubling – perhaps only to me, but a bit – is that when you see what appears to be evidence that the costs and benefits are, let’s say, finely balanced, or could be, that the drive towards digital migration, one might think, was driven more by the technology than by the needs either of the broadcasters or the consumers.

The Committee’s displeasure with Ofcom and the government was evident both in this exchange and in its subsequent report on digital switchover, published in March 2010, which stated:

“We strongly regret that the cost benefit analysis carried out by PricewaterhouseCoopers was not published at the time it was delivered to Ofcom and the Department for Culture, Media & Sport in February 2009.”

The government’s response to the Committee’s statement, published in June 2010, was:

“The Cost Benefit Analysis produced by PricewaterhouseCoopers, to accompany the work of the Digital Radio Working Group, was widely distributed amongst broadcasters and consumer representatives. However, there were technical difficulties which prevented the initial publication of the report on the DCMS website; these were rectified and the report published in February 2010.”

“Technical difficulties” for a whole year? As excuses go, this really takes the biscuit. It seems unlikely that the PWC report would ever have been made public, if not for the intervention of the House of Lords Communications Committee in January 2010 (first publication of the report’s findings was in this blog a few days later).

The PWC report did not offer the government the support for its digital radio switchover strategy that it had anticipated, so now it has to commission a further cost/benefit analysis which it hopes will produce a more favourable outcome. Is the government in a hurry to complete another study evaluating the supposed benefits of digital radio switchover? Hardly, judging by the evidence.

In June 2009, the government’s Digital Britain report had promised:

“We will conduct a full Impact Assessment, including a Cost/Benefit Analysis of Digital Radio Upgrade.”

In January 2010, Ofcom’s Peter Davies had offered evidence to the House of Lords Communications Committee:

Baroness McIntosh of Hudnall: What about your own impact assessment?

Mr Davies: We haven’t done an impact assessment yet.

Baroness McIntosh of Hudnall: But you have been asked to – correct?

Mr Davies: At some point in the future. I think the Digital Britain report said that we would be asked to do one, but we haven’t been asked to do one yet. Obviously we would need to do that and we would need a much fuller cost-benefit analysis before any final decision was taken.

Most recently, in June 2010, the government stated:

“We agree that a full impact assessment is an essential part of informing the Government’s decision on whether and when to move from a primarily analogue to a digital radio landscape. Work has already begun to collect the evidence needed to support an impact assessment and analysis should begin shortly.” [emphasis added]

Why bother with yet another report at this late hour in DAB’s history? Someone else has already done the sums. News International has just run its sliderule over the idea of launching a national digital radio station ‘SunTalk’ (a brand extension of its national daily newspaper ‘The Sun’) on the DAB platform. Its result was: DAB radio is not a viable commercial platform.

According to The Guardian: “News International management were considering extending the [SunTalk] station’s reach by launching it nationally on DAB digital radio. But it is understood they baulked at the extra cost.”

If Murdoch cannot see a way to make a profit from a broadcast platform that is crying out for compelling content, then how exactly does any other content owner think it can make a financial return from DAB radio?

It’s the platforms Rupert Murdoch rejects ….

Ofcom’s DAB radio strategy: busy doing nothing, trying to find lots of things not to do

In June 2010, the government published its flimsy 5-page response to the House of Lords Communications Committee’s critical 279-page report on digital switchover that had been unveiled three months earlier. The response was a disappointing document that dismissed with little more than one sentence each of the Committee’s carefully worded recommendations, deduced after having considered hours and volumes of evidence.

One of the Communications Committee’s most forceful recommendations, in Paragraph 107, had concerned the necessary improvements to DAB reception:

“Given the importance for the Government’s plans for digital switchover of universal reception of the BBC’s national stations, it is essential that a firm and unambiguous plan and funding for the completion of build-out of the BBC’s national multiplex is put in place as soon as possible.”

The government’s feeble response to this issue was:

“In order to agree a plan for DAB coverage build-out, so that it can ultimately meet the current levels of FM coverage, Ofcom have been asked to form a Coverage and Spectrum Planning Group to make recommendation on the following:
• the current coverage of national and local radio on FM;
• changes to the current multiplex structure and frequency allocation; and
• what new infrastructure is needed so that DAB can match FM.
Ofcom are expected to present their recommendation to Government in Spring 2011.”

Surely it does not need yet another government committee to look into DAB? Had not these issues already been considered by the Digital Radio Working Group two years ago? By Digital Britain a year ago? By Ofcom? By anybody during the last decade of DAB underachievement?

Then I recalled a speech made by Ofcom Director of Radio, Peter Davies, to the Radio Festival in July 2008, in which he had set out his imminent workplan on the DAB issue:

“Increased coverage of DAB will be absolutely essential if it is ever to become a full replacement for FM for most services…… That brings us to the tricky part – defining what existing coverage is and how we improve it. This is still work in progress but we are approaching it in three stages. Firstly, we need to define what existing FM coverage is. That’s not nearly as simple as it might sound. Radio is not like television where you stick an aerial on the roof and you get reception or you don’t. Radio is used in every room in the house, usually with a portable aerial. It’s used outdoors on a wide variety of devices and it’s listened to in cars. So we need to look at geographic coverage as well as population coverage, and we need to look at indoor coverage in different parts of the house. FM coverage gradually fades as you move around, so we need to decide how strong the signal needs to be to be usable. And, surprisingly, this work has never really been done in any kind of consistent manner for the UK as a whole, so it has taken a little while to agree a framework and calculate the numbers.

Having done that, we then have to do the same for existing DAB coverage. Now DAB has all the same issues as FM, but it also has different characteristics. It doesn’t fade in the same way – you either get it or you don’t – so we need a different set of definitions here. Once we have defined what existing DAB coverage is, we then have to work out what it would take to get existing DAB coverage up to the level of existing FM coverage. Now, we have already done a lot of work on this, and certainly enough to inform the interim report, and the whole thing will be finalised in time for the [government’s] Digital Radio Working Group final report later this year.”

This 2008 workplan seems to comprise precisely the same tasks that the government has just told Ofcom to start and complete by Spring 2011. So what happened? Was this work not done by late 2008, as Davies had promised? And if not, why not?

Improvements to DAB reception were considered a critical issue for consumer take-up of DAB radio … in 2008. Now, in 2010, they are probably the main factor likely to sound the death knell of DAB as a mass market consumer platform. So are we to assume that, in the intervening two years, work on this essential issue was never done, or was not completed, by Ofcom?

Why should consumers consider DAB radio to be anything other than a disaster if even our public servants appear to be busy doing little to fix the acute problems with DAB reception that the public has been rightly complaining about for years?

Digital radio switchover: talk is cheap, action will never happen

Politics is the art of flip-flop policymaking (and justifying it convincingly). This is evident in the new UK government’s first statement about DAB radio and digital radio switchover, published this week. What is its new policy? Well, there is no new policy. The Conservatives are simply continuing the previous Labour government’s ill-advised determination to foist digital radio switchover on an increasingly resistant public. A critic might even be so bold as to say of new Secretary of State for Culture, Media & Sport, Jeremy Hunt:

“The Government have ducked sorting out digital radio switchover…. They are giving Ministers the power to switch over in 2015, yes, but without taking any of the difficult measures necessary to make it practical or possible.”

But wait! In fact, these were the words of Jeremy Hunt himself, in April 2010, criticising his predecessor, Ben Bradshaw, during the previous Labour government. Now that the boot is on the Right foot, Hunt seems to have simply dusted off the Labour policy he had previously lambasted, crossed out Bradshaw’s name and written in his own instead.

In his same speech to the House of Commons, Hunt had been scathing about the digital radio switchover clause in the Digital Economy Bill:

“I think that clause is so weak that it is virtually meaningless, as it gives the Secretary of State the power to mandate switchover in 2015 but the Government have not taken the difficult steps that would have made that possible, such as ensuring that the car industry installs digital radios as standard [….] and that there is proper reception on all roads and highways. As a result, a lot of people are very concerned that 110 million analogue radios will have to be junked in 2015.”

That was ‘opposition’ Hunt then. Three months later, ‘government’ Hunt appears to see nothing problematic with the digital radio switchover clause. Indeed, the new government has committed itself to exactly the same fantastical strategy for DAB radio as the old government:

• digital radio listening will somehow reach 50% of the total by 2012
• someone somewhere will pay to upgrade the DAB transmission system to render it as robust as FM
• someone somewhere will launch lots of fab new digital radio stations
• consumers will somehow be persuaded to replace all six or more of their household’s radios with new DAB ones
• analogue radio transmitters will somehow be switched off in 2015
• all cars will somehow be fitted with DAB radios by 2015
• mobile phones and portable devices will somehow all suddenly include DAB, rather than FM, radio receivers.

All these objectives always had been, and still are, pure fantasy. None, and I literally mean ‘none’, of the available evidence and data demonstrate that these things will happen. Definitely not by 2012, certainly not by 2015, and probably never.

A year ago, Hunt was very clear in marking out his party’s strategy for digital radio as more realistic than the ruling Labour government’s:

“I think the most important thing is not something the government can do, but something the industry can do is, which is to develop new services on digital platforms that actually mean there is a real consumer benefit to DAB. At the moment, the benefits are marginal. I mean, there are some benefits in terms of quality, but your batteries get used up a lot more quickly, the reception is a lot more flaky, and a lot of the things that make digital switchover attractive on TV don’t apply to radio in the same way. So I think the industry needs to do a lot more to make it in consumers’ interests to have that switchover…..

We have also got to think about consumer anger. Consumers are people that the radio sector needs. It’s going through a very tough patch. We don’t want to switch off listeners by suddenly saying that we are not going to – that we are going to force you to have a new radio, and there’s a real danger, if we do that, that they might start listening to their iPods and their CD players instead. … At the moment, we seem to be getting into this mindset where we want to force it on the public, even though the public can’t really see what the benefits are.”

So, between then and now, who is it that has convinced Hunt to backtrack and instead to endorse the status quo? The civil servants in his Department who hitched their wagon to the ‘DAB is the future’ train too long ago to let go now? The Ofcom radio staff who were appointed years ago on the strength of their promise to deliver digital radio switchover? The commercial lobbyists who still fantasise about the huge profits to be made (for Britain!) from global exports of their European DAB technology? All of them are nothing more than dreamers.

At the same time, many of these same parties are already distancing themselves from responsibility for DAB so as to save their own skins once DAB’s ‘fall from grace’ inevitably arrives:

• the government is saying that digital radio switchover depends upon the public’s take-up
• the regulator is saying that digital radio switchover depends upon the radio industry’s commitment
• the commercial radio industry is saying that digital radio switchover depends upon the BBC paying
• the BBC is saying that digital radio switchover depends upon its audiences
• the BBC Trust is saying that digital radio switchover depends upon the commercial radio sector’s commitment.

For years now, the stakeholders assembled around the table in those endless DAB committee meetings have been occupied identifying DAB’s problems yet, at the same time, every one of them has expected somebody somewhere else to fix them. But there is no sugar daddy out there. There is no cavalry about to ride over the horizon. It is you stakeholders who created such a mess of DAB and either you must fix it….. or throw in the towel.

This week’s announcement about digital radio switchover demonstrated that the new government does not have the guts to do what many, including the House of Lords Communications Committee chaired by Lord Fowler, had asked of them. To commission an objective analysis of why DAB was introduced in the first place, how close we really are to digital switchover, whether we will ever get there, what the costs have been to the radio sector to date, and to evaluate whether it is still worth pursuing these objectives thirty years after the DAB technology was invented.

Instead, the government has decreed that the present DAB unreality will continue … probably until one of these stakeholders eventually is forced by circumstance to kick the entire digital radio switchover issue into the long grass. In the meantime, the poor consumer is still on the end of misleading campaigns to persuade them that they will need to buy new DAB radios (which are mostly British), throw out their old radios (which are mostly foreign) and somehow get used to the sub-standard quality of DAB radio reception that most of us experience. No wonder they are asking in increasing numbers: ‘What was wrong with FM?’ And the correct answer is: ‘Nothing at all’.

This week’s government statement by Ed Vaizey, the new Culture Minister, was so woolly and vague that the media were able to write it up from wholly contradictory viewpoints.

“Government abandons 2015 target date for switching radio to digital signal,” said the Bloomberg News headline.

“Radio industry welcomes Tory backing for digital switchover in 2015”, said The Guardian headline.

Those two headlines cannot both be true. All the government has done this week is leave everyone more confused than ever. So why did it bother saying anything at all? A critic of Ed Vaizey’s announcement might be moved to say:

“We have got to be concerned that people will be ready before any switchover takes place and that there won’t be literally millions of analogue radios which suddenly become redundant. As you know, the government has set a provisional target date of 2015 and we are sceptical about whether that target can actually be met.”

But wait! In fact, those were the words of Ed Vaizey himself, in March 2010, criticising the then Labour government’s digital switchover plans.

Meet the new boss, same as the old boss.