Broadcasting Act 1996 (Renewal of Local Radio Multiplex Licences) Regulations 2015

Tuesday 10th March 2015 Grand Committee

Motion to Consider

17:27

Moved by

[Lord Bourne of Aberystwyth]

That the Grand Committee do consider the Broadcasting Act 1996 (Renewal of Local Radio Multiplex Licences) Regulations 2015.

Relevant document: 23rd Report from the Joint Committee on Statutory Instruments

[Lord Bourne of Aberystwyth (Con)]

My Lords, the Government have a long-term objective to support a listener-led migration from analogue to digital radio. These regulations support the expansion of local digital audio broadcasting—DAB—network coverage, which has been identified as a key barrier to the uptake of digital radio. These regulations will allow the holders of a local radio multiplex licence to apply for a further renewal of their licence until 2030. They are an important step in supporting the Government’s commitment to expanding the coverage and reach of digital radio in the United Kingdom.

Digital radio continues to grow steadily: it accounted for 24.8% of all radio listening in the third quarter of 2010, but by the same quarter last year that had risen to 37.8%. The number of households with DAB radios has increased from 32% in 2009 to almost 50% now. More than 61% of new cars sold each year now have digital radio fitted as standard; figures for the fourth quarter of 2014 from the Society of Motor Manufacturers and Traders show it up from just 4% in 2010. The strides made are due to the efforts government has made to support the radio sector through this transition, and by the radio industry itself and its growing partnership with the United Kingdom’s motor industry.

In July 2010, DCMS launched the Digital Radio Action Plan. While recognising that the future of radio was digital, we sought to tackle the key barriers facing the industry in support of a future decision on a timetable for switchover, when the 50% of radio listening was to digital and when DAB coverage had been built out to match FM coverage. I stress that 50% is a trigger to consider a possible switchover; it would not be an automatic trigger for switchover.

17:30

A key barrier for digital radio identified in the action plan is the level of DAB coverage. This has been a major frustration for listeners. Funding was set aside in the last licence fee settlement to improve the coverage of the BBC’s national digital radio network. The BBC is around two-thirds of the way through its programme to extend the service to 162 additional transmitter sites, helping to increase its national coverage from 94% of UK households to more than 97% by the end of this year. There are also improvements in the coverage of the national commercial digital radio network, with investment by Arqiva, the transmission network operator for terrestrial television and radio, to extend its coverage from around 89% to more than 91% of UK homes, also by the end of 2015.

The real barrier on coverage has been the local DAB network. It consists of 55 licensed multiplexes around the UK and is the primary broadcasting network for local commercial radio services and the BBC’s local stations in England. It is also the network for the BBC’s nations’ services in Scotland, such as BBC Radio Scotland; in Wales, such as BBC Radio Wales and BBC Radio Cymru; and in Northern Ireland, such as BBC Radio Ulster. The rollout of this network has lagged far behind the expansion of the two national United Kingdom DAB networks and it has been much more challenging.

Between 2007 and 2012, the network’s coverage remained stuck at 65% of UK homes with little prospect of it being built out further, in part because the licence holders of 13 licensed local multiplexes across the country considered it unviable to launch them as there would be little or no take-up from broadcasters. The deadlock was broken through intervention by DCMS and an agreement was reached with the industry in 2012. This has resulted in the launch of 12 such local multiplexes, with the first in Oxfordshire in December 2012 and the most recent in north Yorkshire in December 2014. This has improved local DAB coverage from around 65% of homes to almost 75%.

In December 2013, DCMS announced a package of measures to support the next phase in the development of digital radio. The measures included a commitment by DCMS along with the BBC and commercial operators of local DAB radio multiplexes to support building out the coverage of those multiplexes to approach current commercial FM equivalence; that is, from around 75% of UK homes to more than 90% of households by late 2016—the 90% being those that are able to get FM at the moment.

Last month, the Minister of State for Culture and the Digital Economy announced the construction of 182 new local digital transmitters and modifications to a further 49 local DAB sites across the United Kingdom in partnership with the BBC and commercial multiplex operators, thus tackling a major barrier to better digital radio coverage in the UK.

DCMS is supporting this programme in two ways: first, by providing up to £7.75 million of capital funding to support the extension of local DAB services. The BBC is also supporting the programme financially in income terms and will meet one-third of the operating costs of additional sites for carriage of BBC local stations and BBC nations’ services. The commercial sector will meet two-thirds of the ongoing costs from 2015 to 2030.

These regulations are the second and crucial element of DCMS support for the build of better DAB coverage. The current local multiplex licences begin to expire in the early 2020s. The build of additional coverage being supported by government and the BBC will require long-term capital and service contracts to be signed between the local multiplex operator and Arqiva, which provides transmission services to the multiplex operators.

If these contracts are over a shorter period, that could push up the cost of the extension of coverage. Permitting multiplex operators to renew their licences so that they expire in 2030 will allow operators to spread the cost of that investment over a longer period, thus reducing the immediate costs to commercial broadcasters, local multiplex operators, the BBC and the Government. When completed in mid-2016, this programme will double the number of local digital transmitters and expand the level of local DAB coverage up to the same standard as FM currently. That amounts to raising coverage from around 75% of UK households currently to 91% of homes after the build-out is completed. It will mean that around 4 million more households will benefit by having access to their favourite stations on digital and a further 4,400 miles of major roads will be covered.

These regulations are crucial to supporting the investment in expanding local DAB and in giving commercial radio the security of tenure it needs to support the expansion of local DAB services. Under the changes in these regulations, local multiplex operators that have completed the programme of building all additional sites in accordance with Ofcom’s local DAB expansion plan will be able to apply to Ofcom to renew the licence to 2030. Local multiplex operators will be required to maintain the expanded coverage as a condition of their renewed licence, though Ofcom will have discretion to make changes to licence conditions—for example, if certain sites need to be replaced or if the multiplex operator wants to enhance coverage further. The DCMS has consulted both Ofcom and the multiplex licence holders on a draft of these regulations and they are supported by the radio industry and Ofcom. They will help to deliver expanded local DAB coverage at a level where a future Government would be in a position to consider a timetable for switchover, but the trigger for considering this decision will be the listener, as we have always said.

Although we have made good progress since 2010, the Government have always said that decisions about a future radio switchover or the timetable need to be listener-led and we will not consider setting any timescales for a future switchover until the majority of all radio listening is to digital. These regulations will help us increase coverage so that as many people as possible can enjoy the benefits of digital radio. I commend these regulations to the Committee.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am sorry we have not attracted a bigger audience for this topic. Indeed, it might have been even smaller if I had not been able to rush out of my medical appointment, which grievously overran, so I am a bit out of breath and slightly unsighted on this. Since it has effected nosebleeds, I might suddenly emerge in a haze of red; if so, I will rush out. I will apologise to the Committee if that is the case. I am slightly extending it to make the point and I do not think it will happen, but that was where I was earlier today.

I enjoyed very much the introduction given by the noble Lord, Lord Bourne. It is great to hear that progress has been made in digital audio broadcasting. There was a bit of a blizzard of statistics. I am not sure I have my coverage detached from my percentage of ownership or use, but I am looking forward to reading it in Hansard and I might come back to it if I am still confused. The two things that have struck me are that more than 60% of new cars now have DAB, which has always been the key issue. If one can get the car manufacturers to adopt this as standard then it will naturally drive people’s experience and use and therefore lead to greater confidence and greater usage—or is it coverage? I forget which. I am also very struck by the 50% of home use figure that the noble Lord mentioned and I think that that is a very good base for further development of this issue.

The noble Lord was clear that simply reaching those figures did not mandate a trigger for anything to do with the switchover, but I wonder whether, when he comes to respond, he could simply just go over this again, because it seems to me it would be helpful both to the industry and to policymakers if there was some sense from the Government of what figures they are aiming for. More than 50% seems to me to be a majority. It is usually what tends to happen in these matters and I think in that situation it is pretty close to getting there. Coverage is clearly a bigger issue and I will come on to some points about that, but I do not yet understand quite what is holding it back.

The position with television is, of course, not the same, but it certainly had a significantly different approach. In the case of the switchover for television, a clear target was given with significant time to allow manufacturers and users to plan for the eventual change. I am sure that this was in the thinking and that, once the trigger point has been reached, we will have that, but it would be helpful to get reassurance on that point from the Minister.

As I hope will be clear from what I am saying, we are very supportive of the measures in this SI and do not have any objections to the process. I suppose that, behind it, there is a slight question about where competition in this area will come in, if at all. The worry outlined by the noble Lord, and which drove the earlier decisions to proceed down this route of giving support, particularly to those who are operating the local multiplexes, loses a little bit of bite when you consider the timescales that we are talking about; that is, another 15 years for these people from today and, admittedly, only 10 years from the point at which their licences begin to run out. It is not a huge amount of time, but in a market like that it is certainly quite a significant support mechanism for this area. I just wonder whether any thought was given to the carrot of giving what is, effectively, a 10-year licence to operate. I was going to say something else, but I will not; it involved the word money. It is an area that we will need to come back to at some point. On the general question of the switchover, I am interested to know what the big picture looks like now and whether there was some sense in which competition was deliberately considered but then ignored. I would like some information on that.

I would like to ask a few questions. I may have missed this in the introduction, but there was a problem with the second commercial digital channel, D2 as it was called. What progress has there been on that? That was surrendered by the winner of the auction following the award of the licence. Will he give us an update on that?

What work is being done on technical measures to support radio in particular? There is quite a lot of talk in technical terms around broadcasting more generally about whether satellite, Freeview and other forms of distribution are likely to make an entry. Do we have any information about commercial radio and BBC radio in the digital field? There are ways in which that could be done. Many people now listen to radio on the internet. What exactly is the balance between those? If there is any information on that, I would be grateful to have it. The attempt to bring all licences in on a landing slot of 2030 is probably sensible, particularly if there are thoughts about technological change. It would be interesting to know something on that.

Finally, I am advised that licence rollovers have been granted in the past to analogue commercial radio stations that also broadcast in DAB, which, presumably, is a means of ensuring stability and supporting investment in digital radio coverage and content. The Digital Economy Act extended those licences only to 2017, so it is a rather narrower date than 2020, which is the date that we are talking about for the local multiplexes. Presumably, in the absence of any action by government, we will look to require those licence holders to reapply for their licences. That does seem a little bit tough. I understand that DCMS consulted on this matter with a closing date of 1 December 2014. As we are now in March, will the Minister mention where he is on that, what is likely to happen to it and what timescale is involved?

[Lord Bourne of Aberystwyth]

I thank the noble Lord, Lord Stevenson, very much indeed for his contribution. If he is capable of that with an impending nosebleed, goodness knows what he would be like firing on full health. We certainly wish him well.

I thank him very much for the kind words of support. I will try to deal with the various questions that he raised. I have every sympathy with his fight with the statistics. I also have had one in this area with the acronyms, but am probably just about making my way through that.

17:45

He raised the issue about the 50%, which is a trigger for looking at the position, but not necessarily a trigger for the switchover. Actually, the 50% initially came from a government White Paper in 2009, therefore under the previous Government. Since then spokespeople in the Commons on the Labour side have talked about a 70% trigger so I am not sure whether that is policy or a stray comment but, as I say, we are looking at this as being consumer-led. We do not see it as being an issue other than consulting with people when it gets to 50% as to what is the appropriate trigger. We have no set figure on that.

The point on competition that the noble Lord raised was well made. We have looked at that in the round but feel that the security of delivering the digital rollout is the important issue at this time. I should have said, and perhaps let me make the point at this stage, that community and local radios will continue to operate on the FM network, so they will be protected in so far as they are very localised and community radios such as hospitals and so on. We are looking at giving them some limited powers in relation to advertising and so on as well, which is the subject of some other regulations but not these today.

The noble Lord asked about the second commercial national D2 bidding process. He is absolutely right that two valid bids have come in and we are looking at them at the moment, and a decision is expected shortly. I think the names are in the public domain but one involves Arqiva.

I think the noble Lord was making the point about the analogue service licences commercial radio stations have until the end of 2017. That was out for consultation until the end of November. The consultation has ended. We are certainly expecting to give a decision on that. We are looking at the evidence and clearly there is an issue there before Parliament is dissolved—certainly that is the intention. That is a point well made, but we are on to that.

In relation to the other types of delivery of radio and indeed television services, I think this area is unique in that delivery can both be very local and global. The United Kingdom leads on internet hybrid radios and we are very proud of our role on that. I will write with more detail on that to the noble Lord since it is somewhat outside of these regulations. With that, I thank the noble Lord very much for the very helpful and relevant questions and commend these regulations to the Committee.

Motion agreed.

Committee adjourned at 5.47 pm.