Small-scale Radio Multiplex and Community Digital Radio Order 2019

Lord Ashton of Hyde Excerpts

Tuesday 23rd July 2019 Lords Chamber

Moved by

[Lord Ashton of Hyde]

That the draft Order laid before the House on 20 June be approved.

[The Parliamentary Under-Secretary of State, Department for Digital, Culture, Media and Sport (Lord Ashton of Hyde) (Con)]

My Lords, the order that we are debating today will facilitate a new approach to open up broadcasting on terrestrial digital radio to more than 300 existing community stations and smaller commercial services. It will also offer an opportunity for new entrants who wish to launch new services.

There has been a marked change in listening habits over the past decade, with a significant shift towards consuming radio via various digital platforms. The latest RAJAR audience listening figures, published in May 2019, show that digital radio now accounts for 56.4% of all radio listening; 10 years ago, it was just 20.1%. This shift has significant implications for around 300 existing community stations and small commercial radio stations that are currently broadcasting to local audiences only on FM or AM. For most of these small stations, a move to digital by broadcasting on their existing local digital radio multiplex is not an option, because many local multiplexes have insufficient capacity available for carrying additional stations and the cost of carriage for an individual station is too high. Smaller stations recognise that they will increasingly be at a disadvantage in retaining their audience as digital becomes the default mode.

To address this issue, the Government supported the development of an innovative approach known as small-scale DAB. Small-scale DAB is digital radio. It uses advances in technology to provide a flexible and cheap approach to digital transmission which performs well in localised geographical areas. DCMS funded a programme of work by Ofcom to examine the feasibility of small-scale DAB technology. This included 10 successful technical trials in towns and cities across the country. However, the trials licences were issued under temporary licensing arrangements and we concluded that these arrangements would not be appropriate for the longer term.

The existing legislation is more than 20 years old and places a number of burdens on radio multiplex operators that are not necessary or appropriate for small-scale radio multiplex services. Importantly, the existing legislation does not allow Ofcom to reserve capacity for community radio stations or enforce restrictions on ownership; both are essential if smaller stations are to have a viable opportunity to broadcast on DAB. To enable the necessary legislative changes to be made, DCMS supported a Private Member’s Bill sponsored in your Lordships’ House by my noble friend Lady Bloomfield of Hinton Waldrist, which received cross-party support; I extend my thanks to her.

The Broadcasting (Radio Multiplex Services) Act 2017 amended the Communications Act 2003 to provide a power to modify, through secondary legislation, the rules for radio multiplex licensing set out in Part 2 of the Broadcasting Act 1996. In 2018, the Government consulted stakeholders about detailed proposals on new arrangements for licensing new small-scale radio multiplexes, and we received 87 mainly detailed responses, including from commercial and community radio operators. Overall, there was strong support for the proposals, but there were representations, including from the Community Media Association—the CMA—on whether we had got the balance right between protecting the legitimate interests of the community radio sector and allowing the commercial sector to be involved. We have reflected all these points in drawing up the order. The order secures important protections for community radio and small commercial stations which want to use these networks while ensuring that only minimum, necessary burdens are placed on new operators.

The issue that attracted the most attention during the consultation was who could hold a small-scale radio multiplex licence and the proposed limits to the number of licences that could be held. The CMA proposed strict rules that limited licences to not-for-profit entities and to holding a single licence. However, we were not attracted to this approach as it would have excluded many of the existing operators of the successful small-scale trials.

We think it is important to have a mixed economy, and for commercial entities to be involved and apply their skills and investment to develop small-scale DAB. This will help ensure that there is interest in taking up licences—something that will actually benefit community stations that would otherwise find it difficult to run a small-scale multiplex service. None the less, we recognise that some restrictions on ownership are necessary to avoid a potential concentration of ownership, and we consulted on this basis. Since the consultation, we have listened and made a small number of changes to the original proposals to strengthen the protections for community radio.

The order ensures that capacity reserved for community stations on a small-scale multiplex is a firm reservation; in other words, it must be maintained for use by community digital radio stations—C-DSP licence holders —and not by temporary commercial services. This removes an incentive for operators to seek to overcharge community radio stations. The order requires Ofcom to ensure that small-scale radio multiplex licence holders publish information about the carriage fees charged. This will allow fees to be compared and benchmarked, which will also help to limit charges. Finally, the order requires Ofcom to consider the extent of involvement of community radio in a particular application when awarding a small-scale radio multiplex licence. In other words, an application supported by local community services, for example as consortium partners, will have a greater chance of success.

In addition to these measures, the order sets out the other elements of the new licensing framework for small-scale radio multiplex services. Taken together, these measures will help to ensure that community radio’s interests will be protected. The key elements are as follows. First, they require Ofcom to reserve capacity on small-scale multiplexes for community digital radio stations. There must be a minimum of three slots available, with a variable upper limit set by Ofcom based on an assessment of local need. Ofcom will be able to review the reservation at the point of renewal.

Secondly, they create a new C-DSP category of licence for community stations broadcasting on digital. C-DSP licensees will need to commit to the same social value requirements that apply to existing community stations. Thirdly, they restrict the total number of small-scale radio multiplex licences that can be held by one company at a given time. They also place much stricter restrictions on the number of small-scale radio multiplex licences that existing national operators can be involved with and require them to do so in consortia with other partners.

The order also contains a small but important provision relating to community radio licensing. Community radio has been a major success story, with more than 280 services on air. But the licence terms for the first stations launched in 2005 are due to expire in 2020. We want community stations to continue to focus on what they are doing well—serving their local communities—rather than being concerned about the renewal of licences during a period when stations will need to think about digital radio carriage on new, small-scale multiplexes. Therefore, the order will also allow for a further extension of analogue community radio licences for a fourth five-year term, up to a maximum of 20 years. This avoids the need for Ofcom to readvertise the first wave of community radio licences, which it would need to do later this year. This proposal has strong support from the CMA.

We believe that small-scale DAB has the potential to revolutionise radio in the UK. This order will facilitate a clear pathway to digital for over 300 existing community and small commercial radio stations, as well as providing an opening for new entrants. The extensive technical trials have demonstrated that small-scale DAB provides a low-cost, viable option for smaller stations to broadcast on a terrestrial digital platform. I beg to move.

[Lord Kirkhope of Harrogate (Con)]

My Lords, I will make just a short intervention. I declare my interest as someone who has been involved in commercial radio since about 1972, first with the White Paper at the time and then, with the emergence of commercial radio, as an applicant for one of the first commercial radio licences, which I did not get. Subsequently, I have been very much involved in the hospital radio movement—and am to this day.

I very much welcome the general tenor of the order, and the nature of it has been very much to do with realising the importance of the community in radio broadcasting. I think all of us agree that radio, as opposed to TV and online services, is still absolutely indispensable to vast numbers of people all over the country—in particular in localities where they can have local information that they could not otherwise get quickly and immediately to their benefit.

My concern over many years has been that the original ideas behind what was then the Independent Broadcasting Authority, which granted the original licences to commercial stations, required in the criteria a considerable level of local input. Over the years, as I think my noble friend will acknowledge, the way in which our commercial broadcasting and radio have developed in this country has been more towards monopolistic situations, combining radio stations, wherever they may be located, in a way that has taken from them the importance of that local interest. Therefore, it has to some extent been up to the new community broadcasters, of which there are many now, mostly broadcasting in analogue on AM or FM frequencies, to provide local input.

--- Later in debate ---

[Lord Stevenson of Balmacara (Lab)]

My Lords, we too welcome the broad approach of the legislation. In so doing, I echo the points already made. Some very difficult questions have been raised by some of the issues the Minister referred to in his opening speech and picked up by the noble Lords, Lord Kirkhope and Lord Storey, but the central one, which I think we all got a fair amount of correspondence about, is how we provide for and support the community activity we are looking for from the digital radio service or services, and ensure the commercial pressures from those larger-scale operators do not squeeze out that initiative. I do not think we will be able to bottom this out in the debate today, but the SI goes some way to do so. Indeed, about four pages’ worth of restrictions and limits are being placed on ownership and various types of constructions that can be made for companies operating in this area, which will try to achieve that balance. We will have to see how that works in practice, but the issue has been well raised.

I will make two points about the broader context. I remember asking the noble Baroness, Lady Bloomfield, when the Private Member’s Bill she supported went through the House what its implication might be for the broader context of digital radio in this country. We have been waiting for some time for some news about the digital switchover date. I am sure the Minister will have a note about that. Could we see whether this brings us a bit closer? Of the two criteria, I think that more than 50% of new cars being bought that had digital radios fitted as standard was reached three or four years ago, but we were also waiting for more than 50% of the listening public to be listening on digital services. I think the Minister said in his opening remarks that that is now well over 50%. The barriers to that appear to be disappearing, and if, as we are hearing, local radio is moving in swarms—even in Harrogate—to digital, why are we not hearing about the switchover date from the Government? Is this not the sort of “get up and go” we have been promised by the soon to become new Prime Minister, taking advantage of the new technology and driving it through for the greater benefit of Britain? I look forward to the Minister’s response.

Of the comments received, there are three small issues I want to leave with the Minister as questions. The question of coverage is to some extent included in the SI, but the broader question of whether all communities will benefit is not. Is there any intention behind the SI? If not, will the Government think about looking at this within a year or two’s time to make sure that all communities, certainly the ones beyond urban areas, are not left behind? True local radio provision has to be local for everybody. This is a step in the process of trying to get greater community radio coverage. I wondered whether there was anything in the thinking that would encourage the point made by Local Radio Group that some areas are still not covered.

The comments from the Community Media Association about making sure that we have a sufficient number of not-for-profit companies organised have already been mentioned. That raises the question of the Community Radio Fund, which is referred to in the Explanatory Memorandum. It has not been uplifted from its current level of £400,000, despite the fact that there are more community radio stations operating and possibly more to come. Does the Minister have any thoughts on how that fund might be moved forward and whether there are any prospects of that happening? It will certainly be an important floor for those wanting to operate these systems to have at least some public money available to get them started.

The third question concerns the impact this order will have on the local commercial radio services that are currently broadcasting, and the question of analogue licence renewal. He said that the extension was going to be made for a 20-year period, to ensure that those currently in it do not feel that they have to go through the process of resubmitting their bids for new licences. The point has been made, and I think we accept, that a balance has to be struck between those who are proposing these services and ensuring that they continue to exist, and not placing undue burdens. However, 20 years seems a long time. Given that this has already been extended once, what will the impact be on trying to drive competition in this area? Surely, if a number of people were interested in bidding for these licences, the opportunity to do so would be when they are advertised. If I am repeating correctly what the Minister said, we are again going to lose out again for another five years on that. Perhaps he will comment on that.

[Lord Ashton of Hyde]

My Lords, I am very grateful for all noble Lords’ comments. I detected a general approval of the order. It provides a benefit to the country, allowing stations specific to local areas and local communities to be set up, which may, to an extent, counter the effects mentioned by the noble Lord, Lord Storey.

Starting with my noble friend Lord Kirkhope, I completely agree that even in this age of Netflix and video-on-demand services, radio is still indispensable. I can provide reassurance to him and the noble Lord, Lord Storey, that the whole point of these requirements is to avoid a concentration of ownership, and that there will be a local interest. In every single small-scale radio multiplex, there will be a firm reservation for community radio. Even though we think that it is beneficial to have a mixed policy of commercial and community, there must always be a reservation for community, which will be a minimum of three. Ofcom has the power to vary that to an unlimited higher amount, depending on its assessment of demand. There are also specific concentration rules stating that no organisation can hold more than 20% of the multiplex licences. This will prevent a concentration.

The noble Lord, Lord Storey, also mentioned national operators. They will be able to hold only a 30% stake in any company, and they are limited to being involved in a maximum of six licences. There are 700 expressions of interest already; I think that is a meaningful limit. There is a strict overlapping rule, which will avoid a local monopoly, and there is also an adjacent area rule. This prevents small-scale radio multiplex licensees holding adjacent licences where the overlap is significant, and avoids operators trying to replicate local regional coverage by holding a collection of small-scale multiplexes.

Lastly in answer to my noble friend, when Ofcom considers a new small-scale multiplex licence, it will look favourably on an application which contains community radio within it. There will be a presumption in favour of community radio if it is combined with commercial radio to set up a multiplex. We set up the rules deliberately to prevent some of the problems that the noble Lord, Lord Storey, mentioned. In many cases, the community and local radio element will benefit from commercial radio as well, because it will be able to contribute to the investment required. Admittedly, the investment required is much less: one of the benefits of the new technology, and the reason there are so many expressions of interest, is that it makes the price of one transmitter, I think, £9,000, and £17,000 for two. It is much more affordable than it was. We have tried to promote competition and diversity of ownership and to address some of the concerns about concentration of ownership; that is why we have taken those steps.