Digital Switchover: Communications Committee Report

Lord Gordon of Strathblane Excerpts

Tuesday 12th October 2010 Lords Chamber

[Lord Gordon of Strathblane]

My Lords, simply because the evidence has been bound into the volume with our report, it looks a more daunting read than it really is. I hope that that does not put off some of our colleagues in the House, because we are all listeners and viewers and digital switchover will affect us all. It is very important that this House at least is well informed as to the effects of digital upgrade, particularly on the radio sector, which I shall concentrate on.

It has already been pointed out that in television everything seems to be going well. In a way, it is not surprising. The digital offer in television is a distinct improvement on radio; there are more services; and the public wanted more than five digital services. The cost of conversion is about 10 per cent of the cost of a set, which is buttons. More than that, the Government made money by selling off the surplus spectrum, so everyone was happy. That should not, however, stop us from acknowledging the very good work done by Digital UK in ensuring that it has all gone quite as smoothly as it has so far. I hope that continues.

By contrast, there is absolutely no evidence that the public wanted any more radio stations—indeed, as I shall shortly indicate, we have far too many at the moment. The Government get no money from selling off the spectrum, and the cost of converting an analogue radio set—as has already been pointed out, there could be as many as 100 million of them in this country—is pretty well the same as buying a new digital radio set.

So let us examine how we got into this position, for I concede that the case for digital switchover in radio is not nearly as strong as it is in television. Let us go back to the Broadcasting Act 1990, which introduced the great concept of licences being auctioned off. Smart operators such as my noble friend Lord Macdonald, who is sitting along from me, very sensibly bid about £2,000 for STV’s licence. Other people chipped out many millions of pounds and have been feeling the pinch ever since.

There was however a public outcry at the idea of auctioning off television without a criterion of quality threshold. So a quality threshold was introduced for television but not for independent national radio. This meant that independent national radio licences went to the highest bidder. The reason that it was not a pop station was because the House, on the recommendation of the then IBA, said that it would not be. When asked how he defined “pop”, the noble Earl, Lord Ferrers, who was then the Minister, said, “Thump, thump, thump”. It was a very apt description. Showtime won the licence, bidding over £1 million more than Classic FM. It was awarded the licence provided that it could raise the money by 16 August 1991. It failed to do so, however, so the licence went by default to Classic FM.

It is fair to say that the IBA, and subsequently the Radio Authority, was quite proud to be allowed to regulate Classic FM. It was the sort of thing you could talk to your friends about. Their wives might admit that they listened to commercial radio as distinct from saying, “I think my cleaner sometimes listens to it”. The authority was very anxious to ensure that that Classic FM would survive. Given that its licence would be up for auction in a few years, all that somebody had to do was come in with £5 more than Classic FM’s bid, whatever rubbish they were going to broadcast, and they would get the licence. So the authority came up with the wheeze of suggesting to the Government that the 1996 Act include provision for digital radio and extend the licence of any broadcaster who agreed to broadcast on digital.

I was one of those operators at the time—I regret that it is no longer an interest since my company was acquired in 2005—who, like everyone else, said, “Yes, extend our licences for 12 years and, of course, we’ll run a second digital transmission system”. We regarded it simply as a tax worth paying for the security of having one’s licence, and nobody did very much about it. It is easy to blame politicians, but the honest truth is that the radio industry did not do much about it.

If we fast forward to 2008, a report came out—a report that was unpublished until ours came along—stating that the actual benefit from digital switchover would not appear until 2023. By 2008, the situation for commercial radio had changed out of all recognition. Audience levels were down, advertising revenue was down and commercial radio’s share of listening was down. With about 130 stations, commercial radio used to enjoy a majority of listening. It had 51 per cent and the BBC was privately prepared to lose share down to 30 per cent. The Radio Authority and subsequently Ofcom licensed more and more radio stations so with three times the number of radio stations—390—commercial radio’s share dropped as it now is to 41 per cent.

A real problem faces commercial radio but at this hour I will not indicate the remedy. It involves a change in the ownership rules. The Government are signed up to that, as were the previous Government, and that will make a difference. Without that, frankly, the future is fairly bleak. We are in a difficult situation and one thing that can be said with absolute certainty is that the independent sector cannot afford two transmission systems. We heard evidence. For example, Michael Betton from Lincs FM said that supporting two transmission systems would literally be the difference between staying in business and going out of business. What do we do? Do we say that we will abandon the digital experiment and say “We’re very sorry all you people who bought digital sets when we told you it would be a good idea. We’ll just forget about it”? The general feeling in the radio industry is that radio cannot remain an analogue island in a digital world. Although the benefits are not huge, we must go ahead with switchover and make the best of it.

The noble Lord, Lord Carter, was right to set a target date and say that we were pressing ahead. More has happened in the 10 months since Digital Radio UK was set up in response to the target date of 2015 than happened in the previous 10 years. At last, the radio industry has geared up and things are happening. Motor car manufacturers are guaranteeing that they will have digital sets by 2013. That would not have happened if the Government had not given a firm date. As various speakers have said, we all need certainty, particularly those who have been asked to invest large amounts in retooling plant and equipment to install digital radios.

Although I fully endorse the decision to press ahead with digital, like other members of the committee, I believe that it should be done provided certain other things happen. The first thing that I would agree on is a big expansion in coverage. I do not like phrases like 90 per cent simply because I usually end up being part of the 10 per cent. Even 92 per cent sounds great, but I will guarantee that the remaining 8 per cent of the population covers large parts of Britain geographically. Rural areas tend to do that.

Universality of provision is a key ingredient in public service broadcasting. Let us remember that we extended terrestrial television coverage at huge uneconomic expense because we thought that it was something that every citizen should have. We must have the same attitude to digital radio and, I say in deference to my noble friend Lord Maxton, with regard to broadband provision throughout the country. I am very worried about all the high talk of 20 megabytes and 100 megabytes in the city and, frankly, 2 megabytes, if you are very lucky, in rural areas. That would increase the digital divide and it will rule out living in a rural area in a few years’ time unless we really motor on this and start to provide wide broadband coverage throughout the country.

The next point we insisted on was that something was done about cars. It has already been pointed out that there will be 20 million old cars without digital radios. Having talked to the digital people yesterday evening, they think that the cost of re-equipping a car when it goes in for an MOT will be around £70 or £80. That is not cheap, but perhaps it is bearable.

The other thing is to have a sensible disposal programme for the useless analogue radio sets. To be honest, I think that we are all right on the DAB versus DAB+ argument. If the Government’s ruling is that all sets must incorporate the multichip that will adapt to all services, I think that we are covered on that.

This was my first full report on the committee. I joined part the way through the previous report on the film industry. I thoroughly enjoyed my time on the committee under the chairmanship of the noble Lord, Lord Fowler. I greatly valued the assistance that we had from our Clerk and his assistant, Ralph Publicover. The noble Lord, Lord Fowler, was an outstanding chairman. He not only guided us through the meetings, but his contribution to the writings of the report went far beyond the call of duty and the House is greatly in his debt.