Review of Radio Licensing in Ireland

Response by IBI to consultation paper.

Introduction:

IBI’ s welcomes the publication of the Ox Report and this consultation process as an opportunity for much needed dialogue between the independent radio sector and policy makers.

While we regret that the process was not conducted by a team that included expertise directly relating to independent radio in Ireland and that the review group failed to conduct any meaningful consultation with IBI prior to the Report being completed, we recognise the Report as a valuable contribution to knowledge and understanding of the sector.

While it is by no means perfect, the commercial independent radio sector in Ireland, has grown to become one of the strongest in the world and has reached a level of equilibrium with the public broadcaster that ensures the viability of both while offering diversity and high quality content to listeners.

It is important that the key issues raised by the report are now considered in full and that the views of the independent commercial sector are sought and taken into account before any radical action is taken that may endanger the success of the sector. The key message from IBI is that Government policy is working reasonably well, the sector has come through a difficult birth and is now relatively healthy.

Key Issues for the Department

The Radio Landscape

a. How should the overall structure of the radio landscape in Ireland be defined and achieved?

In the context of a proper economic and social analysis of the impact and viability of local and national radio services carried out in full consultation with public and private sector radio operators.

Such an exercise should involve agreement on the scope and terms of reference as well as involvement of the sector throughout the process.

b. Is the existing structure and mix of national, regional and local commercial and community stations appropriate? What, if anything, is missing?

IBI is of the view that the current mix of national, regional, local and community stations is uniquely successful in comparison to other countries and great care needs to taken in introducing any reforms. Its success lies not only in the diversity of content that is provided but in the economic equilibrium that is maintained between sources of revenue from local and national advertising markets.

c. Does it remain appropriate to leave the development of local and regional radio to commercial or private interests?

The success of local and regional radio is founded upon a number of critical factors. One of the most important is the absence of the heavily subsidised public service broadcaster in these markets.

While all parts of the country have access to specialist national stations such as Lyric, the vast majority of local content is produced by commercial local stations. The Ox Report rightly pointed out that many of these stations, due to the size of their franchise area, were at the edge of commercial viability.

Given that the RTE stable of stations, unlike its counterpart in the UK, soaks up a considerable proportion of available advertising revenue, any moves to allow it access to local markets would seriously undermine the viability of existing services.

Any analysis of the programming schedules of independent local radio stations in Ireland will demonstrate that these stations provide a diverse range of content and appeal to a very broad spectrum of listeners.

Commercial services provide many services that are clearly public service broadcasting (news, current affairs, features, alternative programming , support for the Irish language etc) and have clearly demonstrated that PSB and profits can go hand in hand.

d. What are the strengths and weaknesses of the current franchise system? What are its implications for the structure of the radio sector in Ireland?

IBI does not accept that some of the smaller franchise areas are not commercially viable as many of our most successful member stations occupy those franchises (although we accept that stations in smaller franchise areas have to work harder to remain commercially viable). We do however believe that stations should be allowed to share services, where appropriate, to minimise overheads, while ensuring that locally produced content is prioritised.

e. What steps should be taken to further develop community and special interest radio services in Ireland?

While IBI has always been supportive of community and special interest broadcasting, it is important to recognise the significant contribution made by commercial radio to local communities. In particular, the commitment to local news and current affairs which, in many stations, extends beyond the minimum requirements should be recognised.

Policy Objectives for the Independent Sector

a. Are these policy objectives still relevant? How might these objectives be changed?

We believe these objectives are still broadly relevant. It may however by worthwhile including an explicit recognition of the importance of commercial viability and a licensing policy that underpins a sustainable and profitable sector.

b. What should be the medium term priorities for the regulation of the radio sector in Ireland?

To ensue the long term sustainability of the sector.

We have a relatively mature radio market with high listenership levels and a high proportion of overall advertising expenditure. In spite of the significant advertising expenditure that flows to RTE, the independent sector has managed to survive and grow to a position of equality in terms of market share with RTE.

In our view, the medium term priorities should concentrate on maintaining the quality and standard of the existing services. Initiatives such as the special production fund are an ideal means of encouraging the provision of greater diversity of content.

A key imperative is to do nothing that undermines the commercial viability of what is recognised internationally as a success.

c. Would it be appropriate for the Minister to have the power to give policy directions to the BCI and ComReg in relation to radio licensing?

Only in so far as it relates to very broad policy objectives of Government in relation to broadcasting policy.

d. If so, in relation to what areas and in what circumstances might the Minister give such policy directions?

As above

Diversity and Plurality

a. How can diversity in radio content be ensured?

While the word “diversity” has become somewhat of a mantra among policy makers, we believe some effort should be made to define it in terms of actual service provision.

The Ox Report mentions two aspects, external and internal diversity and at the same time makes the point that areas with just one commercial local station are somehow suffering from a diversity deficit.

We believe this analysis is somewhat simplistic and does not take into account the impact of national services in all local markets as well as the fact that commercial local stations where there in only one operator tend to operate very broad programme schedules catering for special interest and niche tastes.

It is also a mistake to assume that diversity in radio content can only be achieved through diversity in radio ownership. Experience both in Ireland and abroad shows that content is driven by listener demand. The fact that many local stations comfortably exceed the minimum local news and current affairs threshold is testament to the fact that they are focused primarily in satisfying local demand. Through this they maximise listenership and commercial return. We believe that the recent trend toward consolidation in the radio market in Ireland does not pose a threat to diversity of output.

IBI is seriously concerned with the idea proposed in the consultation paper and the Ox Report that all available spectrum must be allocated and used to satisfy the somewhat abstract concept of maximising diversity. Such a policy must be subject to an overriding objective of ensuring the long term economic viability of the sector that is currently responsible for providing the current high levels of diversity.

The Dublin market is a case in point. IBI is concerned that the BCI has proceeded to issue two new licences while up to four existing stations have yet to prove their commercial viability. We are of the view that the process of calling for expressions of interest is flawed in so far as it merely tests the willingness of new potential entrants to invest and not the ability of the market to absorb additional competition while maintaining quality of output.

b. What impact might the introduction of dedicated licence formats by the BCI have on the quality and diversity of Irish broadcasting?

If the introduction of dedicated formats is carried out following a market analysis that demonstrates that the introduction of the new licence will not undermine the commercial viability of existing services, then overall levels of diversity and quality will be maintained and possibly enhanced. The opposite is also true.

c. How can the community and independent commercial sectors contribute to enhancing diversity in what is offered to the audience?

There is already significant diversity in terms of local content on independent commercial radio. Well over 90% of content on these stations is locally produced. Much of this content is aimed at minority and special interests.

We welcome the development of the Broadcasting Funding Scheme as it will provide additional support to stations in producing high quality special interest programmes. We are concerned that the fund may be limited to peak programming times during the week where subsidised programmes may replace programmes that attract useful advertising revenue thus creating a zero sum or even a loss for commercial stations. The experience of the sector is that high quality special interest programmes broadcast after 7pm during the week, attract good listnership figures among their target audience. This difficulty does not extend to weekends where mornings in particular contain significant amounts of special interest content.

d. How might the BCI go about deciding on new dedicated formats?

Such a process should begin by establishing the commercial viability of a new service in a franchise area. If the introduction of a new entrant could be shown to endanger the viability of existing operators, then the priority should be to engage with existing operators to establish whether through the addition of additional opt out frequencies and other supports they would be capable of developing new formats.

e. What impact do existing ownership rules have on the level of diversity and plurality?

None

f. Does the nature of ownership impact on the output of radio stations? If so what policy positions are needed to ensure that change of ownership does not impact negatively on the range of services offered to Irish radio listeners? What policy positions are appropriate in relation to cross-media ownership?

The only policy positions required relate to the amount of shared programming that may be broadcast. If stations are required to broadcast predominantly locally produced programs then diversity of content is assured.

The normal rules of competition should apply to cross media ownership in terms of establishing dominant positions.

A Citizen's Voice

a. How can a mechanism be provided to enable the views of the public to be represented in implementing policy in the radio sector?

The most important measure of public support is the JNLR. After that the question is whether a forum to establish and discuss the views of the public in relation to content is required. We find it difficult to imagine how such a process might work without it becoming dominated by narrowly focused special interest groups.

If the objective is to gain an insight into public attitudes and opinion relating to quality of service and content, it may be more worthwhile to conduct regular market research as this will be objective and statistically valid.

b. Would an audience council be useful in this regard?

See remarks above. IBI has no objection in principle to an audience council. As a complementary measure, we would request that a structure be put in place to facilitate more regular discussion and input from the industry to policy making.

c. What other methods might be useful to obtain feedback from the listening public?

See above. Many stations carry out regular market research and find this is a useful tool to measure audience satisfaction in more detail.

Licensing - Application

a. What changes, if any, should be made to the current application process?

IBI’s position regarding licence renewal is well established. We believe that current licence holders should be subject to a performance review in the period prior to their licence expiring. If the BCI is satisfied with the performance of the station, their licence should be renewed without it being advertised.

Where a station failed to measure up to the standard required by the BCI, their licence would be advertised and they would be free to compete against other applicants.

We note the willingness of the Minister to look at a fast track process for stations where there is no challenger for their licence. While this would be a significant improvement, we believe no good argument has been put forward as to why licence holders who have provided high quality services in their area should be subject to re-licencing.

b. Does the application process as currently structured (e.g. costs, information requirements, etc.) act in any way as a barrier to entry?

No. It does however create a significant burden for incumbent stations both in terms of a distraction of management time as well as costs.

c. Is there a case for different application procedures for different categories of licences?

This may be worthwhile pursuing.

Licensing - Evaluation

a. What role should the BCI Executive have in the licensing process?

IBI believe that the BCI Executive should have a formal role within the application process whereby they review applications and make recommendations to the Board. We see this as a sensible recommendation and would provide a counterbalance to the broader but less specific experience of the Board of the BCI

b. Are there changes which could be made that would strengthen the licensing process?

We believe that the marking schemes should be more transparent. Feedback to unsuccessful applicants should be more detailed. We also support an appeals mechanism for unsuccessful applicants. It may be more appropriate to consider a “soft” appeals mechanism where decisions of the BCI are reviewed and the BCI asked to reconsider or re-visit aspects of their decision rather than a mechanism that accepts or rejects the decision.

c. Should a scoring system be used by the BCI in making licence award decision? How should such a scoring system operate?

See above.

d. What other steps could be taken to make the licence award process more transparent and accountable?

See above.

Licensing - Duration

a. Are current licence durations appropriate in all cases? Is there a case for offering licences of different durations for different categories of stations?

We believe there should be a minimum 10 years. New operators seldom re-coup investments in the first 4 to five years of the licence period. This means that the number of potentially profitable years can be as little as half of the licence period. Indeed a longer period may be more appropriate for stations with larger transmission networks. Here up to 15 years could be appropriate to allow a longer depreciation period for expensive capital assets.

b. Should the BCI have powers to re-licence rather than hold competitions in certain circumstances? If so, when?

Yes. See above.

Licensing - Appeals Body

a. Is there a need for an appeals body for radio licensing decisions by the BCI?

IBI supports the idea of an appeals body. See above.

b. What powers and remit would be appropriate for such a body?

Such a body should firstly establish whether the process employed by the BCI was fair and within its established procedures. It should also examine whether the decision was supported by adequate evidence and whether it was reasonable. While these have traditionally been the functions of the judicial review process we believe that an appeals process such as this would minimise recourse to the Courts where decisions of the Commission are disputed.

c. Is there a more appropriate model than the model used in the telecoms sector?

 
See above.

Enforcement

a. Are the existing enforcement powers of the BCI appropriate?

We share the concern expressed in the Ox Report that existing powers are rather narrow and do not provide for a flexible range of responses to breaches of licence commitments.

b. What additional powers, if any, would enable the BCI to enforce licence conditions effectively?

IBI would support the introduction of a points or a yellow card type system. Fines may be appropriate in instances of blatant or repeated serious breaches.

c. What specific areas should the BCI attempt to bind successful bidders to in their broadcast contracts?

We believe the BCI should concentrate on measuring core parameters such as advertising minutage and news and current affairs content. We would support a move to a model closer to that of the UK where less detailed formats rather that very detailed programme policy statements are used to measure the appropriateness of the content of radio stations.

d. Is there a conflict between the role of the BCI as a licence award and a licence enforcement body?

No. In fact we believe there roles to be complementary.

Financial Return and Administration Costs of Independent Sector

a. Should the State charge for the use of radio spectrum and, if so, how?

The State should not charge for the use of radio spectrum. Spectrum charges may be viable in those sectors where the entity being charged can pass on the higher overhead to its customers by increasing prices. Ultimately, it is telephone users who pay for Comreg. We don’t charge our listeners and we have to comply with significant public service obligations in terms of minimum news and current affairs content.

The question may be asked, why we don’t compensate by increasing advertising rates. However, any proposal to charge for spectrum will fall disproportionately on the commercial radio sector given that we do not enjoy the cushion provided to RTE by the licence fee. Newspapers and outdoor media would also be exempt, further distorting competition.

It is also important to note that many local stations already pay large amounts to RTE each year for the use of transmission infrastructure. These rents are not insignificant and constitute an ongoing financial burden.

b. Is there an offset between financial return and the quality of broadcast output?

Yes. Those stations which are more commercially viable are able to employ more staff, pay better rates and produce higher quality content. It follows that any attempt to claw back profits will impact on quality and ultimately on investor confidence in the sector.

In this regard, IBI has concerns about the tone and content of some of the debate regarding the use of claw back mechanisms. There are many sectors where public resources are an essential part of the infrastructure required to provide services to the public. To our knowledge, radio is the only such sector where it is seriously being suggested that the sector in question should be punished for making profit.

(Take the recent sale of Aircoach, a successful business dependent on a transport licence from the State that uses public roads provided by the State. For a number of years it struggled to survive as a business but eventually it became a success and was sold, making significant profits for its investors. Did anyone question the right of its investors to make profit? Did the department of Transport seek to claw back some profit to pay for the use of the roads?)

Digital Radio

a. Is DAB technology sufficiently developed to justify input of resources in terms of policy development in Ireland?

Not at the moment.

b. How should policymakers go about developing the scope for DAB in Ireland?

Great care should be taken in any promotion of DAB. An expensive national infrastructure has been provided in the UK for 8 years and yet the total number of receivers has only now exceeded 600,000. The UK adopted codex ‘ Eureka 147’ is now outdated and newer systems can support twice as many stations.

Digital radio listenership is on the increase in the U.K. –but mainly through TV sets. Freeview and Sky services provide new technologies for the dissemination of radio services. These are more popular that DAB at present.

It may be that a new digital distribution system will emerge that can better accommodate the simultaneous transmission of digital TV and Radio services (both national and local). DVB is one such system that is now under development. Ireland is not short of spectrum (ref, Ox) .We should adopt a wait and see attitude for the next 5- 10 years.

c. What policy steps should be taken now to promote DAB as a format?

As above

d. What might the impact of new DAB services be on existing licence holders?

As above.

END