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Digital Britain has arrived (or is at least en-route)

Digital Britain Logo

So here’s my brief contribution to the flurry of analysis of Lord Carter’s Digital Britain report.

The biggest news is that we get a target date for switchoff (sorry, “Digital Upgrade”). 2015 is the year we should be flipping the OFF switch on (almost all) analogue radio, and offering universal coverage of DAB. That date can now be plugged into business plans, and financial projections, and hopefully provide the necessary laxative effect to the recently sluggish developments around DAB in the UK.

So, rather than dissect all of the Radio section of the report, which others will do better than I, here are the bits I particularly noted:

It’s a full switch-off (“upgrade”)

Some summaries have suggested that the 2015 deadline only applies to national radio. It doesn’t – it applies to all services being carried on both national and local multiplexes (3b.10). The only thing left on FM post 2015 will be very small scale services; either commercial or community. There is not going to be a dual-speed changeover, which leaves local radio dragging along for years with a foot on each platform. That’s good.

Support for WorldDMB Profile 1

There it is, snuck away in 3b.20 – receivers sold in the UK should be at least WorldDMB Profile 1 compliant. The box on the following page is a little more explicit in saying that we are giving ourselves a migration path to DAB+, which is the smart thing to do. Nobody seriously considers DMB-A (the Frankenstein bodge invented to make an ill-informed decision seem at least slightly less ridiculous) for radio, so let’s ignore that. Some commentators have, incorrectly, said that Profile 1 includes DRM. It doesn’t, and DRM needs to mature a great deal more before it can earn a guaranteed place alongside DAB and DAB+.

Improving Signal Quality

It’s no secret that I don’t believe DAB should be crippled by being forced into universally super-serving a small fragment of the audience that expects ultra-high-quality audio from every radio station. The market can and will decide what audio quality is right for which stations and bearers.

But I do believe that we need to offer robust indoor and handheld coverage to everyone who currently enjoys that from FM now, and by crikey, it’s not rocket science to do it. Australia’s got the right idea – power. And more of it.

There’s some more crypticness in the report. It talks a lot about achieving equivalent coverage prior to 2015, but only in 3b.23 does it explicitly recognise that indoor coverage must be more effective. It also recognises that there’s some cost in achieving network upgrades, but notes that there is opportunity for negotiation between the BBC, multiplex operators and transmission providers. That’s timely, as many of the initial multiplex transmission contracts come up for renewal soon, and knowing with certainty that it’s worth spending money on the infrastructure is very valuable.

Replanning the network

This wasn’t as explict as I had hoped for. There is reference in 3b.26 to giving OFCOM the powers to re-plan and amlgamate multiplex areas, but I would really would like to have seen a more definite commitment to re-plan at a spectrum level to get a step-change in coverage (up) and costs (down). At least there’s a statement that sorting out coverage shouldn’t be as expensive as some people might have made out it could be.

And now – drum roll – the best bit…

In fact, it’s so good, it’s the only bit I’m going to quote verbatim from 3b.31:

Functionality and interactivity must become central to the DAB experience.
EPGs, slideshows, downloading music, as well as pause and rewinding live radio
must be developed and brought to market on a large scale. Broadcasters and
manufacturers must seek to develop and implement digitally delivered in-car
content, such as traffic and travel information.

Well, we waited a decade, and now it’s a formal part of the plan to digitisation. Digital Radio must prove its worth by doing something… digital. If we don’t use the platform and spectrum we’ve been given (and will continue to get for free for a while – 3b. 27) to evolve radio, what’s the point of doing it? Same value, different platform?

If the other parts of Digital Britain are designed to create confidence in building transmission infrastructure, and writing long-term financial plans that support transitionary investment to achieve that, then this is the statement that should create the confidence in investing in a new kind of digital radio, and it’s about a content led experience that’s enabled by a universal, free-to-air technology. If the rest of the report stabilises the ship, and gives it a shove in the right direction, this is the bit that signals the start of true innovation and digital change for radio.

The Myers Report and DAB Digital Radio

BBC Radio Holby co-shares with Classic Gold

BBC Radio Holby co-shares with Classic Gold - from a Casualty shoot in 1999

John Myers’ report “An Independent Review of the Rules Governing Local Content on Commercial Radio” was published yesterday, and it’s well worth committing time to read through in detail.

If you’re outside the UK (or even outside the UK Commercial Radio Industry), you might be wondering why a report into the regulation of local content on commercial radio should involve Digital Radio.

I will very briefly précis 95% of John’s report. Commercial radio has got into a perilous state financially, through a combination of over-farming (too many new licences, not enough associated audience/revenue growth) and increasingly burdensome costs. The currently regulatory system promulgates this situation, and without urgent change, there is a real risk of sectoral failure.

John’s remit was to consider the regulatory environment surrounding local content, but Digital Radio (and digitisation in general) is brought to the report in a number of places. (I’m not going to talk about the issues and suggestions in respect of local regulation that John raises in his report).

A key tenet of the report is that the current regulation of localness is wholly inappropriate for the media environment of 2009 and  onwards. John mentions several times that it should be considered unreasonable for licensed radio operators to work under local content regulation when Internet radio does not. In my opinion, John has somewhat over-played the threat – current and future – from Internet delivered radio to support this argument. I believe the issue is that listeners are seeking choice and innovation, and that if the licensed industry can’t/won’t provide that, people will find it from new operators. In this respect, the method of delivery is largely irrelevant. Existing operators stream over the Internet, and new services can start on DAB (but see below too). It probably depends on how much choice you have to deliver to remove the incentive to buy IP-connected radios to seek out new stuff, and your estimation of the value that exists in the “long tail” of radio. In my view, radio operators have all the tools the need to reach out further down the long tail if they believe it’s profitable to do so, and have a unique advantage of doing so on both IP and into protected spectrum which will deliver universally into the fixed and mobile domains (that would be DAB then). Even with broadband penetration heading towards 80%, Internet listening is very very small, and dwarfed by DAB listening.

Whilst outside the direct remit of his report, John clearly identifies that costs and revenues are a problem for the radio industry. Growing numbers of stations have raised sectoral costs, and revenues are declining. Changing the regulation of localness would relieve the industry of some costs, but John is right to identify that the implementation of DAB has saddled the industry with burdensome long-term costs that it can’t support in the current environment. I agree. He reviews the rapid licensing policy of DAB, and notes that many of the multiplex areas licensed were barely able to profitably support one or two local FM services, let alone the addition of a local multiplex. Understandably, John has avoided detailing why DAB is so expensive, but you’ll know from my previous posts that I have a much more unequivocal view – the multiplex spectrum plan was too complex which drove up the infrastructure complexities, and the transmission provider offered prices that now look very unattractive. John suggests that the costs of DAB can be made more realistic by re-planning into a less complex configuration – which I hope also translates into fewer sites running at realistic power levels. This is a sound recommendation which I hope OFCOM and DCMS take note of and get moving on quickly. Sadly, DAB+ still isn’t mentioned, meaning it remains taboo in the UK. That’s a mistake in my opinion, but as I’ve said before, it’s an issue of frightening complexity, and I can understand its omission.

The most contentious recommendation, in my view, is this. John recommends that one of two things should happen; EITHER Broadcasters should not be allowed to run multiplexes OR the cost of multiplex access must be more directly regulated by government to ensure it remains at or below the equivalent analogue cost. I’m very much hoping that John made the first suggestion for it to be roundly and loudly rejected from all sides, leading adoption of the second approach. In all honesty, I don’t think either is optimal. It has long been an issue that the gatekeeper regulation of multiplexes included a loophole that allowed the gatekeeper/broadcaster to attempt to cross-subsidise the carriage of their own stations. This probably made sense in the heads of the accountants, but was a dismal failure on the ground. The high cost of DAB carriage deterred many new entrants (although that could also have been policy – deliberate or accidental) and thus multiplexes lost money in reality, even if the paper accounting looked OK.

But it had a far more detrimental effect, and one that goes to the root of the slowdown of DAB in the UK, and the failure to see enhanced revenues from going digital. DAB did not grow and flourish with new and innovative services that consumers were expecting. And neither did it deliver new things to advertisers in any volume. In short, the policy hindered the very innovation that the industry needed from digital. The reason that no data services launched in the UK was due to an unholy interplay of effects around multiplex ownership, costs and infrastructure capabilities.

I can understand John’s call for broadcasters not to be gatekeepers, given the circumstances, and maybe it will always be an unresolvable conflict of interests for a broadcaster to try and encourage competition and innovation against its own stations. I think the Australian model of multiplex ownership and regulation bears careful inspection, to see if it can be exported to the UK. I don’t believe it’s right for there to be no involvement from broadcasters in the development and management of their digital platforms, and I don’t believe an infrastructure provider operating in isolation has the right incentives to manage costs, coverage and functionality appropriately.

In respect of costs, the evidence is that DAB, when deployed in a sensible configuration, is naturally lower in cost than the equivalent FM coverage. Indeed, that was the whole point of DAB; to replace 6 identical sets of infrastructure costs with one single cost carrying 6 stations – but we lost sight of this somewhere. If DAB is replanned properly, and if the cost is equitably shared amongst the users (without daft “uplifts” for functionality), it will be cheaper than FM. Of course, someone has to bear the risk of the whole cost before it’s shared out, and that’s a tricky one to answer. But if broadcasters want to address the long-tail with more services, they’ll have to bear more costs of infrastructure and spectrum, and it’s naive to deny that.

John’s report uses the opportunity to address many of the failures in the UK’s DAB deployment, and I’m glad to see his recommendations concurring with many of my own suggestions. Now the report has to be acted upon by OFCOM and DCMS, and swiftly.

Digital Radio changes and causes change

DAB Radio everywhere (CC) Nick Piggott @ flickr

It’s been a difficult time for radio lately, and for digital radio doubly so. Since Fru Hazlitt made her dramatic announcements on 11th February 2008 (the “2/11” for Digital Radio), it’s been a rollercoaster ride, consisting mainly of the scary bit of going down very fast and being apparently about to shoot off the edge of the tracks to certain death.

Radio is contracting. The contraction that means I’ve been saying goodbye to lots of colleagues, and that’s seeing many small analogue services go out of business, is also squeezing what can be done with digital radio. The enthusiasm for digital radio has evaporated, as the costs of an ambitious network build-out became crushingly apparent, and the revenues that should/could be generated from digital haven’t arrived (or been hit by a contracting industry).

Going Digital had a profound effect on the UK Radio Industry. The regulatory policies that set up Digital also shaped the analogue licensing regime, and committed the industry to investments stretching over long periods of times. The Digital Radio envisioned by the people who set it up doesn’t fit well with the plans of the people running the radio industry now.

Something had to change. If you’ve followed this blog, you’ll know that my hope was that some deal could be arranged to make the cost of the network more managable, and that the industry could reorganise itself to plan an inherently more cost-effective plan for digital. Some of that would have involved changing the digital infrastructure to reflect real-life requirements.

And now, nearly 14 months after Fru’s big announcements, and with Global the biggest commercial operator in the industry, things are changing.

The first big change is that Global is doing a deal with Arqiva, the transmission provider, which will see Arqiva take over DigitalOne (the national multiplex operator) and NowDigital (the local multiplex operator). This makes Arqiva a licence holder in their own right, and it’s the first time that multiple DAB multiplex licences will not be held by broadcasters (Ayrshire is already owned by Arqiva, due a regulatory anomaly when EMAP purchased SRH). In return for Arqiva taking over the multiplexes, Global will only pay for the capacity it uses, reducing the costs of transmission. As both DigitalOne and the NowDigital muxes are rather empty, this is a fairly considerable cash saving.

I think Arqiva have got a good deal. They will have to compromise their financials for a period of time, but I suspect that in the mid-term, demand for DAB capacity and infrastructure will grow, if not in the current configuration, then in something than can be met using the infrastructure currently in the D1 and Now networks. They now hold spectrum licences, and that puts them in a good position when it comes to any network replanning. The relationship has been spun on its head.

OFCOM has provided the other big change in the Digital landscape. Their submission to Digital Britain has proposed radical changes to the UK’s regulatory regime, both analogue and digital, in response to the changes that the financial difficulties of the previous year have brought. A lot of the headlines have focussed on the proposals by OFCOM to dramatically change the analogue regulatory regime – reducing the burden of producing local content; allowing the emergence of quasi-national brands that could theoretically have the scale to provide plurality to the BBC; explicit recognition that smaller commercial licences may never be viable financially. This seems to make the assumption that local brands cannot challenge the BBC’s dominance, or may not be able to hold onto the revenue to stay alive.

In my opinion, the most interesting and positive statement is that D2, which failed to get to air as a Single Frequency Network (akin to D1), could come back to life as a series of regional networks with effective national coverage. One suggestion is to blend the existing regional muxes together to create D2. This recognises that a true national SFN isn’t massively commercially valuable, and that’s a great move forward in my opinion.

OFCOM firmly supports continuing with DAB Digital Radio, whilst at the same time acknowledging that other solutions will appear over time. I think the likelyhood of LTE/4G technologies becoming a primary broadcast platform is slim if DAB continues, but there’s no doubt that a converged Broadcast+IP solution is looking increasingly important. This conviction from OFCOM and Government that DAB is staying is very beneficial to Arqiva and the other multiplex operators.

One theme recurrs. In both OFCOM’s and RadioCentre’s submissions to Digital Britain, as well as in the interim report itself, there is talk of using DAB to deliver innovation for radio. That innovation needs to harness the data capabilities of DAB to provide something new, enhanced and reflective of a more complex multi-media world, and more capable multi-media devices.

There has been virtually no innovation, despite 10 years of DAB in the UK.

There’s no lack of ideas for new services, but the barriers to making them happen have been many, high and hard to scale. Broadcasters have to pay for their capacity, and that makes it hard to justify speculatively taking more than the bare minimum to carry stereo audio. The multiplexing equipment is old, and doesn’t reliably support functionality beyond audio (including a number of other very important DAB features). There is a classic chicken-and-egg problem, where manufacturers won’t build receivers to support enhanced functionality because broadcasters won’t commit to services.

That needs to change.

Global Radio launched a series of applications for the Apple iPhone (for which my team deservedly got a SONY Radio Award nomination). These applications feature RadioVIS – a simple visualisation layer for radio. Whilst I’m not going to tell you the stats, I will say that the amount of visuals delivered is considerable and demonstrates a commercial opportunity. But as well as delivering visuals to the iPhone we also publish them as DAB Slideshow into 16kbit/s of 95.8 Capital FM’s DAB stream. (Admittedly, it’s taken 10 months work with Arqiva to get the right interface to the multiplexer).

It won’t take much more work to get the technology right, but launching innovative services needs to start with a commitment to face a digital future and start moving analogue to history. It looks like OFCOM can make that commitment, but will the radio industry follow suit?

Under New Management

Under New Management by inju @ flickr.com

As the clock passed 17:00 without any official statement, it became clearer that the deal was almost done. At 18:30 it was confirmed by e-mail that Global Radio had made a formal offer to acquire GCap Media plc for £2.25 per share, valuing the company at £375m.

The purchase process won’t be particularly swift, as it requires a vote by shareholders to ratify, and then a period of scrutiny by the Competition Commission. The expectation is that operational transfer will take place in mid-Summer, and until then GCap will retain its own management and plans. (Mirroring the process that Arqiva is close to completing over its acquisition of National Grid Wireless).

There will doubtless be speculation about what this means for the strategy that was outlined on 11th February, and most particularly the very clear stance taken over DAB Digital Radio.

The purchase does not guarantee a clean bill of health for DAB Digital Radio. The structural problems that disturbed the management of GCap continue to exist, and cannot – indeed, should not – be ignored. That merely increases the risk of a unstructured collapse of the eco-system and economics around DAB in the UK.

As GCap starts a new financial year tomorrow, nothing has changed in terms of how much DAB is costing to transmit, and how little its potential is being used to evolve radio and the revenue that underpins it. The bills will keep rolling in, and there’s no reason why decisions to close Planet Rock or theJazz should suddenly be reversed or reviewed.

What a new ownership – an ownership in private hands, and away from the demands of institutional shareholders – should bring is an ability to look beyond the bills of this month and next month, and commit to approaching development of DAB (and other new platforms) on a new basis. We have learnt so much in the last 9 years about what’s good and not good about the current strategy; now is the opportunity, with most of the commercial radio industry in private hands, to take that experience and use it to regroup and reshape the DAB plan for the UK.

To generalise, private equity investors are ruthless on reviewing costs and benefits to customers. There will be pain, and no doubt many people will speculate on “what ifs”. If the potential for DAB can be underpinned with a viable medium-term business plan, then that may justify a renewed commitment to investment. But it’s hard to see how that business plan won’t involve radical change to the existing DAB plan.

It also requires more than just Global and Bauer to commit to change. If Arqiva can’t/won’t contribute meaningfully to cost-reductions re-engineering of DAB infrastructure; if OFCOM can’t tear up the old plan and write a new one; if the BBC are unhappy with changes to DAB for local BBC radio; if receiver manufacturers and consumer electronics manufacturers can’t produce 21st century radio devices – then it’s not going to make the difference that’s required.

I continue to be positive about the potential of DAB. The market is demanding more evolved digital media experiences. Listeners want more “stuff” and more control of it. Advertisers want more compelling, effective and measurable opportunities. Consumer Electronics manufacturers want to add more and more function to devices. The industry can create “new radio”, and of all the technologies that can be used to distribute it, the only one that maintains the ubiquitous, free nature of radio is DAB.

The hidden value of Local Radio

Photo (CC) left_handed_male @ flickr.com

“Local Radio”. What does that mean to people? Alan Partridge on the slide? Cats stuck up trees? Jumble sales and council tax moans? Smashey, Nicey and cheesey jingles?

Local radio has a poor reputation with media (sorry, meeedijah) types, and possibly justifiably so. From a distance, the UK’s local radio stations used to seem terribly, well, raggedy. I think it must be a bizarrely British quirk to name local radio stations after rivers (Trent, Wyvern, Severn), Latin mottos (Invicta), Victorian railway companies (GWR) or most inexplicably, Anglo-Saxon kings from the 11th century (Hereward).

National radio may have “brands” and “stars”, but local radio brands are astonishingly highly regarded in their local areas, and local radio stations have local heroes. You might not have heard of Bush & Troy or Jo & Twiggy, but to the people of Bristol and Nottingham they’re as prominent as Chris Moyles or Terry Wogan, and considerably more visible.

Local radio has a hidden commercial value too. National radio might be able to attract national brand advertising, but only local radio can take both national and local revenue. The economic cycle seems to be moving back towards smaller independent businesses again; my local coffee shop (Baristas) is 150m away from Starbucks, but does fabulously well and has more character and is more welcoming. I’m writing this in the Star & Dove, a gastropub which is doing roaring trade and knocks the spots off Wetherspoons. These are businesses who can invest in local radio advertising, in the same way they can invest in Google Adwords and local classified listings.

Google loves local. They know that they can create more inventory and make advertising accessible to more businesses by segmenting their audience based on where they live. (Thus, in a strange way, copying something that local radio did 20 years ago by splitting adbreaks across transmitters).

Of course, when Google do something, it gets a funky new media (sorry, meedijah) name…

Geo-targeting

So maybe a new way to think about local radio is geo-targeted radio.

On DAB Digital Radio, both DigitalOne and Channel 4 will have single frequency networks across the UK, which sounds lovely and “national” and big. But I would suggest that as digital stations get bigger and bigger, we’ll see something unexpected happen. The really big digital radio stations, will move to the local multiplexes. And the national multiplexes will become the home of the “community of interest” (= “niche”) radio services.

The geo-targeted multiplexes (local multiplexes) will deliver more profit to national radio stations. On FM, Classic fm has to split commercials into regions because it’s simply too expensive for most advertisers to buy as a single station; by making it available in smaller units, more business comes in and it makes more money.

So what’s the future for “local radio”?

I think it’s potentially quite bright, because geo-targeting works for content as well as advertising. I’ll always have more interest in things-about-Bristol, and choosing to listen to GWR Bristol automatically defines a filter-set for content that includes national/international stuff I need to know about, and local stuff I want to know about. It’s like adding “+bristol” to a Google query.

Whether or not the structure of local content remains the same is open to more debate. OFCOM apply a fairly broad-brush approach to “locality” which is largely disconnected from economics. That tends to make “local content” seem like a chore, a cost and something to be avoided, rather than being an essential weapon in the competitive armory. It worries people to think that local content in the future might be regulated by actual demand, not specified requirements.

I’m excited about the prospects for geo-targeted radio. I’m looking forward to commercial radio brands using star-power to knock the BBC into a corner, but combining that with essential local information and local content that the BBC can’t replicate on Radio 1 or Radio 2. (Nor should be allowed to – note to BBC Trust). The existing local radio brands (that are powerful and valuable in their local areas) could be supplemented by new national commercial brands, but all providing geo-targetted content and advertising.

There’s a growing understanding that delivering a national brand on geo-targeted platforms could be more profitable than delivering a national brand on a national platform. I’m expecting a renaissance for “local broadcasting”, one where local content continues to thrive but in a different way to now, and spread across geo-targeted DAB multiplexes populated by the famous local brands we know now, and new national commercial brands yet to be developed.

OFCOM’s Review of DAB Sound Quality

Like My Ears? by *Rob* at flickr

 

OFCOM’s Future of Radio consultation has come back for a part 2, following the initial findings published in November 2007. Whilst most attention has focused on the regulation applying to local content on Analogue radio, there is also a significant statement on DAB Sound Quality.

 

Sound quality is a subject that provokes ferocious sentiment in a small number of listeners, some of whom feel that DAB should have stuck to its original proposition of very high quality sound. They haven’t accepted that the success of DAB so far has been driven by the mass-market appeal created by variety of services, and so continue to look for ways to bring DAB back to the place they think it ought to be.

 

I wonder if OFCOM occasionally curse the Broadcasting Act (1996) that brought DAB to life, as it also contained a statutory requirement to regulate the “audio characteristics” of a service, a piece of legislatory meddling that was no doubt done to appease someone somewhere, but now looks increasingly anachronistic in a world of streaming over the Internet and via Digital TV where no such regulations exist.

 

Unfortunately, the statues stand (s 54(6A) and 54(6B) if you’re interested) so OFCOM isn’t in a position to allow the market to take its course as it would do anywhere else. It’s also a point of leverage that the audio connoisseurs can bring to bear.

 

At first glance, their statement that they will now regulate not just the bitrate for services, but also whether they’re in mono or stereo, is pretty heavy-handed.

 

I ‘ve always maintained that OFCOM is a pretty realistic and pragmatic regulator, so finding themselves in between the rock and the hard place, I think they’ve found a way of meeting their statutory obligations (of which they have no doubt been reminded by the lobby groups) whilst seeing a way through pragmatic requests for change.

 

Reading the justification for the decision:

 

“…our policy is intended to be a backstop to ensure that multiplex operators do not seek to unacceptably diminish the range and variety of the services that they broadcast by changing the audio characteristics of a radio service in order that freed-up capacity can be allocated to services which, in our view, would not be in the best interests of listeners. Examples of such services would be those aimed at a closed user group (i.e. not available to the general public) and where Ofcom judges this would not be in the overall public interest.” 

 

That sounds like a very clear reference to DigitalOne’s situation where the (now defunct) BT Movio Mobile TV service chewed up vast amounts of capacity, forcing radio stations like Core and Life and theJazz into mono. As we’re some way past the event now, I can say that there was quite a lot of discussion about how to fit three radio stations into space made (snugly) for two, and in the end the decision was that it was better to run two moderate and one good quality mono services, than one medium quality stereo service and two ropey mono ones. If you disagree, then aim your complaints at me.

 

If OFCOM stick to the guidance they appear to have issued themselves, then I can’t see that it will affect reasonable requests from broadcasters, and by leaving the door open for a review in 12 months time there’s an opportunity to show that the market can manage services and spectrum effectively.

 

However, the phrase “shifting the deckchairs on the Titanic” also springs to mind. The reason D1 took BT Movio’s shilling (well, I hope it was more than 5p) was that it needed to justify the costs of their network and turn a profit, and that in turn overrode the economics of the radio industry and forced a capacity squeeze and a sound quality squeeze. The underlying problem of all of this – the reason why stations have to scrimp and save on capacity and cost – is that the infrastructure as originally built in the UK is too expensive.

 

OFCOM’s Digital Working Group, and particularly the Technology team, need to look at why DAB infrastructure is so inexplicably expensive, and how it can be got into the realms of the affordability that are achievable. If OFCOM can successfully apply their regulatory weight to that problem, then it will be appreciated by both broadcasters and listeners.