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Ox report, July, 2004

Review of Radio Licensing Consultation Document

Introduction

Overview
On 14 August 2003, The Minister for Communications, Marine and Natural Resources Dermot Ahern T.D., announced his intention to carry out a fundamental review of radio licensing in Ireland. The purpose of the review is to examine all aspects of radio licensing in Ireland including what is licensed, the processes through which licences are awarded and to make recommendations for the future.

This consultation paper marks the second stage of a two-part process. The first stage of the process was a comprehensive study of radio licensing in Ireland carried out by industry experts (OX Consultants). That report informs this consultation paper. A copy of the report is available from the Department (see contact details on the cover of this document).

The purpose of this public consultation is to seek the views of stakeholders involved in radio broadcasting in Ireland including station owners, advertisers, content creators, information service providers, public service bodies, individuals and local communities. All submissions received will be considered as input to any changes in the licensing regime.

Contributing to Consultation
Section 3 of this paper sets out key questions which arise in the context of the review of licensing policy. It would be helpful if submissions followed the sequencing of questions in Section 3. Comments of a general nature or on issues not addressed already in section 3 are also welcomed.

As part of the consultation process the Department will also run an online forum, where comments can be made directly. The public consultation will run from 7 July to 30 September. All comments and observations received will be made available on the Departments website.

The Department undertakes to use its best endeavours to hold confidential any information provided subject to the Freedom of Information Act. Should you wish that any of the information supplied by you in response to this consultation not be disclosed, you should, when providing this information, identify same and specify the reasons for its sensitivity. The Department will consult with you about such information before making a decision on any Freedom of Information request received.

Background

Overview of Radio in Ireland
Prior to the enactment of the 1988 Radio and Television Act, which provided for the establishment of the Independent Radio and Television Commission (IRTC), all broadcasting services licensed in the State were provided by RTE. The IRTC was established to oversee the development of independent commercial broadcasting and community broadcasting in Ireland. The IRTC proceeded to licence independent radio at national, local and community levels. The 2001 Broadcasting Act provided for the creation of the Broadcasting Commission of Ireland (BCI), which took over the existing functions of the IRTC along with some additional responsibilities relating to all broadcasters in Ireland.

Radio in Ireland is very popular. According to recent audience figures , 86% of the population over 15 years tuned in every day and the average listening period was over four hours. While radio listening has declined from a 90% daily rate of two years ago, Irish radio listening habits are amongst the strongest in the world (see Table 1 below). In the initial ten-year period following the opening of the radio market, listenership increased as distinctive local radio stations began to offer a greater range of programmes to listeners.

Country Total Media (m) Radio(m) Radio% Total Med Adspnd Population (m) Media Adspnd Pop Radio Adspnd Pop Daily Listening Time (mins
Ireland 1.073 97 9,0% 3,84 280 25,3 240
Austria
1.984 156 7,9% 8,14 244 19,2
Belgium
1,964 188 9,6% 10,31 190 18,2 240
Netherlands
3.740 240 6,4% 16,11 232 14,9 184
UK
18.734 779 4,2% 60,08 312 13,0 207
Switzerland
2.807 87 3,1% 7,25 387 12,0
France
9.621 654 6,8% 59,34 162 11,0 189
Spain
5.095 393 7,7% 40,43 126 9,7
Norway
1.393 44 3,1% 4,53 308 9,7 137
Germany
18.567 753 4,1% 82,43 225 9,1
Finland
1.145 44 3,8% 5,20 220 8,5 215
Portugal
1.485 82 5,5% 10,30 144 8,0 200
Sweden
1.747 54 3,1% 8,91 196 6,1 163
Denmark
1.271 30 2,4% 5,36 237 5,6 197
Italy
7.838 319 4,1% 58,02 135 5,5 176
Greece
1.238 42 3,4% 10,60 117 4,0

Table 1 Listenership and Advertising Expenditure for Certain Countries

Policy Framework for Independent Radio

The Minister for Communications, Marine and Natural Resources has overall responsibility for the broadcasting sector in Ireland. The Department of Communications, Marine and Natural Resources Strategy Statement 2003-2005 identifies three core policy goals with regard to broadcasting generally in Ireland. These are:
To create an environment that encourages the maintenance of high quality Irish radio and television services by both independent broadcasters and RT;
To secure a viable future for high quality public service broadcasting in the Irish market.
To seek to retain access to a range of quality programming in analogue and digital form, on a universal and free-to-air basis.
The BCI is the organisation charged with the orderly development of the independent radio sector in Ireland. Its responsibilities include the following:
Licensing of independent broadcasting services;
Ensuring that the number and categories of broadcasting services made available in the State under the 1988 and 2001 Acts best serve the needs of the people of the island of Ireland, bearing in mind their languages and traditions and their religious, ethical and cultural diversity.
Development of codes and rules in relation to programming and advertising standards;
Monitoring licence holders to ensure that they comply with statutory obligations;
Provision of support for training and development initiatives; and
Undertaking and commissioning research to assist the development of broadcasting policy in Ireland.
The Minister has announced his intention to bring forward legislative proposals to provide for the establishment of a single broadcasting content regulator for both the public and private sectors.
The Commission for Communications Regulation (ComReg) is the statutory body responsible for the regulation of the electronic communications sector. As such, it regulates and provides the framework for the use of spectrum in radio broadcasting.

Development of Independent Radio Sector
There are now 27 independent radio stations which capture approximately 54% of Irish radio listenership (15+). The estimated advertising turnover for the independent radio sector, which employs over 900 people, was 72.3 million in 2003. There have been two major rounds of licensing by the IRTC/BCI. At present the following services are licensed:
One national station (Today FM)
Twenty five local commercial stations
One regional station (Beat FM)
One special interest stations in Dublin (Anna Livia)
Fifteen community/local interest stations
Six hospital stations

The BCI, having consulted with ComReg regarding spectrum availability, determines the franchise areas for national, regional and local commercial licences. The table below shows the franchise areas for independent commercial stations and associated populations.

Franchise Area Population 15+ No. of Stations Station Name
Less than 100,000
South Donegal/ Sligo/ North Leitrim 77,000 1 North West Radio (expires October 2004)
Clare 80,000 1 Clare FM
Waterford 81,000 1 WLR FM
Donegal North 87,000 1 Highland Radio
Wexford 91,000 1 South East Radio
Wicklow 91,000 1 East Coast FM
Mayo 93,000 1 Mid West Radio
Between 100,000 and 200,000
Carlow / Kilkenny 100,000 1 KCLR
Kerry 106,000 1 Radio Kerry
County Tipperary 110,000 1 Tipp FM
Kildare 126,000 1 Kfm
Limerick 141,000 1 Limericks Live 95FM
Laois/ Offaly/ Westmeath 149,000 1 Midlands 103
Roscommon/ Longford/ South Leitrim/ Cavan/ Monaghan 164,000 2 Shannonside/ Northern Sound (2 services under 1 contract)
Galway 168,000 1 Galway Bay FM
Louth/ Meath 182,000 1 LM FM
More than 200,000
South East of Ireland Region (Counties Carlow, Kilkenny, Waterford, Wexford and South Tipperary) 334,000 1 Beat FM
Cork City and County 356,000 3 Cork 96FM/ 103 County Sound (2 services under 1 contract) & Red FM
Dublin City and County 921,000 6 FM104, 98FM, Lite FM, Spin 1038, Newstalk 106, Dublins Country 106.8FM

Table 2 - Independent Commercial Radio Franchises

In May 2003, The Joint Oireachtas Committee on Broadcasting published a wide-ranging report into local radio licensing. Copies of this report are available from the Houses of the Oireachtas on request.

In August 2003, the Minister announced his plans for a review of radio licensing. Ox Consultants were appointed to carry out the first stage of this review and reported to the Minister in April 2004.

Key Issues for the Department

The Radio Landscape
The Irish radio broadcasting landscape is composed of two distinct sectors: the independent sector regulated by the BCI; and the State sector regulated by the RT Authority.

Since the 1988 Radio and Television Act, RT no longer operates local services. RT operates four national stations:
- RT 1
- 2FM
- Radio na Gaeltachta
- Lyric FM

Details of the services licensed by the BCI were provided in Section 2.

Independent radio in Ireland has proven to be both popular and commercially sustainable. It is recognised, however, that getting the balance right is a complex task.
The Minister considers that community radio and special interest stations are a vital element in developing a rich and diverse sector capable of meeting the needs of the wider community. A key objective in undertaking this review is to ensure that the needs of local communities and special interests are recognised in the Irish radio landscape. At an overall policy level, the Minister is anxious to ensure that the franchising and licensing processes work dynamically to deliver an appropriate mix of public, independent and community radio, including special interest services. The objective is to achieve a balance where both commercial enterprises and not for profit services co-exist in a suitable and sustainable manner.
The Ox Report suggested that some of the existing franchise areas may be too small. Seven of the stations currently licensed are for franchise areas covering a population of less than 100,000. Ox Consultants concluded that commercial radio stations in smaller franchise areas have to depend on the enthusiasm of producers and the commitment of employees.

a. How should the overall structure of the radio landscape in Ireland be defined and achieved?
b. Is the existing structure and mix of national, regional and local commercial and community stations appropriate? What, if anything, is missing?
c. Does it remain appropriate to leave the development of local and regional radio to commercial or private interests?
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?
e. What steps should be taken to further develop community and special interest radio services in Ireland?


Policy Objectives for the Independent Sector
The BCI has identified the following objectives for the regulation of the sector:
To promote plurality of ownership of the communications media, with particular reference to radio and television services:
To promote diversity of viewpoint, outlet and source, that is, diversity in the opinions expressed, in programming delivery and content, and in the sources of information available to the public:
To ensure that broadcasting contracts are held by persons who have available to them the necessary character, expertise, experience and financial resources:
To ensure that the ethos of a broadcasting service is such that it will best serve the needs of the audience it is licensed to service.
The BCI is independent in the exercise of its functions. This independent structure is designed to ring-fence decisions on the award of individual licences from the political process. Regulatory policy, is however, influenced by broader policy concerns. In other sectors, such as telecommunications, Ministerial policy directions are used to help shape the parameters and the broad direction of regulatory actions.
a. Are these policy objectives still relevant? How might these objectives be changed?
b. What should be the medium term priorities for the regulation of the radio sector in Ireland?
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?
d. If so, in relation to what areas and in what circumstances might the Minister give such policy directions?

Diversity and Plurality

The Minister is committed to developing and sustaining diversity of content within the radio industry. It is important that the process of licence allocation supports this over-riding objective. At present, the BCI invites expressions of interest from the market and can only invite applications for a format that the market expresses an interest in providing. It has been suggested that this limits the BCIs ability to adding new or under-represented formats to the existing mix in the Irish market. One option for the future might be to allow the BCI to offer licences in respect of formats not covered or under-served by the existing mix of stations.


Another possible way of achieving greater diversity would for the BCI to continue to offer licences, under different formats, until all available vacant spectrum was being utilised. The BCI could look to both the commercial and community sectors in terms of dedicating licence formats.


The European Framework Directive is designed to promote efficient use of spectrum through providing for the release of all vacant spectrum. Ox report that (with the exception of the Dublin area) at least 25% of the FM spectrum is not used or is being used inefficiently, along with vacant AM spectrum. A critical review of the planning of the existing broadcasting networks could potentially result in more spectrum for radio stations


Ownership is also a factor that can influence diversity. The BCI has rules in relation to the ownership of individual stations and in relation to how many licences one individual or one company can hold. Under the existing BCI policy framework, an organisation may own up to 25% of sound broadcasting services licensed under the 1988 Act. Over the last few years the independent radio sector has seen a degree of ownership consolidation. Consolidation may have benefits through economies of scale, and may allow for increased format diversity in certain circumstances. Consolidation may also act as a constraint on diversity of format, and may lead to a dilution of media freedoms and independence.


Cross-media ownership is concerned with media organisations, whether print media groups or broadcasters, taking a stake in, or owning, other media, including radio stations. Under Section 6(2)(h) of the 1988 Radio and Television Act the BCI is obligated to consider: the desirability of allowing any person, or group of persons, to have control of, or substantial interests in, an undue amount of the communications media in the area specified, when considering the awarding of a licence.

The Minister is anxious to ensure that an increasing level of media consolidation does not have any unbalanced impacts on diversity of both content and viewpoint in Irish radio services, and that the legislative framework is appropriate in this regard.
a. How can diversity in radio content be ensured?
b. What impact might the introduction of dedicated licence formats by the BCI have on the quality and diversity of Irish broadcasting?
c. How can the community and independent commercial sectors contribute to enhancing diversity in what is offered to the audience?
d. How might the BCI go about deciding on new dedicated formats?
e. What impact do existing ownership rules have on the level of diversity and plurality?
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?


A Citizen's Voice
The radio listener must be the key stakeholder in any consideration of radio licensing. At present, however, no structured mechanism exists to allow the public to feed into the regulatory system on an ongoing basis. This means that the interests of smaller concentrated groups tend to dominate at the expense of more general public concerns.
An option for redressing this imbalance going forward would be to establish an audience council to allow for direct input from the public on issues such as:
Quality
Diversity
Format
Franchise Areas
Impartiality/Independence/Objectivity
a. How can a mechanism be provided to enable the views of the public to be represented in implementing policy in the radio sector?
b. Would an audience council be useful in this regard?
c. What other methods might be useful to obtain feedback from the listening public?

Licensing - Application
Licensing award processes are the responsibility of the BCI. The Ox Consultants Report sets out in some detail the manner in which the BCI awards licences. The effectiveness of the licence awards process is a critical element of delivering quality radio. The process itself must be objective, transparent and credible and be seen to be so. The choice of licensee by the BCI, together with the regulatory management of the licensee, drives radio output in the Irish market.
The licence award process is, for obvious reasons, the area of most contention in terms of policy in the radio sector.
a. What changes, if any, should be made to the current application process?
b. Does the application process as currently structured (e.g. costs, information requirements, etc.) act in any way as a barrier to entry?
c. Is there a case for different application procedures for different categories of licences?


Licensing - Evaluation
At present the Executive of the BCI prepare an analysis of the information received for each licence application but does not make a recommendation to its Board. The Board makes its decision based on its assessment of the applications and having considered the analysis presented to it by the Executive. Another approach would be for the Executive to make a recommendation based on its expert analysis and then for the Board to accept, amend or reject that recommendation. If this approach were to be adopted it might also be necessary to seek expert independent advice to support recommendations by the Executive.


One issue raised in the Joint Oireachtas Committee Report was the degree of transparency attaching to BCI decisions. The Ox Report argues strongly for the use of a scoring mechanism by the BCI when evaluating applications for licences as a means of increasing the transparency of the licensing process.
a. What role should the BCI Executive have in the licensing process?
b. Are there changes which could be made that would strengthen the licensing process?
c. Should a scoring system be used by the BCI in making licence award decision? How should such a scoring system operate?
d. What other steps could be taken to make the licence award process more transparent and accountable?


Licensing - Duration

There have been two major rounds of licensing. In the case of the independent and local radio sector the first set of licences were awarded for a period of seven years. In the recent round, licences were awarded for a period of ten years. It would be an option to offer licences for different lengths of time even within the same category where objective reasons exist for doing so e.g. the marketability of certain formats. Another option would be for automatic re-licensing without competition, where appropriate policy objectives were being met. It is difficult to see an argument for this, however, except where the licence held little commercial attraction and where clear issues of diversity / plurality were involved.
a. Are current licence durations appropriate in all cases? Is there a case for offering licences of different durations for different categories of stations?
b. Should the BCI have powers to re-licence rather than hold competitions in certain circumstances? If so, when?


Licensing - Appeals Body

At present there is no opportunity for appeal against a decision by the BCI to award a licence, other than an appeal through the Courts on grounds of process. While the Minister wishes to avoid the creation of a second tier of decision-making in the licence award process, he recognises that the importance of the licence award decision merits some form of appeals outlet, other than an appeal on grounds of process to the Courts. An option would be to introduce a model based on the Regulatory Appeals Panel used in the telecommunications sector. Under this model appellants may seek a review of a the regulators decision by a Panel who may accept the decision or ask that it be reviewed by the Regulator.
a. Is there a need for an appeals body for radio licensing decisions by the BCI?
b. What powers and remit would be appropriate for such a body?
c. Is there a more appropriate model than the model used in the telecoms sector?

Enforcement

BCIs powers for licence enforcement are derived from section (4) of the Radio and Television Act 1988. The BCI uses an applicants proposal as a basis for a contract when awarding a licence. This means that issues such as broadcast output and format along with organisational issues including personnel and financial issues all become part of such contracts.


At present, the BCI has only two instruments to enforce licence conditions: suspending or terminating the contract. In practice the BCI also uses warnings.
The Minister is concerned that these instruments may not be sufficient to allow proper, sustainable and credible enforcement. These instruments may not be proportionate to minor or medium breaches of licence conditions and may, accordingly, be effectively unusable in many cases.
a. Are the existing enforcement powers of the BCI appropriate?
b. What additional powers, if any, would enable the BCI to enforce licence conditions effectively?
c. What specific areas should the BCI attempt to bind successful bidders to in their broadcast contracts?
d. Is there a conflict between the role of the BCI as a licence award and a licence enforcement body?


Financial Return and Administration Costs of Independent Sector

In awarding radio licences the State provides spectrum, which is a scarce natural resource, to broadcasters for uses which are in most cases commercial. Furthermore the State restricts entry in the broadcast market occupied by the licensee. The State provides these operating conditions over a protracted period. Questions arise, therefore, over the appropriate terms, including financial terms, under which access to the spectrum should be provided by the State. These question are generally based around the format of the process used to award licences. Ox Consultants examined four different tools which could be used to generate a financial return to the State. These are
1) Auctions a mechanism to assign a licence to the highest bidder.
2) Market based spectrum fees or royalties
3) Claw-back arrangements - a method used to ensure that a portion of any windfall profits earned as a result of spectrum ownership are shared with the Exchequer.
4) Combinations of these mechanisms
a. Should the State charge for the use of radio spectrum and, if so, how?
b. Is there an offset between financial return and the quality of broadcast output?


Digital Radio

Digital radio services include services transmitted over digital audio broadcasting (DAB) networks, the Internet and other digital platforms (e.g. cable and satellite). Beyond certain must-carry obligations, there is no legal framework for licensing cable and satellite radio services in Ireland. In 2001 an informal Digital Audio Broadcasting Forum set up in Ireland concluded that there was little commercial incentive for broadcasters to invest at that time. The forum also identified that many operators were unclear as to the potential benefits that DAB could achieve for them.


The introduction of DAB is a challenge in the development of radio broadcasting policy. DAB offers opportunities for a significant expansion in the number and range of radio services. It also offers advantages in terms of quality and innovative listener services.
a. Is DAB technology sufficiently developed to justify input of resources in terms of policy development in Ireland?
b. How should policymakers go about developing the scope for DAB in Ireland?
c. What policy steps should be taken now to promote DAB as a format?
d. What might the impact of new DAB services be on existing licence holders?


Appendix A
Review of licensing of Radio Services in Ireland

Terms of Reference
To conduct a review of the processes through which radio licences are awarded in Ireland, having regard to comparative international experience and to make recommendations on the licensing of services in the future. The review to address the following issues:
Objectives
describe current objectives of radio licensing
evaluate whether there is a need to revisit objectives having regard to changes in Irish society and in broadcasting markets
consider existing power of BCI including power to decide type of services to be provided and franchise areas


Process
describe and evaluate existing licensing processes
evaluate existing roles of the Executive of the BCI and of the Commission
evaluate need for independentoutside expertise in licensing process
explore options for an appeals mechanism in relation to licensing decisions


Structural
consider what and who should be licensed
consider terms of existing and future licences including duration
consider issue of licence roll over
consider barriers to market entry


Policy Interface
evaluate existing policy interface