Statement on commercial radio localness regulation

Statement published 15|04|10

Executive summary

1.1 Changes in the advertising market, greater competition for audiences' attention and technological developments mean that the radio industry is facing significant challenges and is having to change. So the way it is regulated also needs to adapt.

1.2 Ofcom is taking a number of steps to de-regulate commercial radio while ensuring that stations continue to deliver programming that consumers and citizens value. This statement sets out our conclusions about the regulation of localness on commercial radio and the opportunities for more national stations.

1.3 We will shortly be consulting on changes to the Broadcasting Code rules governing sponsorship and commercial references on radio to allow greater flexibility, and we are also considering the future regulation of music formats and the small scale radio sector. These other potential changes are not covered in this statement. In addition, at the end of last year we recommended to the Secretary of State that the radio specific ownership rules could be removed, and the local cross media ownership rules simplified.

1.4 Ofcom's duties as regards radio are set out in legislation and include:

• Promoting the interests of citizens and consumers;
• Securing a range and diversity of local commercial radio services;
• Ensuring, for each local station, an appropriate amount of local material with a suitable proportion of that material being locally made.

1.5 Our research shows that audiences continue to value local content on commercial radio: both for key information (local news, traffic & travel and weather) and for other local programming (such as local sport or community issues) that reflects local identities.

1.6 However, local programming can be expensive to produce. This cost has been difficult to bear for some commercial radio stations in recent times. Declining advertising revenue in the past few years has led to uncertain viability for many local stations, particularly smaller ones.

1.7 The main challenge for regulation is to ensure, as far as possible, that all UK listeners are served by one or more commercial radio stations providing local programming, in such a way that allows the radio industry to remain financially viable.

1.8 The Government's Digital Britain Final Report in June 2009 signalled the intention to introduce legislation to change Ofcom's duties and powers with respect to the regulation of localness on radio. In July 2009 we published a consultation (Radio: the implications of Digital Britain for localness regulation), which proposed how we should change regulation to address the current challenges.

1.9 Some of the proposals we made required legislative changes; Parliament has now debated those changes proposed by Government, and these became law as part of the Digital Economy Act 2010.

1.10 This Act makes provisions for a possible future Digital Upgrade for national and local stations, under which they would stop broadcasting on the analogue platforms of FM and AM and broadcast only on digital platforms. Digital-only stations are currently less regulated than FM and AM stations, which face statutory regulation of localness and formats. So, without further legislation, the process of Digital Upgrade establishes a glide path' towards a more lightly regulated radio sector as the proportion of digital listening increases. As a first step along this glide path', the Act allows Ofcom to reduce significantly the burden of localness regulation for analogue stations.

1.11 This statement, then, sets out our policy decisions on regulating for localness following the proposals we made in the July 2009 consultation, responses we received to that consultation and the changes introduced by the Digital Economy Act 2010. It is important to note that Ofcom does not have the power to implement these changes until the relevant provisions of the Act come into effect on 8 June 2010. For simplicity, we will therefore implement all of the provisions and policies in this statement from that date.

1.12 The deregulatory changes set out in this statement will allow stations greater flexibility and a greater prospect of viability through cost savings, making the delivery of local content more sustainable and benefitting the citizens and consumers who value this content.

1.13 In our July 2009 consultation, the proposed changes to localness regulation on commercial radio were discussed in the context of the three-tier structure set out as a strategic goal in the Digital Britain Final Report, namely:

• At a UK-wide level, facilitating the creation of new commercial radio stations to create an improved consumer proposition: a wide range of popular and niche services, delivered digitally.
• At a local level, helping ensure the survival of a viable tier of commercial services, large enough and sufficiently well resourced to provide local news and other content in every part of the UK. This would also allow for the creation of nation-specific services for each of Scotland and Wales, while Northern Ireland in effect already has its own nation-specific commercial service in Downtown Radio.
• At the smallest scale, building on the success of the not-for profit community radio sector, but also allowing for the survival of commercial models where these are viable.

1.14 The changes to localness regulation set out in this statement are all based on existing analogue local services regulation, and so would apply to current simulcasts of analogue services on DAB. If Parliament desires to protect local content on digital platforms post-Digital Upgrade, this would require new legislation.

1.15 We have considered whether, under the new Act, we could go further than our consultation proposed in reducing localness regulation. As we indicate above, Ofcom has a number of statutory duties in relation to the regulation of radio, including to secure a range and diversity of local commercial radio services and to ensure that local programming is provided. Although on the face of the law there may be the capacity to go further in reducing localness regulation, we set out in our consultation why we believe that our measures offer an appropriate balance easing the pressures on the viability of the commercial radio sector while at the same time securing the continued provision of local radio content. This reflects the evidence available both of the value to consumers and citizens of localness and of the burden of regulation and the financial health of the industry in a way that meets Ofcom's duties and in keeping with the spirit of the legislation.

Encouraging new UK-wide services

1.16 Existing regional FM stations may request to have their localness obligations removed, allowing them to share their programming across a number of regions. We will generally consent to this in return for those stations providing a version of their programme service across the UK on DAB. This will foster competition and choice in UK-wide services, encourage a greater range and diversity of content for consumers, and provide the potential for new investment in programming. While the aim is to provide UK-wide services, the specific needs of the devolved nations mean that regional stations in Scotland and Wales will be required to retain their specific focus on programmes for their own nation for a number of hours a day.

1.17 Existing regional or London multiplex operators may request an extension to their existing licensed area, so they can form a single area with adjacent multiplexes. Ofcom may consent to such requests, following public consultation, if it is satisfied that doing so would not unacceptably narrow the range of programmes available to persons living in the area for which, before the proposed variation, the local radio multiplex service is available. Our policy is that we would be likely to allow them to do so provided that certain criteria, relating for example to the promotion of digital sound broadcasting and safeguarding the interests of existing stations, were met. Ofcom will also consider advertising further regional multiplexes in areas that do not already have them, should there be frequencies available and demand from potential operators.

1.18 Station operators may decide to offer a UK-wide service on a national multiplex. But using regional multiplexes plus some local multiplexes they could, if they wished, effectively form UK-wide stations with the ability to offer regional opt-out programming and advertising, taking advantage of the relaxation of localness requirements as set out in paragraph 1.16 above.

Regulating for localness within a sustainable, universal local tier

1.19 Ofcom's regulatory guidelines and licence conditions have previously required the majority of FM local stations to broadcast at least ten hours during weekdays of locally made programming containing local material. Co-location and programme sharing were generally permitted only for smaller stations.

1.20 The need to balance protection of local content with stations' need to achieve commercial scale led us to propose a new set of defined or approved local areas within which stations would have far greater flexibility, while still being held to local programming requirements. We are now confirming those areas we consulted on with the exception of northern Scotland and Greater London, where we will continue to consult on requests on a case-by-case basis for the foreseeable future.

1.21 Within each approved area, our policy is that FM stations can request to co-locate and share all of their programming, effectively allowing them to come together to become larger, more viable stations. We will be likely to consent to such requests if we are satisfied that the stations involved will continue to meet their licence obligations to provide local material relevant to the listeners in the licensed areas. We have changed our localness guidelines and format change policy to this effect (see Annexes 1 and 2).

1.22 Requests for flexibility beyond these areas will still be considered, but will require individual consultation and assessment using the existing criteria of station size, local affinities between the licensed areas of the stations concerned, distance between them and financial viability. Ofcom may consent to such requests, following public consultation, if the relevant statutory requirements are met.

1.23 Local multiplexes may request to carry the same set of stations as adjacent multiplexes within each approved area. Where spectrum availability allows, they may also request to use a common frequency across these multiplexes. They may also request to extend their licensed areas. Ofcom will consult before making a decision on such requests.

1.24 Listeners tell us they value news more than other content on local commercial radio. Local radio also provides a source of news plurality, complementing the BBC. We are changing our guidelines on local programming so that, generally, stations may choose either to retain the current commitment of at least ten hours of locally made programming daily, or to request a licence variation to reduce this to at least seven hours in return for broadcasting local news, regularly refreshed and updated, at least hourly during weekday daytimes. We have revised our localness guidelines and format change policy in accordance with this approach.

1.25 Local AM stations may request to be freed of any requirement to provide locally made programming, except for the existing licence requirement to produce at least 10 hours a day of daytime programming (including breakfast) on weekdays from within their home nation.

NB: We have amended the statement in response to enquiries from some licensees, in order to clarify certain points relating to approved areas. The relevant changes are in paragraph 4.35, the footnote to Figure 3 and the final footnote to Annex 6. The changes are for clarification only and not substantive.