14 December 1998 - A SUBMISSION BY AER TO THE EUROPEAN RADIOCOMMUNICATION OFFICE - CEPT REGARDING THE DEBATE “DSI PHASE III (862-3400 MHZ) - MARKET SCENARIOS AND VIEWS ON THE DEVELOPMENT OF RADIO SERVICES"

AER's main objective is to develop and improve a suitable framework for private commercial radio activity. AER encourages co-operation between its members and with other European radio stations and associations, in order to preserve and develop freedom of speech, freedom of enterprise, private initiative and the protection of listeners.

AER welcomes the initiative taken by ERO through its consultative document to support the DSI Phase III.

Role played by Private Radio in Europe Currently, in the EU there are approximately 8,000 active private radio stations in an environment of great pluralism and democracy.

Radio offers to all people in each Member State a range of programs containing entertainment and informational services of increasing quality, which reflect the culture and languages of the different nations and especially regional and local interests.

Radio is embracing new technology, presenting itself as a digital media through the DAB (Digital Audio Broadcasting) system. More than any other media, it will lead the way to a truly portable “information highway”.

The shape of radio in Europe is different from that of television. Radio has different structures, and offers distinctive types of services. It may be taken for granted on occasions because of its reliability and multi-station provision but, unlike television, it is a useful secondary medium which engages listeners while they are doing other things. Therefore, AER asks that international institutions consider and treat radio as separate and different reality from television.

AER, representing private radios in Europe, has always supported the testing and development of DAB, conscious of the consumer benefits of this new technology.

AER has always stressed the importance of radio in terms of advertising and audience. When considering the potential for growth in the European media market, it appears that television seems to have reached a limit to its expansion. On the contrary, Radio has enjoyed sustained growth during the last few years, and there is room for further expansion, both in terms of audience share and advertising expenditure. One of the main reasons for this rise in radio advertising has been the implementation of more reliable and accurate methods of audience measurement in several countries, accompanied by improvements in the organization of time-selling. The radio sector has also gained credibility with the development of multi-station packages, allowing for nation-wide space buying policies.

DAB will take Radio into a new age offering consumers interference-free reception, CD-Quality sound, easy to use Radios, automatic tuning, a wider choice of programs, text/data transmission and access to Internet. DAB will also allow a more efficient use of radio spectrum, new business opportunities and considerable scope for new output.

VHF-III and UHF-L band for DAB broadcasting (Terrestrial DAB). Due to the performances of the system, unfortunately, L band is of limited value for extensive terrestrial use. The limited coverage area of each transmitter causes higher investment costs developing the broadcasting network. L band is possibly suited for satellite based services with international coverage or for limited area coverage. Only local services (i.e. metropolitan areas) can be cost effectively implemented in band UHF-L. Other services (i.e. inter-metropolitan, regional, nation-wide) require the use of band VHF-III. Up to now, the haphazard development in the management of the frequency spectrum has been one of the main barriers for the implementation of digital technologies among broadcasters.

The Wiesbaden plan has co-ordinated one block in each band for each area and/or region. It is true that inside the plan the rules for the implementation of other blocks not co-ordinated have been outlined, but the final result has lead to difficulties. The numbers of available blocks needs to be increased. The poor response from the commercial broadcasting sector, from the receiver manufacturers and, from the market is caused by the lack of offer for digital services.

At present, listeners enjoy many different programs from public and private stations giving them plenty of choice. A wide number of different radio formats (i.e. classical, pop, and folk music, news with different editorial lay-outs and others) target different types of listeners. Where only one DAB multiplex is operating this tends to be assigned to the public sector and does not provide any new appeal. Even the good reception quality is not enough to trigger the purchase of the receivers if the choice of radio programs remains the same.

On the other hand, in many countries the late implementation of DAB services has delayed extensively the roll out of the new technology.

Currently, to speed up the development of the DAB in Europe, AER believes that all efforts should be aimed at overcoming the difficulties in the allocation of new blocks in the available spectrum and that digital radio broadcasting should be defined as primary service in band UHF-L as well as in band VHF-III. This could simplify and speed up the migration of existing FM services to the better technology as well as allowing the creation of new services.

AER, due to the interest that many private radio broadcasters are now showing, seeks an increase in the DAB blocks in L band for small-scale local radio.

Frequency spectrum is a scarce resource. Digital technology allows the release of

broadcasting spectrum in the long term, but given the importance of radio for the Information Society, it is crucial that the broadcasters’ needs retain high priority in the allocation of resources.

In several EU countries it seems that publicly funded broadcasters have been given guaranteed places on DAB multiplexes. They are able to use public money to finance development and building of transmission networks, whereas private broadcasters’ shareholders have to bear the cost of the new DAB transmission facilities. In many countries, advertisement revenues also fund the public sector. This means that the auctioning process of frequencies for the private sector will increase the already distorted market building new barriers against a quick development of the new technology. Many private radios in Europe are enthusiastic about DAB, but fear that DAB may prove to offer yet another privilege and market advantage to public stations.

In the shorter term, all existing analogue services should have the capability of being transmitted digitally within a reasonable time-span. Spectrum pricing should be used with extreme caution. The principle of "free-to-air" services allied to the low cost of market entry has underpinned radio's growth in the past decade. Any dilution of that principle in respect of mainstream services could seriously prejudice the growth of DAB and threaten the needs and values of the Information Society. In the Radio sector, we believe that selling by auction the available broadcasting spectrum can reduce and/or avoid the pluralism and the diversity gained up to now. This, together with the other difficulties already described, can defeat any effort that the broadcasters are now putting or are intended to put in the near future to implement DAB!

We propose that, since DAB is essentially an enhanced form of transmission rather than an alternative or new technology, the right to provide DAB services should be automatically available to existing broadcasters as the first step in its introduction. Established broadcasters are best placed to introduce digital broadcasting to the public as they have proven market skills and the necessary industry experience to judge whether simulcasting, different programming mixes, or other service improvements are more likely to attract audiences to DAB.

Ownership and control arrangements for DAB should balance the legitimate concerns of existing broadcasters and aspirant broadcasters with the interests of the consumers of the new service. Care should be taken to prevent monopolisation and stabilise access and user costs.

There are three possible ownership and control models for the multiplex:

1.Broadcasters ownership of the multiplex

2.Access through a single, national network provider; and

3.Open competition

Under model 1, one or more broadcasters who would determine programming and sharing arrangements would own each multiplex. Conditions could be applied to provide for access by non-owner broadcasters and to control access prices.

Under model 2, only one network operator would control access to all multiplexes in accordance with a regulatory regime that would not leave open space to free competition and pluralism. This would mean a common level of functionality, conditional access and a contestable market but also absolute control by the operator over the single broadcasters, the diffusion and the content of programs.

The model 3 would rely on existing competition law to regulate a market-driven access and price regime.

AER favors model 1. It considers that model 2 would favor one big telecom giant, with total control over national, regional and local broadcasters on one hand and programming on the other, and this would lead to market distortion. Radio broadcasters should have the right to manage their own multiplexes.

Model 3 could be combined with model 1, but attention must be paid to protect smaller broadcasters, who may possibly be unable to compete financially, in order to maintain an open market. Over the last few years, there has been a considerable growth in the radio market that deserves attention and that is creating new working opportunities – there is no point in inverting the market trend.

In market studies developed in some European countries, the listeners’ need for local services (i.e. traffic and weather related with others) has been clearly demonstrated. For this, local services adjusted for metropolitan areas and run by local stations broadcasting on band L could be of great interest. In the mid term, pure data broadcasting could be provided for mobile computing devices which would be interfaced by a GSM phone and DAB receiver (i.e. the MEMO project funded by the EC). This would enable the conditional access features available inside the DAB system to be fully used.

Analysis of actual local services in the FM band foresees from 4 to 7 DAB blocks in metropolitan area audio services. The same amount of blocks could be operated only or mainly for data and also some special services like TV for the railways and public transportation in general. Overlapping areas and their co-ordination indicate that the availability of 23 blocks would answer all requirements. But we have to keep in mind that this scenario will be implemented on a mid/long term time scale and what is most needed now is DAB spectrum for current and new radio services.

Looking at the efforts that have been made by Member States to free spectrum space for the new emerging mobile telephone systems it is difficult to understand why the same process can not be put in to operation for the broadcasting sector (i.e. encouraging migration of analog TV in band VHF-III to the UHF band, and fixed links in band L to other frequencies).

At national level steps should be taken to help implement new DAB broadcasting systems as follows:

· The creation of independent national telecommunication authorities (where they don't already exist)

· The timing of licence awards. A critical mass of good quality content across Europe will be an important factor in driving take-up of DAB. In terms of consumer take-up, the greater the number of services and the sooner they are introduced, the better.

· The timing of licence awards. A critical mass of good quality content across Europe will be an important factor in driving take-up of DAB. In terms of consumer take-up, the greater the number of services and the sooner they are introduced, the better.

· Licence periods. DAB licenses will not reward share holders for many years. Digital licences should be for long periods of time.

At the European level there are also measures to be taken to guarantee a safe environment to DAB:

· Clear definition of the role of public service broadcasting, in order to avoid the existing double funding problem, which leads to market distortion in many EU countries.

· Clear definition of the role of public service broadcasting, in order to avoid the existing double funding problem, which leads to market distortion in many EU countries.

· A declaration from international institutions stating that a common standard is needed for digital radio broadcasting in Europe, in order to allow market expansion.

· Encouraging the production of programs, which are suited for digital radio.

· Supporting professional training for operators in the "new" digital radio sector.

AER is not in favor of overlapping the competencies of technical authorities (i.e frequencies) and those taking care of editorial issues (i.e. content of programs).

In terms of programming, one of the keys to DAB’s market chances is the availability of high quality content and added value. DAB has an important cultural dimension. It offers broadcasters the opportunity to improve content range and content quality as well as sound quality.

Therefore, a policy of competitively for the European broadcasting industry must also take into account the importance of European content creation. The following could be achieved.

· Encouraging the production of programs, which are suited to digital radio.

As far as we know from receiver manufacturers and after some years of delay, interesting developments are now taking place. Five brands have started their promoting campaigns during 1998 in Italy, the UK, Sweden, France and Germany. In particular, Pioneer, Kenwood, Bosch/Blaupunkt have launched their DAB receivers. Clarion and Grundig are following, and Alpine is going to present its products at the beginning of next year. Also other companies are going to finalize their commitment to the launch of digital receivers. Sony and JVC have confirmed their intention.

AER recognizes that the receiver manufacturers have taken some encouraging steps and welcomes the EACEM statement in favor of DAB-EU147 as the only reasonable system for radio broadcasting now available and affordable.

But this is not enough. Together with the growth of new broadcast services, an appealing choice of simulcasted programs will lead to a critical mass triggering the adoption of the new system. A speedy decrease in DAB receiver pricing will be of crucial importance. This can only happen if more services are developed so full use must be made quickly of available spectrum.

Harmonization between alphanumeric displays (numbers of characters, typically 2 x 16) and screens (number of pixels) is required. For this purpose, co-operation between ERO, the EU-147 project office and the World DAB Forum Module 1 should be encouraged. Car navigation platforms are now being introduced and at present different screens are being used. An agreed standard will ease the effort for broadcasters intending to develop new broadcasting data services.

Unlike television, radio output is mainly live. This gives a sense of truth and reality, of immediacy to radio broadcasting. Radio's target consists of individuals. Thanks to radio, minorities of all kinds are given their own voice. Radio stations prefer social group targets to a nation-wide audience of all socio-economic groups. It is particularly effective in the provision of local information. Favorite radio stations are considered reliable, sincere and truthful in terms of information and popular cultures. Radio listeners enjoy the reliability offered by their favored stations.

The advertising market is crucial for private radio and DAB is going to offer new opportunities to advertisers. It will be possible to reach easily a particular audience and therefore to use advertising time more efficiently. Advertising on private radios is also important for national and regional economics, sustaining trade and commercial activities, which means the maintenance of existing employment and the creation of new working opportunities.

Finally, on the technical front, AER emphasizes two important benefits that DAB technology offers to operators, regulators, listeners and citizens. The availability of real SFN management of the DAB networks greatly simplifies the management of the EM spectrum in a cost-effective way. Also the adoption of digital technology can give an approximately ten-fold reduction of effective radiated power where the impact of EM pollution has to be taken in account.

These two features should be borne mind when the final decision about constraining or facilitating the implementation of DAB in Europe will be taken.