Sunday, January 27, 2008

Cutting the Costs of the Masts

The UK Sunday telegraph newspaper says that Arqiva, which currently owns half of Britain's radio and TV masts is offering to slash its prices in a move that could secure regulatory approval for its £2.5bn merger with rival National Grid Wireless and provide a boost to Britain's ailing commercial radio industry.

The company is owned by Macquarie, the Australian bank - and they are pledging to cut the cost of transmitting all radio stations by an average of 15pc if the merger is approved, according to commercial radio sources. The BBC and commercial radio spend a combined £100m a year broadcasting radio in FM, AM and digital formats. The BBC's contract is with National Grid Wireless, but the offer of a price cut is understood to apply to the BBC as well.

Broadcasters would also be able to cancel contracts for the first time, once capital costs have been recouped, with one year's notice. The break clause would be introduced as part of new 10- or 12-year agreements. This would make it easier to shut down loss-making digital stations, or those broadcast in AM on mediumwave, which have a dwindling audience. I have a feeling if this goes ahead, many spots on the UK mediumwave band will go dark. And what of the DRM test down in Devon - I cannot believe that has been a success.

Arqiva agreed last April to acquire rival National Grid Wireless in a move that would create a monopoly for the transmission of all radio and terrestrial TV in the UK. The Competition Commission is investigating, and in November warned it might order Macquarie to sell off National Grid Wireless. A final decision is expected in March.

To avoid a forced disposal, Macquarie is hoping to reach an agreement that can be proposed jointly with the radio companies to the commission. The cut in transmission costs is designed to pass on savings from the merger.

Radio companies are desperate to cut the amount they spend on transmission, particularly for digital stations. They have spent millions buying up local, regional and national digital licences and committing to 12-year transmission contracts with Arqiva in the hope that listeners would throw away their old analogue radio sets. However take up has been disappointing.

While digital TV is in more than 86pc of homes, just 20 percent of adults own a digital radio. In the past six months, loss-making digital stations have been going off air. UBC Media has closed the national speech station Oneword, GCap has closed Core and is due to close Life. Virgin Radio has scrapped plans to launch a women's station, Virgin Radio Viva. GCap spends a total of £25m a year on transmitting all its ­stations, and could save up to £4m under the new terms.


Anonymous said...

If there's one message to be passed on from the UK to countries just starting to ramp up their DAB activities, it would be "It's all about the cost of the network!". I wrote a little thing about it back in October

Jonathan Marks said...

Nick's right on the money here. I recommend following the link to his article. Reminds me of the early days of FM radio in the Uk when the authorities put an FM station into 40 geographical zones in the UK without looking at whether they would be commercially viable. Several stations outside the main urban centres either went bust or became part of a network.