Media: Mixed messages over the airwaves: In the next three years the Radio Authority will award 128 licences for local commercial stations. Its plans are sending shivers through the industry, writes Martin Wroe

THE fanfare that heralded this week's launch of Classic FM, the first national commercial radio station, was in considerable contrast to the furtive air surrounding another significant radio development a fortnight ago. That was when London's leading speech-based station, LBC, split its frequencies, offering distinct programming on its AM and FM services through most of the day.

If this does not sound very novel, it is because it is not. The station split frequencies once before, to a huge promotional campaign, three years ago, creating LBC Talkback on its AM frequency and LBC NewsTalk on FM. It was such a commercial flop that the services were reunited and NewsTalk took over.

So why do it again? The answer is that from next month the Radio Authority begins a marathon round of re-advertising every local commercial radio franchise in the country. When LBC's turn comes up in the autumn of next year, the station, which came on air in October 1973, will have to reapply not just for the single licence it was awarded in the first place but one for each of the two frequencies it has used. If it wants to keep two frequencies, it will have to demonstrate to the authority that it is using each to offer distinct programming which adds to listener choice in its area.

That is just one of the rules in the new radio environment sending tremors of anxiety through the industry.

Such are the changes being introduced by Lord Chalfont's Radio Authority that some predict chaos and even disaster. Unlike the commercial television process, the 128 new radio franchises - 55 before the end of 1993, 73 in the following two years - will not be awarded to the highest bidder but to the applicant combining financial viability with a commitment to local needs that demonstrably increases listener choice in a given area.

This is not all. The Radio Authority, in addition to the three new nation-wide services of which Classic FM is the first, has decided to launch five new super-regional radio services, which it wants on air by the end of 1994. These will cover central Scotland, north-east England, north-west England, the west Midlands and the Severn Estuary. All will be on the coveted FM waveband (which can carry stereo) and open to applicants offering proposals that are different from independent radio services currently found in those regions.

The new winners of existing local franchises, the super-regional stations and the new national stations will all be chasing advertising revenue from companies that already spend heavily with independent local radio (ILR) stations. The industry is worried.

Brian West, director of the Association of Independent Radio Contractors (AIRC), says: 'We've said to the Radio Authority that if they take a frequency from here and give it to a new player, and take another from there and give it to a new player, they could end up destabilising the whole industry. They must proceed with caution.'

Next month North Sound Radio in Aberdeen will be the first station to reapply for its share of British airwaves. On air since October 1981, the station serves a population of 310,000, centred on Aberdeen but stretching north to Peterhead and south to Stonehaven. It puts out the same service on both FM and AM, the latter crucially improving reach into sparsely populated areas.

John Martin, the station manager, says: 'The difficulty of the licence round is that the Radio Authority wants us to provide two services on two frequencies but our existing operation is dependent on covering the whole area and we can't cover that without both frequencies.'

He is not alone in doubting whether many of Britain's commercial stations would survive with only one of their two frequencies. Most increase their audience with a different service, usually a 'gold' format on the AM band, but achieve economies of scale by having just one centre of operations. One radio station, two radio services: 'For many, it is doubtful if either would be profitable divorced from the other.'

Mr Martin already knows of competitors for North Sound Radio's FM frequency - the lucrative one serving the population centre of Aberdeen - and he argues that the AM service is not viable on its own. If he won back the FM frequency but was shorn of the AM frequency, he would expect revenue to drop by 20 per cent, turning his marginal profit into a loss. The consequences? 'We'd have to cut spending, particularly on the more expensive speech programmes - they'd have to go.'

Mr Martin wants the Radio Authority to agree that in areas such as his own there is room for only one licence- holder, requiring both frequencies, and therefore for just one to be advertised.

David Vick, head of development at the Radio Authority, says this would put them in an impossible position: 'If we were to decide, after expensive research in every single franchise area, that in some areas there is room for only one service, we would be playing God over what is and isn't viable in local radio.'

But in their desire to broaden choice, as required by the Broadcasting Act, critics say that the Radio Authority may end up restricting choice, or at least ensuring that currently successful stations win back their franchise in impossible circumstances - without the essential extra frequency, for instance.

Some of the larger radio groups, which own several stations around the country, are worried about the local emphasis in the re-awarding procedure. Robert Pierson, an adviser to the radio industry who helps new radio consortia put together franchise applications, believes that some groups may be hit. 'Any station may be vulnerable which cannot demonstrate local support and where there is a strong local contender.'

Mr West of the AIRC says: 'The authority can be a bit too influenced by letters from people in local areas saying we want a crack at running a station. It could end up damaging the whole shooting match.'

There is fear that the many new players in the industry could drain advertising revenue from existing ILR companies. But if Classic FM succeeds in achieving an audience of ABC1s, thereby winning new advertising revenue to radio, it could do much to allay such anxiety.

Douglas McArthur at the Radio Advertising Bureau is confident that national and regional stations will attract sufficient new advertising to double present revenue in three years. While these will inevitably eat into some of ILR's traditional advertising base, they, along with the new local stations on former split services, offer a chance for radio finally to boost its share of all media advertising revenue from 2 per cent.

'We have to be radical and grab the moment,' says Steve Hyde at Zenith Media. 'We can't go on cutting up the cake into smaller and smaller slices.'

If the industry as a whole is voicing worries about the coming changes, it seems that individual operators are not prepared to be left behind. As one source at the Radio Authority puts it: 'They're queuing up to register interest in running the new services.'

(Photograph omitted)

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