All ears for radio?

Another national commercial radio franchise now seems certain, but do we really need it, asks Meg Carter

Commercial radio continues to glow red hot in the UK, and interest in owning stations has never been greater. There are already 180 services around the country, and London's last FM licence, to be awarded next month, attracted bids from a whopping 25 companies.

No wonder, then, that the enticing prospect of a fourth national radio licence, which the Radio Authority confirmed this month was a distinct probability, has further whetted appetites in the commercial sector.

The opportunity to licence a fourth national commercial station came entirely out of the blue, says Tony Stoller, the RA's chief executive. The frequency, on 225MHz, was previously used by the BBC for transmissions in Scotland and only recently became available. The RA lobbied the Government for it to be licensed for a domestic commercial operator. The regulator was concerned that the licence might be allocated to an offshore organisation which would have set it beyond the RA's control.

"We wanted the service to be one we could regulate," Stoller says, "and to be able to ensure it was complementary to other commercial services." Existing national stations - Virgin, Classic and Talk Radio - have to offer distinct formats, so the fourth service will have to provide something new. Finally, Stoller adds: "We wanted something that could benefit independent radio as a whole."

Plans for the new service (known in the business as INR4) are at a very early stage. Following a meeting of the Radio Authority last Thursday, a period of cross-industry consultation will begin in mid-January. Interested parties will be invited to comment on the viability of the new service and the likely impact on existing businesses. The RA also wants to know who might bid for the franchise.

It is the first time the RA has instigated such far-reaching public debate before licensing a new service. But the process is deemed essential because of the timing - so close to the hotly anticipated launch of Digital Audio Broadcasting (DAB) in the UK.

"The last thing we want to do is kill digital before it's even been born," Stoller explains. Yet at the same time, the RA is eager to redress the imbalance that now exists among analogue radio services: while the BBC has four FM and one AM national frequencies, commercial radio boasts only two FM and one AM.

Industry opinion remains divided on whether the station will expand commercial radio as a whole. For a start, INR4 will broadcast on long wave - less attractive than stereo FM - adding to its start-up costs as the frequency requires a larger transmitter and a bigger aerial.

Secondly, 225MHz offers only near-national coverage and so will need topping up by medium wave. Meanwhile, a number of leading industry figures fear INR4 could prove an unnecessary distraction at a time when attention should be fixed firmly on how to launch digital successfully .

"Long wave is history. DAB is the future," believes David Campbell, chief executive of Virgin Radio. "[INR4] is a move backwards. Throwing more analogue licences into the mix will distract attention from digital. If DAB creeps and crawls into the market it will fail."

Commercial radio has, to a certain extent, become a victim of its own success, Campbell adds. Although it has won over advertisers, financial success is elusive. "Classic FM loses money. Talk Radio UK loses enormous amounts of money. And I doubt we would make any money without the London FM audience."

Others, however, believe that like other nationals before it, INR4 will further expand the total commercial radio market. "There's a tremendous opportunity for a fourth national station provided it can target a gap in the market and a tightly defined audience," says Nigel Reeve, managing director of London News Radio and former sales director of Classic FM. Paul Robinson, general manager of Talk Radio UK and formerly strategic development director of BBC Radio, adds: "Further competition must be good for listener choice and advertiser choice."

Advertisers are all for it, says Simon Ward, head of radio at advertising agency Leo Burnett. In the year to September 1996, revenue growth for commercial radio was up 18 per cent year on year - to just over pounds 300 million, according to Advertising Association estimates.

Long wave is a successful frequency - if the format is right, Robinson adds. "Atlantic 252 is Britain's most listened-to commercial station." Although important, he believes, digital won't become mainstream for a number of years. "Licensing new analogue services and making DAB a success are not mutually exclusive."

Digital is a major concern, Stoller concedes. "At the moment, each existing national station is guaranteed a place on the digital audio multiplex. We must consider whether to advertise the analogue licence on its own, or with DAB." As the analogue frequency is only average quality, DAB could support it well, he says. Analogue could be also be used as a taster to drive listeners to digital.

Campbell is unconvinced. "That argument presupposes digital will not be an immediate success. We have to find a way of making a big bang in the marketplace." Stoller, however, also has an eye on the rapidly filling analogue capacity and the imbalance that still exists between the allocation of frequencies between commercial radio and the BBC.

After 225MHz, he says, it is highly unlikely any other major frequency will come commercial radio's way. This has already prompted calls for "spectrum pricing" - which would require non-broadcast services, such as mobile-phone operators, to pay for their frequency in the hope they would then use it more efficiently.

That leaves the 105 to 108FM frequency which the RA is now licensing - at the rate of around 20 new local and regional services a year. And INR4. Plenty of scope, then, for the swelling ranks of radio mogul wannabes - for the time being, a leastn