The Government is today expected to bow to intense lobbying from the radio industry and permit major consolidation to go ahead.
The sector has complained that it was left out of the deregulatory thrust of the draft Communications Bill, published earlier this year, which paved the way for a single ITV and greater cross-media ownership. On radio, the draft Bill did allow for greater consolidation than the current rules permit, but said there must remain three commercial operators in any one area, plus the BBC.
The industry has since been insisting that it should be allowed to consolidate to two commercial operators in any market, plus the BBC. This further liberalisation could open the door to a merger of two of the big radio players – Capital, GWR and Emap – while "three plus one" would stop these major deals.
It is thought that Tessa Jowell, the Secretary of State at the Department of Culture, Media and Sport, will tell a media conference in London this afternoon that the Government has accepted the principle of "two plus one".
The final Bill is expected to be published in the next few days. However, it is thought Ms Jowell will use the event today to settle the issue of radio ownership, one of the few remaining aspects of the legislation on which the Government has not appeared to give its final view. The Government's position on most of the other reforms to media laws has already been spelt out in the draft Bill or in the ministry's response to a report by a parliamentary committee that scrutinised the draft legislation.
One political source said: "Two plus one would be a massive shift in [the Government's] thinking but how much consolidation it allows will depend on the formula applied."
The draft Bill suggested a limit of 45 per cent market share in a region for any one operator, thus requiring three players in that market. Allowing competition to shrink to just two commercial operators could be satisfied by raising this limit to 50 per cent. But the radio industry has insisted that at least 60 per cent market share must be permitted for serious consolidation to take place.
The Westminster insider added: "There is a feeling that while a 50 per cent limit would be two plus one, it would still mean that the big boys cannot get together. The Government is in a hurry to get this Bill through. So if Ms Jowell accepts the principle of two operators in a market, the radio industry will carry on the fight [through the Bill's parliamentary passage] to make sure it gets 60 per cent [market share limit]."
Simon Mays-Smith, an analyst at JP Morgan, said even if the law allowed consolidation down to two players in any one area, proposed mergers would still need to get through the competition authorities.
Lord Eatwell, the chairman of the Commercial Radio Companies Association, said that greater consolidation in radio ownership would actually lead to more diversity in the output of local radio stations, not less.
"Small stations seek to maximise their audiences by going for the middle ground.... A larger company can offer services to different parts of the community," he said.
Mr Mays-Smith said: "There should be some greater consolidation, but while that may mean more diversity for consumers, it doesn't for advertisers."
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