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Speech

Notes for an address

by Michel Arpin

Vice-Chairman, Broadcasting
Canadian Radio-television and Telecommunications Commission

 

to the Conference and Annual General Meeting of the North
American Broadcasters Association

Panel on “Radio Challenges and Opportunities”


Washington, D. C.

June 5, 2009

(This speech may have been altered during delivery)

Thank you, Mike [Starling], for that kind introduction.

I have always considered NABA’s conferences as a great forum for the exchange of ideas. I’m particularly glad to have been invited to participate in a panel on the challenges and opportunities facing radio.

I was involved in the development of digital audio broadcasting in Canada from the very beginning. When I was in the private sector, I dedicated 15 years to promoting the need to go digital and to undertake research to find the most suitable technology. As the Vice-Chairman of Broadcasting at the Canadian Radio-television and Telecommunications Commission (CRTC), I have now spent four more years encouraging Canadian broadcasters to investigate the potential of digital radio.

Despite a promising start and some early progress, to my chagrin the industry continues to rely on analog technologies at a time when the world is going digital. Regrettably, in North America, there is currently no plan in place to adopt a true next-generation technology for radio. In the meantime, the rest of the industrialized world is moving swiftly to implement digital radio technologies.

To properly understand why digital radio is at a standstill in Canada, let me give you a brief recap of key events.

Arrival of digital technologies – Early interest
Towards the end of the 1980s, the radio industry began to experience serious financial difficulties. Its market share was declining, mostly due to a lack of synergy. The Canadian Association of Broadcasters launched a strategic planning exercise with the industry, which I happened to chair.

Three key conclusions emerged from this exercise:

  • First of all, we noted that broadcasters in the United States were consolidating through mergers and acquisitions. We believed that Canadian broadcasters needed to explore similar opportunities in order for radio to create synergies that would allow for a reduction of costs and for it to capture its fair share of the market.
  • Secondly, radio’s advertising revenues were not proportionate to its audience share when measured against all media consumption.
  • And thirdly, the introduction of compact discs signalled that digital technologies would soon become a competitive concern.

A strategic plan was developed, which was presented to the CRTC and what was then known as the Department of Communications. Not long after, the government invited stakeholders from the radio sector to participate in a round table discussion on digital technologies and other possible business opportunities. This resulted, in November 1992, with the creation of the Task Force on the Introduction of Digital Radio in Canada.

Meanwhile, in 1988, our public broadcaster, the Canadian Broadcasting Corporation (CBC), attended the first public demonstration of the Eureka 147 Digital Audio Broadcasting (DAB) system. The CBC engineers made immediate contact with European working groups that were studying digital radio and invited them to consider Canada as a test site for their new technology.

In the summer of 1990, after an agreement with the European labs developing DAB, Canada was successful in bringing prototype equipment for demonstrations in various Canadian locations. Some of you will recall the yellow bus tour in which there was a prototype receiver the size of a refrigerator.

In 1992, a Canadian delegation attended the World Administrative Radio Conference in the hopes of convincing the other administrations to increase frequency spectrum allocated in the L-band to DAB. Just as importantly, they wanted to make it not only a satellite delivery system, but also a terrestrial one. There was significant international resistance to these proposals as some of the frequencies were being used for other purposes. But the delegation was successful in its lobbying efforts.

First phase of implementation
The Task Force on the Introduction of Digital Radio in Canada formed three working groups to discuss the logistics of implementing digital radio. I chaired two of these working groups, including the one responsible for developing a non-technical regulatory framework. These roles gave me an intimate knowledge of the different viewpoints around the table.

Similarly to what happened in the U.S., I quickly came to realize that the main Canadian broadcasters of the day were conservative in their approach:

  • They advocated for the adoption of digital radio as a replacement technology rather than an enhancement to the system.
  • They preferred to simulcast the entirety of their AM and FM programming over the introduction of new services.
  • They wanted to have spectrum allocated in such a way that very few new frequencies would be available.
  • And later, in early 2002, it became obvious that they were not ready to make the necessary financial commitments – then estimated at C$50 million – to build the network required to serve the heavy-traffic highway corridors in Canada.

Given these proposals, the broadcasters of the era must shoulder the responsibility for the limitations that were imposed on digital radio at this early stage.

In 1993, Canadian public and private broadcasters formed Digital Radio Research Inc., which later became Digital Radio Roll-Out Inc. These consortiums built and operated the first experimental DAB stations with transmitters in Montreal, Toronto and Vancouver. These three cities were chosen to be the test beds for the new technology in North America. The transmitters remained in operation until 1998, when they were replaced by state-of-the-art DAB transmitting equipment.

The Task Force presented its final report in 1994. The regulatory framework that emerged from the working group was eventually adopted by the CRTC. However the regulator insisted on making one important change. It allowed transitional digital radio services to broadcast up to 14 hours of original content each week, though few broadcasters took advantage of this decision. To my recollection, only two come to mind: the first at Radio-Canada in Montreal, where for a few months Bruno Guglielminetti hosted a daily program; and the other at CHUM Radio in Toronto, where the programming was assisted with ongoing alphanumeric transmission.

After Canada hosted a World DAB conference in 1994, Industry Canada formally adopted Eureka 147 as the Canadian standard for digital radio. Two years later, in 1996, Canada became the first country to develop a national allotment plan for digital frequencies. That same year, the CRTC issued an interim policy for the establishment of DAB in Canada. While the framework was revisited in 1998 and 2006, it is essentially the same policy that is in place today.

Now that all the pieces had come together, the CRTC began to call for licence applications. In May 1998, the first licences for transitional digital radio services were granted to stations in Toronto, followed with stations to serve Montreal, Vancouver, Windsor and Ottawa. It is worth mentioning that the initial licences were granted for three years instead of the usual seven-year terms. This was seen as a first step to the creation of a long-term policy and licensing regime.

But the battle to launch digital radio services was only half-won. Finding manufacturers to build DAB receivers for the Canadian market proved to be much more difficult.

Gaining a foothold in the market
In 1993, Pioneer requested the use of the DAB infrastructure in Toronto to test its prototype receiver for new vehicles. In exchange, the company committed to providing the Canadian after-sale automotive market with their first receivers. This was viewed as one of the key components to the roll-out strategy for digital radio.

Pioneer kept its word until the 2001 Consumer Electronics Show. After thanking Canada for its support in developing the company’s first DAB receivers, Pioneer indicated that the manufacturing of third-generation receivers was directly linked to the speed of the uptake of DAB in Europe.

For the retail market, we struck a deal with Radio Shack to build portable receivers. The retailer agreed to stock them in its stores in cities where the DAB transmitters were located. To give you an indication of how successful the roll-out was, I have heard that to this day there are still receivers gathering dust in their warehouses.

Establishing partnerships with the automotive industry was the third component to our strategy. We held long discussions with all of the manufacturers to build and install receivers in new vehicles. At the end of the day, General Motors Canada was the only one to make a serious commitment, going as far as to announce on October 29, 2001, that the 2003 Chevrolet Impala and Monte Carlo were to be DAB-equipped. Unfortunately, a new president soon arrived at GM Canada who had little interest in pursuing the partnership.

This decision led to the demise of the broadcasters’ financial commitments that would have supported the introduction of DAB in Canada. The DAB infrastructure has essentially remained at a standstill since that time.

Some of our international peers, such as the United Kingdom, were experiencing better luck. Part of the reason may be attributed to the fact that they chose different approaches. The United Kingdom, for instance, adopted a strategy that was complementary to analog and, as a result, the majority of players launched new digital services.

And here in the United States, after an early interest in DAB, broadcasters decided to experiment with what has become HD Radio. Two of the largest Canadian broadcasters persuaded their peers in the Canadian industry that they should wait to see the results of HD Radio in the U.S. before proceeding with their DAB plans. The situation was also not helped by the fact that HD Radio’s proponents considered Canada to be a market that could adopt this technology. However, a standard for HD Radio had not yet been chosen and the tests that had been carried out had been inconclusive.

The CRTC was faced with an industry that was slow and tentative to take up digital audio broadcasting. In 2006, we decided to review our approach. It had been eleven years since we had issued our transition policy and we observed that: “The adoption of the new digital radio technology by consumers and the switchover by the radio industry to digital is now effectively stalled.”

To improve the prospects of digital radio broadcasting, the CRTC decided to give licensees the flexibility to create whatever services they believe would be of greatest interest to the public. So far, no one has come forward with a new proposal.

 

The current situation – Growing competition
The Canadian radio industry finds itself in an unenviable situation, largely of its own making.

I realize how funny that may sound, considering the healthy financial returns posted in recent years, but I would ask you to consider the following points:

  • AM radio holds less and less interest for audiences, resulting in stations closing or converting to the FM band.
  • There are very few FM frequencies left in the heavily populated corridor from Windsor, Ontario to Quebec City, as well as in other markets such as Vancouver, Calgary, Edmonton and Winnipeg.
  • There continues to be a high demand for licences to operate new services, but we are running into more interference problems, such as issues related to second and third adjacent frequencies.
  • Media consumption patterns are evolving thanks to the growing popularity of satellite radio, out-of-market stations over digital cable, Internet radio stations, podcasts, portable MP3 players and smartphones.
  • Wireless technology is improving. That industry is now working on Long Term Evolution and WiMax as standards to provide Internet broadband services over mobile phones.

Despite these developments, the majority of Canadian broadcasters have maintained a wait-and-see approach.

Our situation is not much different from yours in the U.S., as described by Dave Wilson on the Consumers Electronic Association Digital Dialogue website in early August 2008. I can only agree with Mr. Wilson when he writes:
“As an industry, radio has traditionally been afraid of expansion and
terrified of new competitors. Of course, fear of new competition is natural
but new competition is a fact of life that everyone must deal with.
Unfortunately, it seems to me that radio sometimes deals with it by running
to the government and requesting regulatory roadblocks that will keep new competitors at bay. […] It seems to me that radio’s desire to block new competition at all costs, including lack of expansion of its own service, may
have an unfortunate side effect – a loss of focus on radio’s own customers.” 

In retrospect, in Canada, DAB was:

  • an engineer’s dream
  • promoted by radio broadcasters’ regulatory and government affairs staff, and
  • supported by the broadcasters’ marketing and promotion employees.

But when financial commitments and disbursements of funds were required for the implementation of the infrastructure, the owners didn’t come forward with the money.

Securing radio’s digital future
Has the time come for a renewed approach toward digital technologies? I would say that the answer is a resounding yes.

While digital audio broadcasting has stalled in North America, we have seen the launch of services using the DAB and DAB+ standards in a number of other countries. In the United Kingdom, 97% of the population has access to digital radio and there were more than 8 million DAB and DAB+ receivers in operation by the end of 2008.

Scandinavian countries have also launched digital radio services.

Last month, commercial digital radio services began broadcasting in five Australian cities, including Sydney and Melbourne, using the DAB+ standard.

France and Germany are launching their own digital radio services this year.

Should Canada follow these examples and start developing a new plan for digital radio? That is certainly one option, and would be a good way to free up FM frequencies and introduce new services. But I don’t believe we should limit our options to the DAB family of standards at this time.

For instance, the Internet and smartphones are creating interesting opportunities. Broadcasters can reach a much wider audience by providing multiple services without having to worry about the availability of frequencies in a given market or being limited by the coverage of the network.

Some broadcasters have been more innovative than others. However, the industry as a whole needs to invest time and effort in order to determine how best to use these technologies.

Another option involves the VHF TV spectrum that will soon be vacated with the transition to digital television. After the switchover, channels 5 and 6 could be made available for other uses, which could include digital radio services. I know that last summer the Radio Board of the National Association of Broadcasters adopted a resolution opposing the use of this spectrum for radio broadcast. Personally, I think that U.S. broadcasters are making another mistake with this decision. To the contrary, I hope that they will not give up entirely on this option.

Could Canada adopt an all-digital broadcasting system using the 12 MHz of spectrum on channels 5 and 6? This question should be explored with the industry.

A call to action
There are over 20 million Canadian wireless subscribers – and that number continues to climb every year. Consumers will be able to access more broadcasting content on their cellphones as these devices become more sophisticated. In fact, the Long Term Evolution and WiMax standards could significantly change the industry if successfully developed and deployed.

There is a real danger here for broadcasters: With Internet broadband access, will there be a business case or consumer demand for mobile devices equipped with AM/FM tuners? If the answer is no, then broadcasters risk losing dedicated access to a large proportion of their listeners.

In an environment where consumer choices are increasing, radio has to remain relevant in the eyes of its audience. Yet analog technologies effectively limit the ability of broadcasters to grow and expand.

Broadcasters need to begin thinking with more urgency about how they can make the leap to digital radio – not only in Canada, but throughout North America. The future viability of the radio industry may well depend on a clearly defined strategy. It is my hope that, further to our discussions today, NABA will play a leading role in initiating this process.

Thank you.

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This document is available in alternative format upon request.

Date Modified: 2009-06-19

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