It’s Radio, Jim, But Not as We Know It

Who would dare predict the future in print? Nostradamus for one. And me. I predict that analog FM and AM radio will appear a pretty thin offering in 10 years’ time when compared to other media and delivery platforms emerging now and yet to come.
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IBOC, DRM, Satellite, Eureka – The Chief Executive of Digital One Calls for a Combination of Technologies to Satisfy Market Needs

Who would dare predict the future in print? Nostradamus for one. And me. I predict that analog FM and AM radio will appear a pretty thin offering in 10 years’ time when compared to other media and delivery platforms emerging now and yet to come.

Radio has served us well since 1922. It has survived the onslaught of talking movies, television, LPs, cassettes, CDs, MiniDiscs, cable, satellite, DVD and MP3. People like radio, and listen for more than 20 hours a week. Radio as a device is the most ubiquitous of consumer products – every household has around six sets. Eighty million new radios sell each year in the United States, and a similar number across Europe.

It is a century since Marconi received Morse code across the Atlantic, and 80 years since public broadcasting began. Radio is undoubtedly the mass communications medium of the 20th century – influential, cultural, politically powerful, entertaining and informative. In fact, radio is so popular you’d think it would figure centrally in every debate about media. It doesn’t.

Ignoring radio

In December 1997, the EU Green Paper on Convergence almost completely ignored radio, concentrating instead on television and the internet. In the UK, the current White Paper on communications regulation and media ownership devotes only one percent of its pages to the subject of radio.

In France last yea, a similar thing happened, and elsewhere radio is consistently undervalued, both as a medium in its own right and as a consumer item.

Little wonder, then, that whilst politicians are busy helping industry to shape the future of television, satellite, mobile phones and the Internet, radio broadcasters – who face exactly the same issues in going digital – are left to struggle alone. The results are unclear business models, slow uptake and a consequent wavering of commitment.

Dateline spring 1991, the National Association of Broadcasters convention, Atlanta. Eureka 147 is unveiled to the world and everyone applauds. NAB President Eddie Fritts declares that Europe is five years ahead of America and NAB recommends the United States accepts the Eureka system.

Three months later and NAB rescinds this, claiming equal transmission areas for all stations on a multiplex would damage individual marketing abilities. Cynics have a different interpretation: U.S. broadcasters don’t like the thought of more radio channels or competition, and U.S. consumer equipment manufacturers would stand to gain nothing from European-owned royalties and IP.

Different approaches

Largely as a result of misinformation, the gulf between the U.S. view of digital radio and the Eureka view has grown over time.

Europe and the United States take very different approaches to radio as an industry. Europe is a mix of state-run public broadcasters and private commercial radio in various degrees of maturity. Competition is still on the increase and the concept of more radio channels is seen as an opportunity, not a threat.

Contrast this to the United States, where station owners rejected Eureka’s opportunity largely to protect the status quo.

In 1994, the world shared out new spectrum for terrestrial digital radio, which could mean worldwide conformity and compatibility. Most countries signed up to this new spectrum, including all of Europe, Asia and Canada. But U.S. broadcasters favor re-using existing FM spectrum for a system – unproven at the time – called IBOC.

Throughout the 1990s, NAB conferences on the respective merits of digital came close to degenerating into playground name-calling: "My system’s better than your system." The only practical outcome of these squabbles was to unnerve Japanese receiver manufacturers, who prefer a single world market and a common standard.

Consequently, although more than 20 manufacturers have made and sold digital radios to the Eureka format, the critical mass necessary for volume manufacturing, which in turn leads to rapid falls in silicon cost, has not yet happened.

Fast-forward to the year 2000: Eureka 147 DAB is rolled out in over 30 countries with more than 400 digital radio services on-air and 300 million people within range of multiplex transmission. Of those countries committed to a digital radio system, only the USA and Japan have not adopted Eureka.

After eight years searching for a viable US alternative, the main contenders developing IBOC – USA Digital Radio and Lucent Digital Radio – merge their efforts to form iBiquity Digital, a company owned by broadcasters as a vehicle to exploit the IBOC technology IP.

IBOC’s marginal benefits

There is no doubt that IBOC has clear advantages for a U.S. broadcaster who, by adding a digital exciter to an existing FM transmitter, can simulcast a digital version of his service. Providing the interference caused to and by other FM services works out, IBOC is likely to prove the cheapest way to go digital.

Where the argument gets muddied is in the assumption that what works in the United States will work everywhere else. FM frequencies and transmitter powers are planned to very different criteria on either side of the Atlantic and this, amongst other things, may prevent IBOC getting a look in.

People are amazed that whilst a New York City FM station may boast 50,000 or 100,000 watts, the equivalent FM in London is limited to 4,000 watts. And whereas the USA has 9,000 FM transmitters, across Europe, more densely packed and smaller geographically, there are 23,000 FM transmitters.

IBOC as currently engineered would probably make the existing European FM spectrum plan unworkable.

Whilst Eureka has been building its networks and, as some would have it, waiting for manufacturers to honor their supply promises, and whilst the United States is still waiting for IBOC to happen Big Time, new rival digital radio platforms, which may yet prove how fragile the radio ecosystem really is, have already arrived.

Perhaps IBOC and Eureka 147 should take stock for a moment and realise that they both have more in common than either would like to admit.

For a start, both need to persuade manufacturers to invest significantly in research and development, and to manufacture new radio receivers.

To achieve mass market penetration there is only one issue: the retail price of a digital radio. Consumers have a perception that radio is already almost a zero cost addition, or that a stand-alone radio is low-ticket, sub $50 item. So why would anyone purchase an expensive digital radio?

The IBOC content proposition means digital radio offers exactly the same as analog and the only marketable difference is the quality upgrade of AM stations, plus data. It is doubtful that consumers will value this at more than a few dollars, insufficient to meet the delta cost of adding IBOC technology to any audio device.

The challenge for the United States is to make IBOC radios for essentially the same price as existing FM/AM devices.

The role of DRM

This same challenge faces Digital Radio Mondiale too, the digital shortwave and AM replacement system.

Whilst DRM’s audio quality doesn’t bear too close scrutiny, and finding simulcast spectrum for a dual-mode AM transition strategy will be a task in itself, there is possibly a role for DRM in long-distance and domestic rural broadcasting, provided the receiver cost is not prohibitive. But DRM is unlikely to be successful as the sole digital replacement technology.

Unlike IBOC and DRM, which essentially offer listeners "the same only different," the Eureka proposition offers perhaps twice as many radio channels as current analog availability, plus multimedia data applications and flexible digital audio quality. This is ultimately more compelling and therefore may be able to command a premium on the final consumer price, but still there is a big gap between current DAB component costs and the relatively small retail premium attainable.

The subsidy debate

With both IBOC and Eureka, the question of subsidy of receivers to kick-start the market arises.

Any broadcaster contemplating subsidy, other than for a marketing stunt, would be mad. Subsidy is like a drug – once started, it’s hard to come off, and it serves little purpose other than to allow the retailer/manufacturer to maintain margins which the broadcaster pays for through the nose.

The plain fact is that subsidy is only applicable where there is a subscription income stream from the end user to pay for it. One of radio’s great virtues is that it is, for the main part, free to air.

Yet without intervention, the receiver market will be very slow for both Eureka and IBOC. Meanwhile, alternative platforms are emerging, some overhyped and ultimately inconsequential, others which should be taken more seriously.

For $10 a month, U.S. consumers can subscribe to either XM Satellite Radio or Sirius Satellite Radio, which promise to deliver 100 channels apiece. The subscription income immediately allows in-car receivers to be subsidized and, with additional substantial investment from car manufacturers, it is likely that satellite radio receivers will emerge more quickly than other digital radio devices in the United States.

Whether people will quickly get bored with DJ-free music services is debatable, and my money is on a gradual return to real radio with announcers and DJs doing what’s been working well since the 1920s.

Limited capacity

WorldSpace receivers are appearing in discount electronic retailers in London and in abundance in duty free shops. Simultaneously, we wonder if the WorldSpace satellite is having trouble with its on-board guidance controls? Suddenly it appears that its beams are receivable in Europe – not bad for a service aimed at continental Africa!

Proponents of satellite radio in Europe seem to have glossed over the obvious shortcoming that whatever capacity exists has to be shared between 20 nations, each with its own language and culture. Unlike U.S. satellite radio, the offering relevant to one country will be severely limited.

Critics of satellite radio point to the need for terrestrial repeaters to provide adequate city coverage and any hope of in-building penetration, and this requires yet more spectrum. Some would go as far as to label it a back door means of achieving conventional terrestrial radio with the bonus of a satellite repeater.

Internet or UMTS?

The Internet is losing its gloss all round, including as a viable alternative means of delivering radio. Broadcasters who rushed to set up audio streams and stake a claim to cyberspace now realize that it is limited and expensive.

Broadband connection is essential, and even then the share of radio listening by Internet is minimal compared to traditional radio reception. The commercial value of a Los Angeles listener to a radio station in Paris, France, is nil. I.T. managers hate it when corporate networks clog up with multiple radio feeds, and ADSL backbones congest when too many users access high bandwidth content.

One of the world’s largest broadcasters reckons its maximum capacity of 30,000 simultaneous Internet streams costs up to $30,000 per hour (including server, throughput and licensing). Compare that to the $100 per hour of a national digital transmitter network reaching unlimited millions, and it isn’t hard to see that the efficiency of the broadcast model is way ahead of Internet streaming.

The same limitations apply to mobile phones which, for all the promise and hype of UMTS, cannot provide even a fraction of a percent of the capacity terrestrial radio broadcasters need. Moreover, listening to radio on a mobile phone connection is never going to be free to air.

In any analysis, terrestrial radio remains the most powerful and compelling consumer proposition. Digital radio adds considerable value to the proposition, yet keeps all the attributes of existing radio.

IBOC will be made to work and may be successful if the consumer appreciates the marginal benefits. Satellite is dependent on geography and subscription. DRM may find favor in limited markets, starting perhaps with international broadcasters. The internet and mobile phones are extension platforms, not replacements.

Meanwhile, Eureka has already gained considerable momentum and commitment which will ensure its continuance.

Combine technologies

So is there a clear way forward without confusion? One realistic option is to encourage a combination of technologies to satisfy market needs.

In countries like Australia, DRM would be ideal for the outback and Eureka for its metropolitan cities. Such a strategy could work with other system hybrids too, and with a big change in attitudes to system rivalry, a successful roadmap can be built which sees receiver manufacturers making worldwide devices with standardized optional modules inside for IBOC, Eureka, DRM.

This could ensure the success of all the digital radio systems rather than the damaging and expensive likelihood of market failure for one or more of them. Ultimately the consumer isn’t driven by the best technology, he just wants a radio that works and we should be capable of delivering that to him.

RW welcomes other points of view.

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