April 2005

Can HD radio hack it in the US?

Can HD radio hack it in the US?

Following up on our March comment and in view of some of the activities at NAB 2005 this month - see our report on US National Public Radio's planned launch of new multicasting services - we look this month at the technology that is being pushed in the US as the answer to competition from satellite and to a certain extent that from other media - digital radio.

Last month we concerned ourselves mainly with the general problems radio faces as other technologies compete for time: this month our emphasis is on what HD - the iBiquity in-band-on channel system adopted in the US - can or will do for terrestrial radio there.

The UK experience.

Before considering where the US is and how it should proceed in introducing HD, we felt it would be instructive to look at the UK's experience.
Here digital radio is generally considered a success story in the making, although so far it has been produced costs rather than profit for commercial radio companies.

The first question therefore is to ask why the commercial radio companies have put in the resources they have in the UK?

The answer is a combination of carrot and hoped-for-carrot: In the UK, whether by well-thought out design or fortunate congruence of factors, the regulatory regime was in a position to offer a carrot, because it could also wield a stick, and did so.

The stick was there because commercial licences were not automatically renewed at the end of a licence period but were re-advertised: True the incumbent usually had an advantage and sometimes there were no competing applications, but there was the risk that a station could be out of business even though the system was one of a "beauty contest" that decided on the basis of the plans put forward rather than by competitive auction.

That being so, the decision to grant automatic renewal of an analogue licence when the station involved was providing a service on the local commercial multiplex was a real incentive to provide such a service.

In addition - even though the BBC was allowed frequencies to broadcast its existing networks plus extra channels - and had a channel for its local station allocated on local commercial multiplexes - the digital channels evened out the playing field for commercial radio which was short on frequencies compared to the BBC.

It would therefore have the opportunity to try and increase its share of the audience and also through a national digital multiplex compete more evenly with BBC networks and through local multiplexes offer significantly more choice as well as also having significantly more outlets to sell advertising, which was limited in the UK by the regulator rather than by what the listeners might have to stand for.

The effect of the above was to ensure that long before listeners had bought any significant numbers of receivers, there were new services available for those who did then buy them.

Despite this combination of technical quality advantages and extra services, initial take-up was still very slow whilst receiver prices remained high - people were understandably reluctant to pay ten or more times the price for a digital receiver than for an analogue one.

The crucial psychological change in our view that broke the logjam was to promote sets in late 2003 below the GBP 100 barrier - they sold out despite the fact that reasonable quality portable receivers were available for a fifth of this.

Once this had been done, more manufacturers began to enter the digital receiver marketplace, prices went down more, those - and to the surprise of most people more sets were bought by older listeners than by the young, usually seen as early adopters of new technology - who bought receivers reacted positively to the service, and a self-sustaining circle began that boosted sales of digital receivers even more dramatically at Christmas time last year.

In addition to all the above, UK digital also had the advantage of gaining slots on satellite TV channels and on the TV terrestrial digital platform Freeview for which no subscription was required, expanding the audience through those who listened through their TV sets.

The situation in the US.

So in the light of the above, how does US the situation for US commercial terrestrial radio compare with that in the UK?


Firstly it does not have the same incentives to push digital in terms of licence renewal - an automatic process.

Secondly it is not in the same position in terms of frequency scarcity in competing with a public broadcaster that applies in the UK.

Thirdly, although more stations are belatedly going for digital transmissions, the system is different in that there is no extra frequency as has been allocated for the UK DAB system but rather, valuable though it may be, just the opportunity to squeeze more out of existing frequencies.

Fourthly so far there is not a great body of new choices available on digital only, just simulcasts of existing analogue station output.

Fifthly receiver prices, even though they have fallen, are still much higher than those of analogue receivers.

Sixthly in the US there is already a digital audio competitor in satellite radio, which offers considerable extra choice and has already gone much further along the road of mass-producing receivers with consequent lower prices.


So what are the pros? What will a would-be listener get from purchasing a digital receiver? They include:

Better technical quality.

Extra text information that can be sent via the digital signal.

More commercial channels that will almost certainly be of the same nature as those that already exist but probably narrower to attract even more closely defined demographics that advertisers want to attract.

Possibly fewer adverts per hour on those channels than on existing channels.

More channels allowing additional services from both commercial and public radio.

Is it worth buying a digital receiver?

The response to the above has to be a highly sceptical one for the moment since receiver prices are almost certain to fall and as yet only a comparatively small number of stations are broadcasting HD. But there are hopeful signs.

The benefit from a better technical quality depends very much on the technical level of the existing analogue signal - in much of the UK a good quality receiver produces excellent quality stereo even for programming with a very large dynamic range thus meaning that for home use the benefit is not that great whereas in an automobile road noise overwhelms any quality difference.

Yes we do appreciate the extra quality from our digital receiver but only when listening in a quiet room: Background noise from other equipment such as in a kitchen or where there is a computer fan in the background certainly affects the quality of listening more. This argument, therefore, only applies in areas where terrain makes reception difficult or where a station doesn't keep its output up to scratch.

Extra text information? Not enough to justify spending a lot more on a new receiver.

More channels, commercial or public? Fewer adverts per hour? Certainly a strong pro in any area where these are being delivered and they are providing programming you want. Maybe not enough, however, if you have already spent on getting satellite and thus are already paying for digital and a wider choice of signals.


From the above, we conclude that for a period the US could well need to clear a logjam that is even worse than existed in the UK a couple of years ago. It was cleared in the UK through the combination of extra channels of programming, better quality, and fairly reasonably priced receivers.

We think that the US therefore needs to do a lot more to produce the programming and reduce receiver prices if people are to be persuaded to go digital. We also think radio is on a long-term loser unless it bites the bullet on this. In this regard public radio is certainly taking some welcome initiative.

We can certainly see prices coming down - and a big station owner could do a lot more, even if it is by offering branded receivers at a lower price, a move some UK radio companies have adopted, to drive this process. They usually have the sponsor's station at the top of preset programmes and branding on the receiver itself but they work.

On programming however, we retain our doubts since producing a quality product will cost money and we wonder how far there will be extra returns to pay for it.

If the programming isn't both additional in content and of high quality then we'd probably decide to divert the money to satellite subscription or other audio sources.

The decision, therefore, depends very much on the HD services available in a particular area but one of the things that we could see HD in combination with multicasting do is to provide for the US the equivalent of the national network services that are available in the UK.

US commercial radio could thus potentially make a similar move to that being developed by NPR and provide a number of services especially intended for national multicasting; thus if it's prepared to put HD into almost every station it can undercut satellite radio's current exclusive ability to provide the same service for someone on the move across the US.

The problem with this is where it leaves the "localism" on which US radio built: Elsewhere licence conditions mean that if local services were gutted to pay for such extra services, station might well lose their licences but in the US the growth of voice-tracking as technology made it possible and cheaper than keeping on local staff has already shown that no such penalty is even on the horizon.

Extra national services plus existing local services would be positive for the US but in the place of them we would see national services as a negative but the main counterbalance to a tendency to drop localism seems to be local advertising and that has been a weak one so far.

In the end HD radio will come to the US and it can produce benefits but when it comes to spending cash to buy receivers, the balance still seems currently in favour of sticking to cheaper analogue receivers and spending on satellite.

As HD services become available in a locality and receiver prices drop this balance moves towards HD: Whether or not it ever comes down firmly for HD will be a matter of personal programming preferences and how much an individual travels out of a home area but once you can get a reasonable HD receiver for around USD 20 -30 it won't matter anyway: Look for US radio to depend on Chinese manufacturing and Wal-Mart's buying clout?

What you think? Please E-mail your comments.

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