Radio - someone still loves you

Given the fiasco over local loop unbundling and the 3G licence debacle, one could be forgiven for thinking electronic content and commerce has burst out of the starting blocks only to trip up. But there is an unlikely contender waiting in the wings, as Lisa Burroughes finds out...

Radio is often viewed as TV's poor relation. When it comes to the entertainment people will pay for, visuals and graphics invariably win the day. What's more, the prospect of digital TV has many believing the days of radio are doomed.

But radio companies have been quietly planning their comeback, and it's called digital audio broadcasting (DAB). Over the last few months, digital radio stations have been launching on a monthly basis in the UK, and many in the business are now calling for the media secretary to set a deadline for switching off analogue radio.

So far there are two national multiplexes - core switching networks a public one owned by the BBC and a commercial one owned by a consortium called Digital One. The Radio Authority has also awarded 24 local/regional digital licences with more to follow.

Apart from higher quality and greater flexibility, digital radio offers one added vital element - data services. The spectrum can be split so that 20 per cent of the overall bandwidth can transmit data, which potentially amounts to a 2Mbps connection.

This is where the commercial opportunities lie. As with digital TV, content could be sold on demand. Digizone, a pure digital channel owned by UBC company Unique Interactive, is an example of what could be possible over digital radio. It offers headlines and games and can provide a link between a radio station and a fulfilment site enabling a user to download an MP3 copy of a tune, or order related merchandise.

Another benefit to the consumer is that this is done on a free-to-air basis - in other words, there are no hidden per-minute charges of the type users have become accustomed to on the internet.

Will it work?

Unfortunately, as with technologies such as ADSL and 3G, the problem of access rears its head.

The key driver behind companies' recent confidence has been the Psion Wavefinder, launched in November last year. Until then digital radio could only be received over the internet and through special digital tuners. But the Psion Wavefinder, which connects to a user's PC, has opened a new door for one-to-many data services over radio spectrum.

Despite its price tag of £199.99, the company claims to have already sold around 15,000 receivers into the UK market. And radio companies claim in total there are around 30,000 to 40,000 digital radio listeners.

But for DAB to realise its commercial potential it needs to have mass market penetration. And that means having very cheap, easy-to-use mobile devices.

silicon.com revealed earlier this month that Sony and other mobile handset manufacturers are racing to get mobile DAB devices on the market before the end of this year at a price that will allow mass market consumption - generally considered to be under £100.

Matthew Pitt, a media consultant and former managing partner of Leap Communications, believes that having DAB chips in mobile phones is a compelling argument for consumers, manufacturers and advertisers.

He carried out focus group research for the Radio Advertising Bureau last year into the market potential. "It would give people a reason to upgrade their phones and would mean they are listening to the radio on the move much more," he said. Pitt argues that each user would listen to an extra five hours of radio a week, making it a very attractive option for advertisers.

The barrier, however, is the revenue potential for the mobile handset manufacturers who prefer the idea of a walled garden service they can control, providing downloadable IP content.

But Pitt doesn't believe this model can work. "The majority of people are inherently lazy and want music to be pushed to them rather than going out to find it. In the focus group, eight out of ten said they would like to have a Ministry of Sound or Kiss-branded mobile phone that receives those radio stations rather than an MP3 phone."

However, if handset manufactures believe radio could undercut the market demand for 3G mobile phones and services in which they already have a huge investment, it's possible they will stall roll outs.

Matthew Honey, managing director for Unique Interactive, argues that mobile DAB would offer users a real alternative to over-hyped WAP. "Using DAB devices offers substantially higher data transfer speeds than what people are used to with WAP," he said.

But Geoff Kell, commercial director at Psion, believes the two would be complementary. "Part of it is getting people used to the idea of using mobile phones for data," he said. "But it is only a one-to-many medium and so when combined with 2.5 and 3G for the return path, the opportunities are boundless."

The biggest barrier to DAB is that it has only taken off in the UK so far. European markets are trailing and the UK alone doesn't offer a big enough revenue opportunity for mobile handset manufacturers.

For now, the Wavefinder remains the consumer's only real option but it still needs some major cosmetic changes to be a hit. It's clumsy with a poorly designed interface, and users could be forgiven for thinking they are paying for something they aren't actually getting. A Microsoft Internet Explorer browser is used to display data channels - though they aren't transmitted using IP. And content can take up to 15 minutes to download.

Psion's Kell admits the model does need modifications. "We wanted to provide the user with a familiar environment and get people used to DAB, but we are taking on board users' feedback," he added. "Wavefinder is just the start of DAB products from Psion."

The overall market for digital radio does look promising - prices for digital tuners are falling and even Ford recently gave its support by committing to have all cars fitted with digital tuners by 2004.

But if the market ultimately depends on mobile phone manufacturers, it could be some time coming. Arguably, a company such as Sony - with a history of recognising and packaging what consumers want - must show that the market can be fertile.