Thursday, November 03, 2011

Why FM is More Expensive than Digital

The Kolsås transmitting tower outside Oslo has transmitters for DMB/DAB. 

I often hear that FM is cheaper than digital radio or mobile TV via DMB/DAB/DAB+. This is often argued, especially when it comes to small local radios. Let us create a scenario.

An FM vs DAB coverage comparison on a larger scale

This little town has 10,000 inhabitants, all living within an area of 20 square kilometers. There is a small hill on one side where the local radio station, TinyFM, has a transmitter and an antenna which has beamed out it's programs for years. TinyFM is however not very financially stable. The only revenues come from some advertising and the weekly radio bingo, where the listeners buy bingo coupons and play for money prizes every Thursday eveneing. It is therefore important for them to keep all costs down.

Will digital radio be more expensive than analogue for TinyFM? It will not, although this is a common misconception. 

FM costs
TinyFM paid 3500 USD for it's complete FM transission gear. They have one radio station on air and need the following:

1 transmitter / amplifier
1 VHF mask filter
1 VHF antenna
Small bits and pieces

What would it cost to do the same via DAB/DAB+?

DMB/DAB/DAB+ costs
We would need the same kind of stuff, although not identical gear:

1 transmitter / amplifier
1 VHF mask filter
1 VHF antenna
Small bits and pieces
And some more:
1 server
1 front-end

European Broadcasting Union showed such a DMB/DAB/DAB+ setup at a conference in Belfast in October, 2010. The costs? 4 800 USD. That is 37% more expensive than FM.

But there is a major difference:

For FM one transmitter/amplifier is needed per radio station.
For DMB/DAB/DAB+, you can have over 20 radio stations, 6 mobile TV channels or a mixture of mobile TV schannels and radio stations.

 The moment you decide to transmit two radio stations, the costs go down to 2 400 USD per station. With 15 radio stations the cost will be 320 USD per station. That is 9% of the cost of one FM station (or a 90% discount). The prices here are for the equipment, not for running costs. Electricity costs are similar on the transmission side as long as there's only one radio station. The moment you introduce more stations (as you can do digitally), electricity used per station will decline dramatically.

TinyFM will therefore encounter a little higher costs for transmission gear, although not substantially. The moment they start an extra station which could boost listenership and revenues, they should benefit. TinyFM may however not have the staffing nor the potential advertising revenues that may justify another station. In that case, they may want to stay with FM, something that governments in both Norway and the UK have opened up for. They will not put pressure on local radio stations to move away from FM, but they may see the benefits and decide to do this themselves.

Friends on technology, foes on content
This is something that broadcasters in several countries have discovered, although on a much larger scale than in Tinyville. In i.e. Norway, Germany, Australia and the Netherlands competing broadcasters have decided to join forces. They cooperate on technology and compete on content. That is obviously a win win situation financially due to lower actual costs. By cooperating on the same mux, all costs can be devided between several companies. Instead of having to pay everything yourself (equipment, installation costs, running costs, internet / radio lines, etc.) this can now be divided by 2, 3, 4 or split between even more companies. Big savings, in other words.
But there are also other benefits:
  • It is greener as one network will serve everyone.
  • Hosting can be done more efficiently and secure.
  • Marketing is more efficient. Competitors can help each other in getting people to get DMB/DAB/DAB+ receivers with the benefits and possibilities they give.
  • A clearer message is carried across. One organization can easier coordinate towards the government, network operators, bureaucracy, etc. This makes communication and formal processes easier and faster.