Friday, August 17, 2012

Why Remaining on FM is More Expensive
Than Building DAB+ From Scratch

The Tryvann Tower, Oslo. 

I travel a fair amount and often speak to people about distribution related issues around the world. In most countries the attitude is that it will be very expensive to introduce digital radio via DAB+.

- Because we already have an FM network, and building a new digital network is much more expensive, they say.

They are wrong. Why? Because they forget to take into account that it costs a lot of money to run an FM network. You can build it, but it will not run for free. Far from it. An FM network costs more to run than a DAB+ network, a lot more if you want a selection of channels. FM needs one transmitter for every radio station while one DAB+ transmitter can broadcast up to 20 radio stations.

A real life example 
I will exemplify, using figures from Norway, where FM will be switched off in January 2017. Digital radio via DAB/DAB+ is already in place covering more than 80% of the population. By the end of 2014, DAB+ will cover more than 99.5% of the population with almost 20 radio stations  (only one radio station (NRK P1) currently covers the same amount of people).

Table: See the comparisons year by year.
FM now
Let us say that to transmit NRKs radio stations on FM costs 1,000 USD a year (the real figure is many thousand times higher). This gives one station (P1) to 99.5% of the people while P2 reaches 99% and P3 reaches 95%. Two additional radio stations (NRK mP3 and NRK Always News) reach 30% of the 
population and only those in the biggest cities.    

FM upgrades needed if not phased out
Of course, FM would need a total makeover if it were to be continued past 2016, and the price would then increase to 1,400 USD per year from 2015. This is a cost that is almost always forgotten by those not in favour of digitalization.

DAB/DAB+ now
To transmit up to 20 radio stations (NRK still has not decided exactly how many radio stations they will offer) to 99.5% of the people will then cost 1,030 USD, only 3% more than FM now but with up to 300% more stations and all those stations to everyone

Do note that this is 36% cheaper than if staying on FM! And I repeat, with DAB everyone gets the same stations, and many more so than with FM. Much more democratic and much more friendly to those living in the countryside.  

Double distribution
Of course you will also have to take into account double distribution, of both FM and DAB/DAB+. The FM costs will be the same as mentioned above, although somewhat reduced the last two years as it is being phased out, saving 1400 USD as opposed to continuing with FM only. NRK currently has 15 radio stations that reaches over 80% of the population via DAB (coverage increases monthly and will reach 90% by the end of 2013 and 99.5% by the end of 2014).

To transmit DAB in addition to FM costs 250 USD in 2012, 600 USD in 2013 and 870 USD in 2014 (before reaching 1,030 USD per year from 2015). This additional cost of DAB for the five years of 2012, 2013, 204, 2015 and 2016 adds up to 3,780 USD. NRK will however save 1,400 USD in the same period on FM as it is being phased out. The real extra cost of double distribution for those five years is therefore 2,380 USD.

As DAB (1030 USD per year) is cheaper than an upgraded FM (1400 USD per year), NRK will start paying less per year already in 2017, while the accumulated costs will be lower five and a half years later, in June 2022. With a much more modern network with many more stations to everyone. And modern radio that can handle parallel and additional services too. Both NRK and the listeners win.   

Governmental reassurance is needed
Of course, NRK could not gamble on increasing DAB coverage to 99.5% unless the Norwegian government had actually decided to switch off FM in January 2017 (they decided to do so in May 2011). That decision made it possible for NRK to plan how to manage its distribution costs in order to give a much better offering to its audiences. Governments and broadcasters in other countries may find a useful lesson in the Norwegian example.

Work together and save more
What if you do not need up to 20 radio stations? Well, work with someone and cut your costs in half or less! Again, with FM, you will need one transmitter for each station, with DAB+ you can have 20 stations per transmitter. If you need 10 stations, work with someone else on the technical distribution and save 50%. If you need fewer stations than that you can save even more. Work together on distribution and technical issues, compete on content. Your costs will go down, your margins will go up.
For this example's sake, a price of current FM distribution was set to 1,000 USD per year. All other figures can be seen in relation to this. They are based on NRK figures.