Getting that FM Chip in Cell Phones

Jeff SmulyanThe great debate about the wisdom of installing FM chips in cell phones in North America continues. It was one of the hot topics disccused from the podium and the floor of the NAB in Las Vegas ealier this month. Now one of the industry heavywrights, Jeffrey Smulyan from Emmis has taken Mark Ramsay to task over his comments he has made in his blog and in particular how the NAB’s ad campaign is all wrong. You can see the website the NAB have created here.

I have written about the importance of getting FM chips into cell phones on a number of occasion including this article which can be found here and here.  Like Smulyan I feel this is important and as an industry we need to pressure the cell phone manufactures to incorporate and turn on these chips as a public safety measure.

Smuylan writes, “When Mark asks, ‘Does NAB know the magic of streaming already makes radio available to those same devices and does so with features enabled by technology that no FM chip can match?’ I feel compelled to answer for the NAB, and the rest of the radio industry, so Mark, here goes:

1.      Yes, I know all about streaming. Like thousands of other broadcasters, I’ve been doing it for nearly two decades. I don’t know if anyone else has made money at it, but we haven’t, and I haven’t heard of anyone else who has. At Emmis, we’ve invested millions of dollars in our interactive ventures because we want to be where our audiences are, but we are also realistic about economics.

2.      Streaming is a one-to-one, interactive medium, which does allow us to do lots of great things, but there is a tremendous cost to that. The best example I can give is to compare streaming with over-the-air transmission. In our Los Angeles station, KPWR, we reach around 2.8 million people a week. Our annual electric costs from our transmitter are $39,500, a cost that does not rise if we serve one person in Southern California, or all 16 million within the reach of our signal. If we were to take down our transmitter and reach every person we currently reach through streaming, our cost to disseminate the signal would be nearly $1 million per year! Is there enough value in making a broadly based entertainment medium a one-to-one medium? That’s the current debate in this country, and I would submit that  consumers haven’t found that value yet.

3.      Consumers haven’t discovered the value yet, and they really haven’t been paying the true cost of streaming, but that is about to change dramatically. Almost every mobile data plan has unlimited usage; most plans cost $30 per month.  However, with AT&T‘s data usage growing by over 5,000 percent in just three years, the company (and every other carrier), admit that this growth is unsustainable. Carriers are going to metering, and our question is, how will people feel about streaming audio and video when their bills grow from $30 to $60 per month, or more? Remember, the average smart phone uses 15 times the data of the standard cell phone, and the average iPad uses 30 times the data of a smart phone. Is there any wonder that the carriers are demanding spectrum from our TV brethren?

4.      When Mark talks about ‘phone makers understand(ing) what drives the consumption of their devices while the NAB does not,’ he demonstrates a frightening lack of comprehension on this subject. In the beginning of my work on this project, I talked to one of the largest manufacturers of phones in the world. They have sold many millions of
phones. Their comment was succinct. ;When people know they can have radios in their phones, they buy them. It is a very cheap addition, and people love the feature.’ That’s why nearly one billion cell phones all over the world have been sold with radios in them!

5.      Why haven’t we seen this in the U.S.? Because unlike most of the rest of the world, the major carriers control phone sales in our country, and they have deliberately kept radio chips out for years. As I was told early on in this project, ‘We’re not going to allow free radio when we think we can sell music downloads!’ Of course, a few years later, the carriers found out that music downloads weren’t selling, and they’ve largely abandoned that effort. Today, radio chips are becoming ubiquitous all over the world as evidenced by a recent TNS Global Mobile Life study showing that nearly 70 percent of people outside of the U.S. have an FM/AM radio feature on their phone, and nearly 43 percent use them. In fact, millions are shipped in radios in this country, but they are deactivated. iPhones are just one of the models where an FM radio exists but isn’t allowed to be used.

6.      The NAB did a study that pointed out that even in the models where FM chips were activated, the carriers never mentioned the feature in their literature, and cell phone salespeople were never told about it.

7.      All media advertising will soon have an interactive factor similar to the metrics seen in Internet advertising now. Greater return path metrics are good news for Radio. We are the most promotional, closest mass medium to the purchase and this interactivity will prove out to be a huge proof point for Radio’s effectiveness. Premium costs-per- thousands from enriched interactive advertising are emerging in video through the set top box and in print through QR codes. Radio’s opportunity, as well as the carriers, lies within a broad reach mobile platform the cell phone subscriber base provides. Streaming consumption is a good complement to over the air listening, not a replacement. The interactivity coming to all media will prove this without a doubt. We have been asked, shouldn’t the marketplace decide this? Our answer is, of course it should. But there has never been a free market for radios in cell phones in the U.S. When people have had the chance to vote, all over the world, they pay a small additional fee and get free, over-the-air radio in their phones.

Since this issue has been blocked in the United States, it is incumbent on all broadcasters, and especially with the leadership of the NAB, to explain and inform the public about what’s really going on here.  How can we expect the public to understand this when industry experts can’t figure it out?

And there’s one other issue here as well..public safety. While Congress required the cell phone industry to alert the public during emergencies through the WARN act in 2006, the carriers have still not implemented a plan. Their ‘solution’ is building a texting system to send the public several lines of messages during an emergency.

We think that makes no sense for the following reasons:

1.      Nearly 40 percent of the American public has never sent or received a text.

2.      In an emergency, like in Hurricane Katrina, the Tsunami in Japan or the recent tornadoes in the Carolinas, the power grid goes down, rendering the cell system useless. Since most broadcasters have emergency generators, we have always provided the only lifeline in such instances.

3.      Even when the cell system stays up, it gets jammed when usage spikes, which is exactly what happens in an emergency.

4.      The NAB has pointed out that the only way to keep the public informed and safe during an emergency is having radios in their cell phones at a cost of less than 30 cents per phone!

For all of these reasons, we will keep fighting vigorously for our industry, for our audiences and for keeping the public safe, while making sure that those in our industry who don’t understand this issue will keep hearing from us.” 

“Mandate or not, we’ll get this done.” said Smulyan at an NAB session about the radio industry push to get FM chips in cellphones. Radio wants to remain relevant and be on the devices consumers are using; hence the industry push to get wireless carriers and cellphone manufacturers to include FM chips in cellphones here, as they do in many other countries. Smulyan said “Putting FM chips in cellphones is a good business decision for both the broadcast and wireless industries. Radio can be a free service on cellphones and offer carriers a relief to their bandwidth squeeze.”