BBC 'threat' to commercial radio

The BBC's current charter will expire in 2006

The BBC's licence fee settlement could force smaller radio stations out of business, according to a report commissioned by the commercial sector.

The Commercial Radio Companies Association report suggests millions could be wasted by the BBC when there is no need for extra public stations.

The government has agreed a rise in the licence fee to £131.50 from 1 April.

The commercial sector is asking for a cap on the amount of money the BBC can spend radio services.

It also expresses concern in the report about the BBC's introduction of ultra-local TV services and the proposed launch of five local radio stations. It believes the BBC's digital radio channels such as 1Xtra and Radio 7 are too similar to commercial stations already available.

A spokeswoman for the BBC said the corporation "absolutely refutes the idea that it imitates formats and that commercial radio alone has been at the forefront of innovation".

The report is published ahead of the publication of the government White Paper on the renewal of the corporation's Royal Charter for another 10 years.

Commercial Radio Companies Association (CRCA) chairman David Elstein said the sector's £1.1bn contribution to the UK economy was under threat from the settlement.

"Uncapped BBC spending on radio will ultimately cost not just the commercial radio industry but also, through a reduction in choice of valuable public services, listeners and communities in which they live," he said.

"Moreover, the BBC's plans for radio could lead to the loss of thousands of jobs and stymie the training and development of the next Chris Moyles or Huw Edwards."

The report also suggests the licence fee could rise as high as £200 by then end of the next Charter period in 2016.

The BBC spokeswoman said: "Many of the arguments put forward in this paper have been debated at length during the Charter review process not least during Lord Burns' extensive review of BBC analogue radio and Tim Gardam's review of our digital services.

"Listeners tune in to the BBC's services because they provide innovative and distinctive content and provide the widest possible audience with services that the market alone would not provide."