It seems that local radio in Ireland is grabbing everyone's attention these days. Although the first independent stations only started up in 1989, the industry has undergone something of a growth spurt in the last few years, with soaring advertising revenues - thanks to the Celtic Tiger - and an increasing listenership in Dublin that is eroding RTE radio's once-dominant audience share.

The new Dublin station catering for the over-35s, Lite FM, has surprised everyone (including the organisation itself) by capturing 17 per cent of listeners after only six months, according to figures from the JNLR, the survey that measures radio listenership.

Some new Dublin stations, which were awarded licences in 1999, are due to be launched this year, including the youth-oriented Spin FM and News Talk FM.

There has been considerable interest in applications for new commercial licences issued by the Independent Radio and Television Commission, which oversees the sector. The closing date for applications for the forthcoming "special interest" Dublin radio licences is January 19th. Shortly after that, the IRTC will hear oral presentations from three groups bidding for the new Cork city and county radio licence. As if all this excitement and competition wasn't enough, a surprise £30 million bid by Ulster Television to buy County Media, which owns both 96 FM and 103 FM in Cork, has sent shockwaves through the industry (see below). However, running a radio station is still no walk in the park - we've seen the demise of Dublin's Century Radio in the early 1990s and the difficult birth of national station Capital Radio, now FM 104 and Radio Ireland, now Today FM.

No one understands this more than Scott Williams, station manager of Lite FM and a shareholder in Fox Radio, an investment vehicle that is part of a consortium bidding for the new Cork licence. With over 20 years experience in RTE, commercial, and pirate radio, he has seen both sides of the coin since the first licensed independent stations were established in 1989.

"We've been successful with Lite FM, which is interesting in itself because it has entered a crowded marketplace. Capital entered an empty marketplace and still had problems. It's not a licence to print money. I think if you lose sight of who you are really meant to please, your whole business will be undermined."

So what is local radio all about? "It's about listeners," says Williams. "If you don't listen to my station, I don't have the ratings and therefore I won't take the advertising revenue, so therefore I'll be in trouble." However, he says that the business is much more sophisticated than it was several years ago. Indeed, it is clear that for new Dublin stations, effective marketing has become an essential part of the formula. Lite FM spent a whopping £700,000 on advertising and marketing its brand in Dublin. However, for radio markets outside Dublin, Williams says: "localism is king".

"It's a sense of Limerickness, Corkness or Galwayness that people have. We don't have that to the same degree in Dublin because of its size. We notice that it's very difficult to have somebody in Terenure interested in something that is happening in Baldoyle - why would they be bothered?" It seems that the truly successful radio stations outside Dublin have tapped into that "localism". From his experience of working with 95FM in Limerick, Williams says people want local news above all else. He points out that RTE Radio 1 is beaten for audience share by local stations everywhere in the State except Dublin. "Localism in Dublin is very funny thing. It seems to me to be a community of taste rather than a community of locality."

Charlie Collins, managing director of Highland Radio in Donegal, supports this point. He says that if Highland Radio was just a bland music station, there's no doubt that it would not have been as successful as it has been. "We have a programme schedule and the listenership figures and the market share will show that is what the bulk of the audience is looking for. But I couldn't transfer this schedule into Dublin or into Cork because it wouldn't necessarily be what they are looking for." Collins says that the programming requirements laid down by the 1989 Radio and Television Act means that local radio is almost like a public service broadcaster, even though they have a commercial licence. "This is one of the big pluses about local radio. If you have people who know their audience and who are able to respond to their audience's needs, that's where the public service factor comes in. "I would have a much cheaper station to run if I dropped the news, current affairs, sports programmes and specialised programmes that we do. Those are the ones that eat most into our income. You can do a three-to-four hour show very cheaply just playing music."

The IRTC, which acts a regulator for the local radio sector, has generated controversy over its intention to re-advertise many of the current radio licences once they expire in 2003. These are the licences that were originally granted in 1989 and renewed in 1996. It could mean that stations with more than a decade on-air could simply be replaced.

Charlie Collins says that the IRTC needs to make it clear, as early as possible, what changes are going to take place as a result of the process. He believes that the plan will generate further uncertainty in what is an already crowded radio market. If Highland and other local stations were unsuccessful in winning back their licences, this could affect the quality and spirit of the local service, he argues.

"What you mightn't necessarily get is people coming in who have really have a feel for community radio. Okay, we're a commercial station, but there's a big community aspect to the stations, particularly outside the major cities. There's a certain mind-set about the kind of programmes you need to achieve that."

Michael O'Keeffe, chief executive of the IRTC, says that the proposed licence re-advertising is a "scarcity of resources" issue: there are only so many frequencies available, and the State has to make sure they are used well.

"A licence is a scarce resource and it is right that after a certain period of time you should have to put yourself forward and say why you should continue with it."

He says that the experience in Britain shows that 80 to 90 per cent of existing operators will be successful in winning back their licences.