The licences were extended in 2003 for a further year, and in 2004 a consultation was issued by the Authority's successor, Ofcom, on the creation of Community Radio. Following this, an invitation to groups to apply for community radio licences nationwide was issued. 192 stations applied and of those, 106 were awarded licences. The first new community station to be licensed was youth-based AfanFM in Neath-Port Talbot and the first to go on-air was 103 The Eye in Melton Mowbray. Many stations awarded licences in this first wave are currently in the process of launching.
In order to obtain a community radio licence, applicants must demonstrate that the proposed station will meet the needs of a specified target community, together with required "social gain" objectives set out in the application. These usually take the form of a commitment to train local people in broadcasting skills or provide a certain amount of programming aimed at an underserved section of the population.
A target community can be defined either by geography or by reference to a particular sub-community in an area, otherwise known as a community of interest. A geographic community can be any defined local area, particularly those which would not sustain a fully commercial broadcaster. A community of interest can be any identifiable local community; existing community stations are aimed at groups as diverse as the elderly or youth, religious groups, speakers of languages other than English, lifestyle groups such as gay and transgender and cultural/recreational groups such as artists.
While there are exceptions in certain rural areas, community radio stations are usually limited to broadcast areas smaller than commercial or BBC local stations, nominally a 5 kilometre radius of their transmitter. The normal allocated power for a new community station in an urban area is 30 watts.
However, where a community radio station lies within the transmission area of a commercial station with a population coverage of under 250,000, no sponsorship or advertising may be sought and all funding must come from alternative sources. In a small number of areas where a commercial station covers a population of under 100,000, a community station may not be licensed at all. This is in order to protect the financial interests of these small commercial stations.