Wyden, Brownback Sponsor Net-Radio Companion Bill

A fight against new webcasting rates moved into the Senate Thurs. Sens. Wyden (D-Ore.) and Brownback (R-Kan.) introduced a companion to the Internet Radio Equality Act (HR-2060). The House bill, by Reps. Inslee (D-Wash.) and Manzullo (R-Ill.), has 60-plus sponsors. But crucial committee leaders are mum on the measure, though they criticized the Copyright Royalty Board (CRB) ruling. Meanwhile, a think tank proposed an alternate webcast royalty structure letting copyright owners set their own rates up to a "statutory ceiling."

Internet radio's financial survival is important in "keeping the e-commerce engine running by preventing discrimination," Wyden said, alluding to his fight against Internet taxation and terrestrial radio's exemption from paying sound-recording royalties. Citing constituencies -- apparently constituents he's heard from -- that the bill would help, he listed: A "basement" webcaster, an "innovative startup," an band and a "huge music fan." Brownback, a Senate Judiciary Committee member, said the CRB decision would harm small webcasters with "limited revenue streams."

The Senate bill isn't identical to the House measure, a Wyden spokeswoman told us. It would set a 2005-2012 noncommercial webcaster rate at 105% of 2004 royalties paid, with a $5,000 yearly cap on payments by non-NPR stations; the House bill sets a 150% rate and has no cap. The Senate bill also lacks provisions that would require NTIA, the FCC and the CPB to file annual reports on webcasting rates. Wyden isn't on either committee -- Commerce or Judiciary -- likeliest to get the referral, but will talk with their chairmen to get the bill heard, the spokeswoman said.

At a Hill event hours before the Wyden-Brownback bill's debut, Information Technology Innovation Foundation (ITIF) officials suggested an alternate royalty system. They would have copyright owners -- labels or artists -- set their own rates, down to individual songs, with a "statutory ceiling" negotiated with SoundExchange or the CRB. That drew skeptical questions from a House IP Subcommittee aide, who asked several times how the proposal would work -- and what it would accomplish.

ITIF favors "technology neutrality," Pres. Rob Atkinson said. That means either terrestrial broadcasters -- "doubly subsidized" by paying no sound-recording royalties and getting free spectrum -- should pay, or no radio providers on any platform should pay. Atkinson noted that the body he left to found ITIF, the Progressive Policy Institute, published the first paper on the original Napster, calling it a dangerous copyright pirate. But Internet radio isn't file- sharing, and "the whole governance structure" of performance royalties is broken, he said.

Copyright owners should be able to set rates for their material, up to a "statutory ceiling," which would break the SoundExchange "monopoly," report author Daniel Castro said. A SoundExchange database of copyright holders for which that entity collects royalties could be posted online under the Library of Congress, with copyright holders allowed to add and change rates for their works, Castro said: "This would be very easy to implement." Seeking exposure, some artists probably would not demand royalties, he added. Only copyright holders specifying rates would get collections under ITIF's proposal.

It would cost little to modify the SoundExchange database, Castro told us: "There's no reason it couldn't be automated," integrating rightsholders' rates with webcasters' systems for tracking playlists. Prices for commercial software to track songs played probably will keep falling, he added. ITIF also wants Congress to let copyright holders set separate -- presumably lower -- royalty rates for small and noncommercial webcasters, a condition that the group contends would prevail in the market.

Shanna Winters, majority staff dir. for the House IP Subcommittee, questioned officials several times on the idea. She said a less complex way to break SoundExchange's dominance over rates would be to repeal the statutory license. Winters voiced "sympathy" for small webcasters, she said, adding that although "parity" among platforms sounds "more than reasonable," she wonders who would set the statutory rate if it could be undercut by private deals. Castro said a ceiling would mirror today's system -- a voluntary agreement with SoundExchange or CRB arbitration. It would be fine with ITIF if CRB set the cap, he told Winters. She asked why a new performance rights organization couldn't handle payments to labels that don't want to use SoundExchange. That would incur costs and not be as efficient as the proposal, Castro said.

Winters told us later the IP Subcommittee was investigating only whether to take action on royalties, and her attendance wasn't an indication that it would get involved. The Commerce Committee was also referred the Inslee bill. "I don't think anybody could deny that this is an issue that needs to be looked at," she said. But the CRB evaluated evidence for 18 months, and the bigger issue for the subcommittee is "how people are second-guessing that decision."

ITIF met with Inslee aides shortly before HR-2060 was introduced, Atkinson told us. "Political" considerations may dictate how CRB rates are fixed, and the tug-of-war between interests -- especially broadcasters wanting to stay royalty- free and webcasters wanting a guaranteed low rate -- may bar the system ITIF envisions, he conceded. But "we're not constrained by that," he said, calling the ITIF proposal "optimal." An Inslee spokeswoman confirmed the ITIF meeting but said the parity angle that Inslee chose -- offering Internet radio the option of using the 7.5% of revenue that satellite radio now pays -- was considered easier to understand and "the right thing to do." Inslee's office has received over 1,000 pieces of correspondence backing his bill, and "I don't see him switching his advocacy" to a different approach, she said. Wyden's spokeswoman said his office was "having conversations" with ITIF. -- Greg Piper