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Net radio fears heard in Congress

A group of congressional representatives are rallying to support independent Webcasters, urging a federal arbitration panel to give them a fair royalty rate for online radio.

A group of congressional representatives is rallying to support independent Webcasters, urging a federal arbitration panel to give them a fair royalty rate for online radio.

The group on Monday asked that the U.S. Library of Congress and the Copyright Office make sure the arbitration panel's proposed royalty fees would not stifle the industry, potentially forcing hundreds of small Webcasters out of business.

The issue stems from a recommendation made by the Copyright Arbitration Royalty Panel (CARP) that would require Webcasters to pay record companies a fraction of a cent for every song they stream online. For larger companies such as AOL Time Warner, royalty fees would increase substantially, but it wouldn't be crippling. For smaller Webcasters operating independently, the new fees could crush them financially, forcing them to silence their services.

The recommendation is still being debated. The U.S. Copyright Office, which appoints members to CARP, is expected to vote on the rates by May 21.

Although small Webcasters said they want to pay royalties to recording artists, they also say high fees would be prohibitive to their business. Six online radio companies--Ultimate-80s, Choice Radio, RadioParadise, Radio Free Virgin, Soma FM and Live365--have been aggressively lobbying Congress, hoping to win further support for a fair royalty regime for Internet radio. Tuesday's request seems to show the radio stations' grievances are being heard.

"We want to ensure that all creators are fairly compensated for their work," the congressional group said in a letter to the Library of Congress. "We are concerned that the CARP-recommended rates for sound recording copyright owners are, however, high in comparison to historical royalty rates, such as rates paid by terrestrial broadcast radio to songwriters and music publishers."

David Landis, founder of Los Angeles-based Webcaster Ultimate-80s, said although the proposed rates "sound like nothing," the figures eventually add up. He said the royalty rates "far exceed" the amount that his business generates in terms of income.

"When stations like Ultimate-80s are playing 15 songs in an hour and you multiply that by 4,000 listeners per hour, you're talking about thousands and thousands of dollars accumulating very, very quickly," Landis said. CARP's rates "are just too high and they're going to knock us all out of business."

Representatives calling for a review of CARP include Rep. Mike Honda, D-Calif.; Zoe Lofgren, D-Calif.; Tom Lantos, D-Calif.; Anna Eshoo, D-Calif.; George Nethercutt, R-Wash.; Corrine Brown, D-Fla.; and Rick Boucher, D-Va.

The representatives said CARP's proposal is contrary to the intent of the Digital Millennium Copyright Act's (DMCA) statutory licensing provisions. The DMCA, passed in 1998, essentially said that if a song were to be played on the Web, the record companies and artists would get a small fee, unlike traditional radio.

News.com's John Borland contributed to this report.