September 21, 2012

Legislation Ends Discrimination Against Internet Radio in the Digital Marketplace

The bipartisan, bicameral bill encourages innovation in online radio by bringing unfair royalty ratesetting standards in line with similar services

Washington, D.C. – Since the passage of the Digital Millennium Copyright Act in 1998, Internet Radio providers have been forced to pay royalty rates for the songs they broadcast that are considerably higher than their competitors in this digital marketplace. These unfair and discriminatory royalty rates have stifled innovation, competition and the growth of the music marketplace. In order to ensure fair and consistent treatment for the online radio industry and its competitors, U.S. Senators Ron Wyden (D-Ore.) has introduced the Internet Radio Fairness Act. U.S. Representatives Jason Chaffetz (R-Utah) and Jared Polis (D-Colo.) have introduced companion legislation in the House of Representatives.
Under current law, Internet Radio providers are subject to a unique regulatory regime that has unfairly resulted in higher royalty rates for their broadcasts than their competitors, like satellite and cable providers. The crux of the Internet Radio Fairness Act is to allow Internet Radio royalty rates to be determined by the same long-established process applicable to satellite and cable radio providers.  
“The Internet has shown itself to be an incredible tool for enabling innovation and competition to make existing industries better,” Wyden said. “However, there are those who seek to stifle that evolution by pushing through onerous and unfair laws to limit competition and protect the status quo. Fourteen years ago, when online radio was in its infancy, the incumbent interests were successful at getting laws passed to discriminate against the Internet.   This bill puts Internet Radio on an even plane with its competitors, and allows the music marketplace to evolve and to expand--which will ultimately benefit artists and the internet economy.”
Under current law, the royalty rates prescribed for Internet Radio are established based on what a panel of three copyright royalty judges determines to be a “marketplace” rate for musical licenses.  But there is no functioning “market” for these licenses and these judges are left to determine rates based on different rights for similar types of services. As a result, Congress has intervened after every Internet Radio proceeding to help the services lower the burdensome rates set by the judges.   The current method these judges use to establish royalty rates for Internet Radio has led to webcasters paying much higher royalty rates than other digital music broadcasters, like satellite and cable.  The long-established method that copyright judges use to determine royalty rates for satellite and cable providers enables a broader and balanced set of factors to be considered.  These factors assure fair compensation to the copyright owners and the economic viability of new types of music services.
The Internet Radio Fairness Act would end the discrimination against the Internet and Internet Radio in the digital marketplace.  It would treat Internet Radio, for purposes of establishing royalty rates, in the same way that satellite and cable radio are treated.  It would enable the copyright judges to consider factors they have long been familiar with to establish royalty rates for Internet Radio in the same way they have long done for other broadcasters.