Editorial: Internet radio static

Saturday, June 30, 2007 | 7:31 a.m.

M any Internet radio stations went quiet Tuesday to protest royalty rate hikes set to go into effect later this month that, station owners say, will put many of them out of business.

They are protesting a decision by the federal Copyright Royalty Board, which earlier this year approved a rate hike plan that would raise the royalties they pay 300 percent to 1,200 percent, according to the Internet radio operators. One of the contentious issues is that the board set a minimum payment of $500 per channel. Internet sites can run hundreds of channels, which would mean an exponential cost to the station operators.

The Copyright Royalty Board fails to understand the dynamics of the Internet, where users control content. The board acquiesced to the desires of the Recording Industry Association of America, which wants more money from online stations. The rate structure would run small operators out and leave only the biggest operators, such as AOL and Yahoo, around.

The plan undercuts the strength of the Internet, which allows people and businesses - of any size - to operate on an equal playing field.

Tim Westergren, founder of Pandora, an online site that lets users create their own stations, told ABC News that the board's decision was a "disaster" and said it would lead to more pirate radio stations.

"The innovation you're going to see is people getting around the law," he said.

An equitable solution is a bill sponsored by Reps. Jay Inslee, R-Wash., and Don Manzullo, R-Ill. The bill, which has 123 co-sponsors, would nullify the board's decision and create a reasonable rate structure for Internet radio stations. Users would still be able to have access to the thousands of music sites and artists would still receive fair payment for their work. Everyone would benefit, which is what the Internet is all about.