[Congressional Record (Bound Edition), Volume 153 (2007), Part 13]
[House]
[Pages 18345-18346]
[From the U.S. Government Publishing Office, www.gpo.gov]




                    POTENTIAL LOSS OF INTERNET RADIO

  The SPEAKER pro tempore (Mr. Wilson of Ohio). Under the Speaker's 
announced policy of January 18, 2007, the gentleman from Washington 
(Mr. Inslee) is recognized for 60 minutes as the designee of the 
majority leader.
  Mr. INSLEE. Mr. Speaker, I come to the floor of the House this 
evening to discuss the potential loss of Internet radio by Americans, a 
tremendous service that, because of Internet software and musical 
geniuses, 70 million Americans now enjoy the ability to listen to music 
by Web broadcasters over the Internet.
  It is a tremendous service. It is as ingrained in a lot of Americans' 
daily lives as a cup of coffee and the morning newspaper.
  Unfortunately, I have to inform the House that that service may be 
gone in a matter of a few weeks if we don't reach a resolution of a, 
frankly, wrong decision decided by the Copyright Royalty Board. What I 
am disturbed to report to my colleagues is that some time ago, March 2, 
2007, we had a decision by a Federal agency, the ramifications of which 
would be to shut down the ability of Americans, on a realistic basis, 
to continue to enjoy Internet-based radio.
  The reason this happened is that this board was given the authority 
to set the royalty that should be paid by Webcasters who stream out 
this great music, by the way, tremendously diverse music. One of the 
great things Americans love about Internet radio is you have such 
eclectic, different types of music, not just top 40. You know, I 
haven't progressed past the Beach Boys in the 1960s, but there are a 
lot of kinds of other music. Internet radio has been tremendous by 
allowing people to enjoy thousands of different genres and types of 
music.
  But now this Copyright Royalty Board has issued a decision which will 
explode the royalty that these Webcasters are forced to pay to those 
who generated the music, to the extent that it will make it totally 
economically impossible for these businesses and these Webcasters to 
continue to stream music to the 70 million Americans who now enjoy it.
  We need to fix this problem. We need to fix it urgently, because the 
decision will, this guillotine will come down on July 15 if either 
Congress doesn't act or an agreement is not reached between the parties 
to adjust this copyright fee that will have to be paid by the 
Webcasters.
  So we need to fix this problem, and, in doing so, we need to do it in 
a way that is fair to the musicians and artists who create the music 
that 70 million Americans enjoy over the Internet. These artists work 
hard in producing this music. They share their genius. It's an artistic 
gift they have, and they share it with Americans. They need to be 
compensated fairly to allow them to maintain their business model as 
well.
  Unfortunately, this was a wildly disproportionate decision by this 
board that is grossly unfair to the distributors of music and simply 
will allow them not to continue in business. And to give folks a 
feeling of how distorted this decision will be, I would like to refer 
to this graph which shows Internet radio per-song royalty rates under 
preexisting law starting in 2005, that started at $.00008 dollars in 
2005, and by 2010, we will have foisted on us 149 percent increase in 
these royalty rates.
  I am not sure any business model can tolerate a three-fold increase 
just in the per-song royalty rates that these folks are having to 
undergo. Unfortunately, this royalty rate means about a 300 percent 
increase for big Webcasters. But because of the particular rules here, 
it's a 1,200 percent increase for small Webcasters, so the small 
Webcasters, which are the vast majority of Webcasters will be hit 
potentially by 1,200 percent increases.
  Now, this board, this Copyright Royalty Board has refused to 
reconsider their decision. What it means in the real world is the 
Internet going silent. Many of the stations a few days ago went silent 
to demonstrate and to protest its decision. I know Americans are 
disturbed by this, and they are now talking to my colleagues. I know 
thousands of them have communicated with my colleagues as a result of 
this, so we need to fix this problem.
  I know in my district, I am from an area just north of Seattle, First 
District in the State of Washington, we have a Webcaster called Big R 
Radio. They stream to over 15,000 listeners who enjoy their product. 
But because of this decision, their rates are going to go up to a 
level, and you have got to understand how bad this is, the rates they 
would have to pay just for their royalties, not for their overhead, 
their rent, their salaries, the royalties they would have to pay for 
this exceed by 150 percent the revenues that this business is getting 
in.
  Well, obviously, that's untenable, and this company will have to 
either go offshore or simply shut down if some change is not made. That 
is bad for Big R Radio, the company, and it's bad for the 15,000 people 
that enjoy their music right now. We need to fix this problem.
  So the first damage that was done is this per-song radio royalty, but 
there was another, perhaps even more odious thing that this board did, 
the preexisting rule required a $500 charge, or, excuse me, a per-
station minimum fee. This new ruling required a $500 charge for each 
streaming station that they offered. Webcasters, of course, stream 
under certain channels. But under this decision, there was no limit on 
the amount total in this per streaming channel that would be placed. 
Many, if not most Webcasters, have multiple channels.
  So, if you look at what it will cost, just three of these Webcasters, 
Pandora, RealNetworks and Yahoo, because they are getting socked with 
this $500 per channel, and they broadcast literally thousands of 
channels with no limit, just those three Webcasters would have to pay 
$1.15 billion, with a B. These rates will dwarf the radio-related 
revenues by substantially more than $1 billion.
  In other words, it will charge these businesses more than $1 billion 
more than the revenues they generate from this business. That's absurd. 
It's ridiculous. It has no relationship to economic reality, and it is 
a government glitch, a foul-up of the highest order that needs to get 
repaired.
  This would result in 64 times more the total royalties collected by 
the group called SoundExchange that collects these royalties in 2006, 
an increase of more than, this is a pretty amazing number to me, 10 
million percent over the minimum fee of $2,500 per licensee. Clearly, 
this is beyond the realm of economic reality.
  Finally, this royalty board, the third thing that they did, they 
eliminated the percentage of revenue fees that many small Webcasters 
use to determine their performance royalty, which would be severely 
damaging to small Webcasters. So, to put this in perspective, in a 
global sense, I want to refer

[[Page 18346]]

to what this will mean in total royalties.
  If you look at this chart, you show total royalties in 2004 of $10 
million. The estimated fee under the old royalty rule in 2006 would be 
$18 million. But under this decision, this flawed decision, it will 
actually be $1.150 million. So if you want to see the difference 
graphically of what the old royalty would be in 2006, this bubble would 
go to this supernova, I would call it, in 2006. This is untenable. It 
needs to be fixed.
  Now, in order to fix this, Representative Manzullo and myself have 
introduced the Internet Radio Equality Act, it's H.R. 2060, and this 
bill would fix this problem by doing something that appears eminently 
fair to me, which would simply have the same rate to be paid by 
Internet-based Webcasters as broadcasters now pay over satellite radio, 
over cable radio and over juke boxes.

                              {time}  2000

  What we are simply saying is that we ought to have equality, 
fairness, that is why we named it the Radio Equality Act, by having 
parity, the same level, which is 7.5 percent of revenue, a transition 
rate, in 2010. This is something that is fair, equal, and economically 
realistic to allow 70 million Americans to continue to enjoy their 
radio over the Internet. And now, 128 Members of the U.S. House of 
Representatives have cosponsored this bill just in a matter of a month 
or two; and the reason they have done so is I think they have heard 
from their constituents who want to keep their service going and 
realize how ridiculously out of whack this particular decision was.
  Now, I know it may surprise some Americans to know that government 
agencies can make mistakes, but certainly one was made here and we need 
to fix it, and we need to fix it quickly. On July 15, this decision 
will go into effect. I encourage my colleagues to look at this bill, 
H.R. 2060, the Internet Radio Internet Equality Act, and cosponsor it 
to add their voices to the choir to demand action by the legislature to 
fix this bureaucratic foul-up.
  Obviously, this is supported by a large number of people, not just 
broadcasters. National Public Radio certainly has an interest in this. 
I know that many of my constituents enjoy it, and it is in great 
jeopardy tonight if we don't act. I know one station has already gone 
off the air because of this bureaucratic snafu. The NPR affiliate Rock 
Island Illinois-based WVIK served hundreds of thousands of citizens. 
They have switched off their Web stream because this is an economically 
untenable situation for them if it is not fixed. So what their 
constituents and their customers are now hearing over the Internet is 
silence. Silence may be better than some of the music my kids have 
listened to over the years, but it is not better than the thousands of 
stations and access that people have over the Internet. We want to keep 
that available for Americans.
  I also want to say that why I think this is so important is 
diversity. One of the best things about the Internet is it gives you 
what you want, not what the broadcaster wants you to listen to. And, 
frankly, because of the consolidation of the industry and the radio 
over-the-air industry, we are hearing a lot more of the same thing over 
and over and over again. And some of it is great music. We are still 
stuck in the 1960s, many of us, and we enjoy it, but diversity and 
having access to Appalachian bluegrass or music from the subcontinent 
of India; I heard of a genre, it was basically heavy metal, hip-hop, 
country at the same time, and that is quite a genre. But this provides 
diversity for people, and they ought to have their multiple tastes 
enjoyed and that is really in jeopardy tonight.
  Now, the other thing I want to say is that this decision will go into 
effect July 15, and these stations will be in great economic jeopardy 
beginning just in a week or so; and, unfortunately, some of them as of 
July 15 might shut off their streaming. Others are going to start to 
consider what to do. Some may consider going offshore, which is not a 
healthy situation for us for a variety of reasons.
  But I want to assure the parties who might be involved in discussions 
in this that after July 15 it will not be the end of this discussion. 
If Congress is unable to act before July 15 and if the parties don't 
reach some resolution of this, July 15 will not be the end of this 
effort. It will not be the beginning of the end of this effort; it 
might be the end of the beginning of this effort, because as these 
stations start to shut down, Congress will be deluged more than they 
have already been deluged with voices of protestation exercising their 
right to petition their government for redress of grievances, and one 
of the biggest grievances people are going to have is they can't hear 
their radios over the Internet anymore. The 128 cosponsors we have 
today even before the sword of Damocles has fallen on the music is 
going to grow, and we are going to be back here to continue to grow 
this until we get relief.
  So I am hopeful that the parties are talking to one another to try to 
reach an economically viable and fair resolution of this so that 
artists, performers, songwriters can continue to have a meaningful 
economic model, so they can continue to do their work and they will be 
compensated for it; that Web casters can have an economic model to 
allow them to stream it over the Web, and 70 million Americans can 
continue to enjoy the pursuit of happiness over the Internet listening 
to this great music. If that does not happen by July 15, we are going 
to be back here until it gets resolved and this chorus, this drumbeat 
will continue. We do not intend to let, in the words of Don McLean's 
song, not allow the music to die. It is, too, a part of the American 
culture, and I will encourage my colleagues to help out by cosponsoring 
this bill.
  Mr. Speaker, I yield back the balance of my time.

                          ____________________