The Internet Radio Equality Act was introduced in the House of Representatives today, proposing several actions – most significantly the nullification of the decision of the Copyright Royalty Board raising royalty rates for the use of sound recordings by Internet radio stations.  Our summary of the decision and its aftermath can be found here.  In addition to nullifying the decision of the Board, the Act does the following:

  1. Changes the "willing buyer, willing seller" standard used to determine royalty rates for Internet radio to the "801(b)" standard – named after section 801(b) of the Copyright Act, which considers a variety of factors in determining royalties – factors including possible disruption to the industry of royalties, the maximization of the distribution of the copyrighted work to the public, the relative value of the contributions of the copyright holder and the service, and the determination of a fair rate of return to the copyright holder.  The 801(b) standard is the used for determining rates for satellite radio and digital cable radio.
  2. Establishes an interim royalty rate for 2006-2010 of  (at the choice of the webcaster) either .33 cents per Aggregate Tuning Hour of listening or 7.5% of the service’s revenues directly related to Internet radio
  3. For noncommercial radio, places the royalty determination into Section 118 of the Copyright Act, which is where other noncommercial royalties (including the royalty for ASCAP and BMI for over-the-air use of musical compositions) are found, using the standards set forth in that section; and
  4. Establishes a royalty for 2006-2010 for noncommercial entites at 150% of the fee that the service paid for the sound recording royalty during 2004.
  5. Requires three studies to be conducted after the initiation of the next royalty proceeding, that will be submitted to the Copyright Royalty Board for their consideration in that case.  One study, by the National Telecommunications and Information Administration ("NTIA"), would study the economic impact of royalties on the competitiveness of the Internet radio marketplace.  A second, to be conducted by the FCC, would study the impact of royalties on local programming, diversity of programming (including foreign language programming), and the competitive barriers to entry into the Internet radio market.  A final study, by the Corporation for Public Broadcasting, would provide information to the CRB on the impact of the royalties on public radio operators. 

This act has been introduced in Congress, sponsored initially by Congressmen Jay Inslee of Washington (D) and Donald Manzullo of Illinois (R).  The introduction merely starts the Congressional process.  Additional sponsors will need to be gathered, the bill will need to be considered by a committee of Congress (where a "mark-up" usually occurs, allowing changes to be made before the bill is reported out of committee) , and then the bill would have to be approved by the full House.  Often, hearings will be held on the impact of the bill.  A similar process would need to occur in the Senate, and then the bill would have to be signed by the President before it becomes law.  Significant public support will need to be necessary for this process to be completed as, no doubt, the bill will be opposed by SoundExchange.  

This is but a first step toward resolving the issues that have arisen since the CRB has released its decision.  While there may questions that will arise as this bill is considered and debated, webcasters certainly welcome this first step in resolving the issues they have with the CRB decision  – both short term (the impending royalty obligations) and long term (the "willing buyer-willing seller" standard that the CRB had to use to resolve the case).