The Real Digital Divide

Unless it is overturned, a rate hike approved by the Copyright Royalty Board -- a lesser known group of federal judges invested with great power -- will end Internet radio's existence.
06/26/2007 12:46 pm ET Updated May 25, 2011

Our government just doesn't get the Internet. And that really is a shame, because it makes grassroots web culture like Internet radio vulnerable to the whims of fools. On July 15th, unless it is overturned, a rate hike approved by the Copyright Royalty Board -- a lesser known group of federal judges nonetheless invested with great power -- will end Internet radio's existence.

The CRB decision doubles the current royalty rate by 2010 and removes a protective fee structure that allows small sites to limit royalty payments to 12 percent of their revenue. But the big problem appears to be a $500 fee per channel per year. Now, that kind of per-channel fee might have made sense in the age of terrestrial radio, where bandwidth is limited. But with Internet radio, where thousands of mom-and- pop webcasters have taken advantage of the open bandwidth and where larger companies like Yahoo Music create thousands of personalized channels for users -- the fee is absurd. That's like charging someone who buys kidney beans for each different type of food they use it in -- two bucks for baked beans, another two for chili -- in addition to the quantity.

Internet radio is really one of the more glorious corners of the Web. All those would-be pirate broadcasters, like Christian Slater in the 1990 flick Pump Up The Volume, can go online and reach audiences around the world. And larger sites, like Musicmatch (which was bought by Yahoo music), put such an amazing catalog of music at your command it's like you were your own Tower Records.

Today, thousands of Internet radio stations are protesting the hike by broadcasting silence, showing us what it'll sound like if this rate increase stands. The Los Angeles Times reports that one webcaster now paying $1,000 a year for his 40,000 streams a month would have to pay $100,000 under the new rules. And a site that lets hobbyists run small stations for as little as $10 a month would have to pay $7 million on July 15th, effectively killing the $8.7 million-a-year company.

This isn't exactly the first time the government has instituted bad Internet laws. Eric Goldman, an Assistant Professor of Law at Santa Clara University and Director of the school's High Tech Law Institute, tried to compile a list of the 10 best and 10 worst Internet laws, but could only find two good laws (the 10 worst were much easier). Notable among the worst is the Communications Decency Act of 1996, which mandated a porn-blocking scheme using an onerous content-tagging system that didn't even exist at the time. Luckily it was enjoined and struck down a year later by the Supreme Court.

Although Internet radio is new, it isn't small. Spread out among the various stations, it serves 72 million listeners a month. And that's the crux of the dangerous divide between lawmakers and the public on Internet knowledge. Pre-Internet, industries were slow to develop. Congress, which is not known for forward thinking, at least had several years to react and adjust the laws. But blogs, Internet video, podcasts, Internet radio -- these spring up virtually overnight and become relied upon by millions of people in just a few short years. Then a bunch of judges who think the Web is something they should call their exterminators about strike it down.

There is hope, of course. Legislation to roll back these rates has been introduced in the House and Senate and appears to have significant backing. But there's almost no chance that it will get through before July 15th. Some kind of amnesty could be reached to save the webcasters from the fees that go into effect. We hope. But what about next time? Until the government catches up to the world of the last decade, fledgling but significant industries will always be at risk.