Regulating Web radio

A company’s balance sheet would draw strange looks if it revealed declining profits as the company gained customers. But such is the fate of Internet-based radio stations, a Web industry the information age seems to have passed by. While a conventional radio station broadcasts for the same cost no matter how large its audience – and recovers its up-front costs over time – webcasters pay their Internet service providers per listener. Most webcast stations don’t survive the adolescent period in which they have enough users to incur significant costs but not enough to draw big-money advertisers.

Now, the U.S. Copyright Office is considering regulations that would drop the government shoe where the market’s has already fallen. An agency panel recently announced its proposed webcast royalty fees, which the Copyright Office has until May 21 to review or amend. Under the Digital Millennium Copyright Act, these fees apply retroactively, putting many Web stations out of business while others prepare to hand over more than half their minimal revenues. The recording industry is lobbying to require webcasters to pay royalties to recording artists – not just songwriters – which broadcast stations have never had to pay.

In view of their industry’s potential for society, webcasters deserve a
regulations break. Although only 8 percent of Americans currently listen to Web stations for at least five minutes each week (compared to 95 percent for broadcast stations), the research firm Webnoize estimates nearly 40 percent of Americans will have listened to a Web station by 2003.

A strong webcast industry would have the same liberating effect on broadcasting that other Internet uses have had on text publishing. The available broadcast spectrum physically limits the number of opinions and entertainment options on the air at any time. The Internet poses no such limits. For less than $5,000, people who could never afford towers and studios can speak to the world or serenade the neighbors.

The handful of Web stations that can be said to have “broken through” to popularity – of which the largest,, can claim only approximately 600,000 listener hours per month – are owned or heavily subsidized by major media companies. Regulations that further increase webcasters’ costs will accomplish little more than Disneying the webcast industry.

Webcasters are not asking for a government handout. They ask only that government not actively stand in their way, and the FCC should hear this reasonable request loud and clear.