“Did they say it was insane?”

That's what an FCC official said to me after I delivered the news that the Librarian of Congress had shot down the CARP (Copyright Arbitration and Royalty Panel) Report's recommendations for internet radio. We're both at a computer/telecom industry conference. Among the several other people standing around hearing my report, huzzahs went up. CARP's mandate would have taken effect on May 22, 2002.

CARP was widely regarded, especially in internet radio circles, as a death sentence for the whole category. Instead the sword cut the other way.

Here's how the death sentence reads:

On May 21, 2002, the Librarian of Congress, based upon the recommendation of the Register of Copyrights, issued an Order rejecting the Panel's determination proposing rates and terms for these licenses. In such cases, the law provides that the Librarian shall issue his final determination within 30 days of his decision to reject the Panel's proposed rates and terms. The final determination is due on June 20, 2002.

And here is the Order, complete:

Thank you, Marybeth Peters.

Ironically, the CARP panel was convened by the Library of Congress. The panel wasted a large amount of energy and time in the course of recommending highly complex copyright obligations, including payments for performance rights, all intended to fulfill requirements of the Digital Millennium Copyright Act (DMCA).

Here's Kurt Hansen of the Radio and Internet Newsletter (RAIN) and SaveInternetRadio.org:

This morning's announcement from the Librarian of Congress makes perfect sense, as the likely impact of the CARP's recommendation—the virtual shutdown of internet radio—would have been totally contrary to the legislative intent of establishing a statutory royalty rate in the first place!

One benefit of attending the Copyright Office's roundtable on recordkeeping requirements two weeks ago was the chance to see and hear Register of Copyrights Marybeth Peters and General Counsel David Carson and realize that they seem to have an excellent handle on the issues involved. The decision on an appropriate royalty rate seems to be in good hands.

The CARP report drew immediate and steady resistance from the moment it was published in February 2002. In “Webcasting Legally”, Jamie Zawinski ran down the list of station reporting obligations, prohibitive even for stations that have troubled to keep records of what they've played and when, such as the Linux-powered KPIG and Radio Paradise. Those stations, which have up to several thousand listeners at any given time, would have been bankrupted immediately by CARP's payment obligations. Here's the math of the matter, according to Internet News:

Here's how the 14/100 of a cent per performance royalty rate would translate for a webcaster with about 500 listeners per day: 500 listeners x .0014 dollars x 15 songs per hour x 24 hours = $250 per day or $90,000 per year, retroactive to 1998.

Recently, webcasters held a Day of Silence to protest CARP. I wrote about it in this article, the most recent in a series of Linux Journal pieces that dealt with the subject.

Here is some more background:

This CARP report may be dead, but the Digital Millennium Copyright Act remains in force, which means concerns about its implications are still quite alive.

We still need to deal with the differences between our default understanding of radio, and the DMCA's characterization of internet broadcasts. Instead of “stations” with “signals” that carry “programs”, the DMCA sees sources of streams that distribute “performances” (that's the key term), as if the radio were a stage in a performance hall. It presumes there is a business here and wants to charge rates for it. The big problem is that no business worthy of the noun has emerged in a state finished enough to even begin guiding regulation.

The CARP report struggled at length with the perceived need to describe a “willing seller” and a “willing buyer”. Terrestrial commercial radio has never had anything of the sort, at least between stations and listeners. Commercial radio's customers are advertisers, not listeners. With internet radio, on the other hand, listeners are in a perfect position to be customers and not just “consumers”. In some cases, such as Radio Paradise's, there is real income through PayPal contributions—up to thousands of dollars per month. But Radio Paradise is the exception. Most web stations essentially give the goods away just like terrestrial radio does, but potentially in a far more accountable way—and that's the rub.

It's clear now that advertising isn't going to sustain internet radio stations any more than it will sustain print publications on the Web. In fact, it's an open question how long advertising will remain a working source of revenue for terrestrial radio stations, especially if new technology makes the relationships between stations and listeners accountable, as TiVo is threatening to do for the relationships between commercial television and its viewers. What's at risk isn't the relationship between stations and listeners, which has always been weak (since listeners paid zero for the goods, their influence rounded to the same), but between stations and advertisers. When mute buttons get wired back to advertisers, the broadcast advertising game will be radically changed, if not killed outright. Broadcast advertising has always been inefficient, unaccountable and thick with unseen but very real waste. Once the accountability appears and the inefficiency and waste fully exposed, the only serious question is how much advertising goes away.

So pay-for-play is the only choice. It's not without precedent in terrestrial radio, since that's what has sustained noncommercial broadcasters for many years. Public broadcasting doesn't suffer that same split between customers and consumers that afflicts commercial broadcasting.

Commercial radio broadcasters might not be willing to look to the noncommercial model for guidance, but internet broadcasters don't have a threatened revenue model to discourage them.

What they need now is a chance to develop. Stations like Radio Paradise are pioneers, but it's too early to call them models for a whole new marketplace. That marketplace needs a chance to emerge and grow, which means now is the time to trust the Commons, not to regulate it away.

Between writing the last paragraph and this one I scarfed down a quick lunch in the informative company of Dave Burstein, Proprietor of DSL Prime and co-host of the Personal Computer Show on WBAI in New York. He gave me a high five when I told him the news about CARP. Then, for perspective on the issue, he offered this famous quote from A.J. Liebling: “Freedom of the press is guaranteed only to those who own one.”

Thanks to Marybeth Peters, thousands of internet broadcasters still enjoy their first amendment guarantees. We need to do everything we can to keep those guarantees safe.