Dugie Standeford

NAB is reviewing options following Wed.’s federal court ruling that broadcasters must pay royalties for AM/FM signals streamed simultaneously over Internet, NAB CEO Edward Fritts said. NAB filed suit in U.S. Dist. Court, Philadelphia, after U.S. Copyright Office refused to exempt streamed broadcast signals from limited public performance right provision of copyright law. Plaintiffs alleged that Office’s rulemaking exceeded its statutory authority and asked court to declare that broadcasters who streamed nonsubscription transmissions of their over-air programs were exempt from digital performance right provision and were eligible for single ephemeral copy exemption of law. Court sided with Copyright Office, saying its ruling was reasonable, particularly given Congress’s silence on issue. It’s possible that Congress might choose one day to address whether AM/FM Webcasters should be exempt from public performance right, Judge Berle Schiller wrote. “However, as Judge Learned Hand aptly noted almost 60 years ago, it is not ‘desirable for a lower court to embrace the exhilarating opportunity of anticipating a doctrine which may be in the womb of time but whose birth is distant…'” NAB is “disappointed” that “unique relationship” among broadcasters, record companies and consumers will be disrupted by decision, Fritts said.

Broadcast Music Inc. (BMI) said it would appeal federal court ruling that set license fees for distribution of BMI-affiliated songwriters’ works by music service company Music Choice via cable and satellite. BMI won right to collect license fee -- but nowhere near what it was seeking -- from music streaming company when U.S. Dist. Court, N.Y.C., ordered Music Choice to pay 1.75% of its revenue for use of BMI music. BMI had sought 4%, but Judge Louis Stanton ruled that figure didn’t reflect “normal competitive license terms” and set fee at 1.75% as proposed by Music Choice. BMI is seeking same 4% fee from other music streamers, but Stanton ruled: “BMI offers no reason why Music Choice’s Internet rate should differ from its cable and satellite rate except that its cable and satellite distribution involves 3rd party operators.” BMI said it wouldn’t challenge court’s rate for Internet music. Music Choice provides 55-channel, commercial-free service to homes via cable, satellite, Internet.

Giving FCC authority to auction Internet top-level Internet domain (TLD) .us would be far preferable to NTIA’s plan to shift its operation to private company, said House Telecom Subcommittee ranking Democrat Markey (Mass.). “I strongly suggest that the Department of Commerce [DoC] reconsider this proposal,” Markey said in a July 20 letter to Commerce Secy. Donald Evans. The .us TLD is “a public asset,” he wrote, but even if DoC decides in favor of commercial management, “it is inexcusable to give away this public asset without due compensation to the American people.” It’s “far better” to transfer .us to FCC, which then could sell it at auction to highest bidder, he said. In July 18 letter to Evans, Senate Commerce Committee Chmn. Hollings (D- S.C.), and Sens. Rockefeller (D-W.Va.) and Kerry (D-Mass.) said NTIA’s plan “seems premature and may not be in the public interest.” Several groups have proposed that .us be run by nonprofit that would use any profits gained from domain-name registrations for activities that benefit public interest, lawmakers said. NTIA should delay further action until new NTIA director is confirmed, they said.

Copyright Office decision to let 7 Internet radio companies participate in royalty-setting proceeding for online radio services was “a nice victory for the Webcasters,” Digital Media Assn. (DiMA) Exec. Dir. Jonathan Potter said. Companies filed suit in early June after RIAA attempted to have them disqualified from Copyright Office Copyright Arbitration Royalty Panel (CARP). RIAA had claimed Webcasters provided “interactive services” that allowed consumers to influence what was played on Internet, so they weren’t entitled to compulsory license. Webcasters said it was unclear whether their services were interactive and issue must be decided in court. In its July 16 ruling, the Copyright Office agreed that CARP didn’t have final authority to determine who was correct, and matter would have to be decided by federal court. However, office said RIAA’s assessment of requirements for participating in CARP was wrong: “In order to be eligible to request rates and terms and to present evidence in support of the request, the party seeking to participate must have a ’specific interest’ in the rates and terms to be adopted.” All 7 Webcasters met that requirement, office said.

European Parliament (EP) panel probing existence of global satellite spy system called “ECHELON” last week strengthened its demand that U.S. respond to questions about its role in gathering and using commercial data. Temporary Committee on ECHELON Interception System has been investigating structure and impact of system, which is said to be able to intercept Internet, fax and telephone transmissions. Earlier this month, group faulted U.S. for refusing to explain how it used business information, gathered through ECHELON, that’s not connected to illegal activities. Last week, committee representatives approved resolution pointedly stating that while U.S. denied gathering extensive competitive intelligence for purposes beyond fighting corruption, “the role of the Advocacy Centre of the U.S. Trade Department is still not totally clear, and talks arranged with the Centre with a view to clarifying the matter were cancelled.” Action puts U.S. more clearly in position where it must answer committee’s questions, sources close to panel said.

European Parliament (EP) panel delayed its vote on report setting out findings and recommendations on satellite communications spy system known as ECHELON. Vote, scheduled for June 21 in EP Temporary Committee on ECHELON Interception System, was pushed back to July 3 at request of Christian Democrats -- one of political parties represented on committee -- who wanted more time to review several proposed amendments, David Lowe, head of secretariat for committee, told us. What’s driving delay is that Christian Democrats and others aren’t happy with prospect that, despite extensive study, ECHELON issue is likely to fade away without action, said James Andrews, technology policy dir. at Center for Strategic & International Studies. Moreover, he told us, some Europeans remain convinced that U.S. is engaging in commercial espionage. Larger question for Europeans, Andrews said, is whether British -- who are part of association of English-speaking countries (UKUSA) operating ECHELON -- are “in or out” of European community on issue. Europeans are concerned about how to create independent security identity while Brits are part of U.S. system, he said.

Specter of universal broadband Internet access is sending chills down spine of movie industry, MPAA Pres. Jack Valenti said Thurs. at Center for Strategic & International Studies workshop on cyberfraud. Only 8-9% of American homes have broadband, he said, but it eventually will spread, allowing users who have broadband and compression software to download full-length films in 12-15 minutes. Online movie piracy is problem even now, Valenti said: By one estimate, 300,000-350,000 movies are being pulled off Internet illegally every day, figure predicted to swell to one million in near future. “I'm not a great believer in estimates,” Valenti said, but he said MPAA antipiracy staffers were able to download Gladiator in watchable form after it had been in theaters for only one week. To counter expected onslaught of cyberpiracy, MPAA recently created Digital Strategies Dept., and was attempting to open dialog with manufacturers of software, computers, recording devices and other products about intraindustry copyright protection standards. Studios want ability to encrypt their movies and take advantage of whatever digital rights management and watermark technologies are available, Valenti said. That’s easy to talk about, he said, but “goddamn difficult” to get done. MPAA members are pushing to develop services in which first-run films are placed online at same time in distribution sequence as they're dispatched to pay-per-view audiences, he said. However, he said, although studios hope to roll out the services by end of year, “we're not there yet.”

Broadband is next great driver of economy, but its widespread deployment is being hampered by several factors, Legg Mason Managing Dir. Blair Levin said at Congressional Internet Caucus panel on broadband technologies and applications Thurs. Broadband has potential to stimulate new forms of e-commerce, entertainment, education and health care, Levin said, but it requires “huge upfront investments” at time when consumer demand is hard to predict. Moreover, he said, issues of service quality and provisioning, uncertainty about how to reach all Americans and lack of knowledge about what broadband is and how it relates to other forms of communication have delayed broadband deployment. Broadband wasn’t at heart of 1996 Telecom Act, Levin said, so many of questions weren’t thoroughly thought through.

Angered by U.S. agencies’ refusal to meet them this week, members of European Parliament (EP) committee investigating existence of global communications interception system said Thurs. they were cutting their trip short and returning home. EP Temporary Committee on ECHELON Interception System, which allegedly can intercept Internet, telephone and fax communications, has been looking into impact and structure of spy system and its function within association of English-speaking nations called UKUSA, Chmn. Carlos Coelho said at news conference at EP hq in Washington. One month ago, he said, committee’s chief of staff began scheduling meetings with congressional and Administration officials to discuss ECHELON. However, Coelho said, “we are concerned and dismayed that scheduled meetings with the State Department, with the Advocacy Center of the Department of Commerce [DoC] were cancelled at the last minute without a satisfactory explanation.”

Webcasters urged Copyright Office to set royalty rate for Web radio that’s fair to artists but won’t stifle growth of fledgling online broadcasting. In documents expected to be filed late Wed. in Copyright Arbitration Royalty Panel (CARP) proceeding, Digital Media Assn. and companies such as Launch Media, Netradio.com and RealNetworks said Copyright Office should set compulsory license royalties for Webcast performance rights of sound recordings at $.0015 per listener hour, rate that could generate hundreds of millions of dollars for recording industry (CD Dec 11 p4). Unlike radio broadcasters, which pay royalty fees solely for performance of musical composition, Webcasters are required by Digital Millennium Copyright Act (DMCA) to pay for both performance of underlying song and sound recording. That -- and fact that, unlike broadcasters, Web radio companies must pay for bandwidth to stream programs to each customer -- makes it harder for industry to make money, said RealNetworks Vp-Govt. Affairs Alex Alben at Wed. news briefing. Webcasters will try to convince 3-member arbitration panel -- which hasn’t been selected yet -- that it should adopt model that will pay artists but recognize Web radio companies’ costs and risks, said Ken Steinthal, who’s representing Webcasters. Economist hired by Webcasters studied what performance rights societies such as BMI and ASCAP received for performances over broadcast radio, he said, and will testify that appropriate Web radio royalty rate for sound recording performances should be derived from adjusting value of underlying composition performances in broadcasting. RIAA also was expected to file CARP submissions Wed., we're told. No one from RIAA was available for comment at our deadline. Steinthal said rate they sought during negotiations was “well over 10 times” rate proposed by Webcaster model.