BY PAUL MALONEY
The House Subcommittee on Courts, the Internet, and Intellectual Property has scheduled for June 13th a hearing to "look at the structure of the CARP process and how it can be reformed."

That's according to Ed McDonald, press secretary and chief of staff for Congressman Howard Coble (R-NC, pictured right), who chairs the subcommittee.

The meeting is scheduled to be held just one week before the deadline for the Librarian of Congress, Dr. James Billington, to deliver his final determination on webcasting royalty rates. This fact led some to believe the hearing was intended to focus on the rate-setting.

But McDonald stressed to RAIN that the hearing is not related to webcasting royalties specifically, as had been reported elsewhere in the media. "This hearing has actually been in the works for several months. The two aren't tied together at all."

CARP system may not work
Copyright Arbitration Royalty Panels, or CARPs, are temporary teams of independent arbitrators appointed by the U.S. Copyright Office to determine royalties for the use of copyrighted material when agreements can't be reached in the marketplace.

This current system replaced the Copyright Tribunal system, in which full-time government employees determined such rates, as opposed to temporarily appointed arbitrators used in the CARP system. That change was made in 1993 during the Clinton administration.

The CARP system has been the subjet of intense debate and criticism lately, especially since a February 20th CARP determination that would have required Internet radio webcasters to pay royalty rates that in some cases would amount to 200%-300% of their annual revenues. That proposal was rejected by the Librarian earlier this week.

Additionally, many smaller webcasters contend they were effectively shut out of the rate-determination process by unfair financial obstacles to participation. Some sources hold that it cost upwards of $300,000 simply to testify. The record label industry group RIAA and larger webcasters claim they spent millions more for legal fees and preparation for the CARP hearings.

Congress gets in on the act
Last week, the Senate Judiciary Committee, chaired by Senator Patrick Leahy (D-VT), met on the subject (see RAIN coverage here -- screenshot from webcast below). That meeting was less than a week before the Copyright Office and the Librarian decided to reject the royalty rate proposed by independent arbitrators in February.

It's interesting to note that Congressman Coble was the sponsor of a letter to the Librarian, imploring him to respect the arbitration process and ignore "anecdotal or other information" in his decision making (in RAIN here). That letter was signed by 16 other members of Congress, and sent May 10th, just one day after small webcasters staged a "Hill Walk" in which they visited the offices of Representatives and Senators to express their concerns over the CARP process and ramifications.

No one at Congressman Coble's office nor the office of the House Judiciary Committee (of which Courts, the Internet, and Intellectual Property is a subcommittee) could provide a confirmed list of witnesses. However, an outside source has indicated to RAIN that those tentatively scheduled to testify include: U.S. Register of Copyrights Marybeth Peters, RIAA representative Robert Garrett (of the law firm of Arnold & Porter), broadcaster representative Bruce Rich (Weil, Gotshal, & Manges), and BMI representative Michael J. Remington (Drinker Biddle & Reath).

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From the San Jose Mercury News: "Internet radio stations this week gained a welcome reprieve from new royalties that could smother them...

"Congress mandated that Internet radio stations pay performance royalties. Earlier this year, an arbitration panel recommended rates, retroactive to 1998...

"Webcasters would pay performance royalties on top of a royalty to songwriters they and broadcast stations already pay. The songwriter royalty should have been a model; it's between a seventh and a twentieth as high.

"Webcasters say they don't object to sharing revenue with performers if the rate is fair. The arbitration panel instead more or less split the difference between the Webcasters' offer and an exorbitant demand of the record labels.

"The panel also recommended that pure Internet radio stations be charged twice as much as broadcast stations that simply retransmit their programming over the Web -- an odd distinction. If anything, it's the pure Webcasters, offering programming alternatives, that should be given a price break, not commercial broadcast stations, dominated by a few conglomerates trying to extend their control of the airwaves to the Internet...

"Three local members of the US House -- Anna Eshoo [pictured], Zoe Lofgren and Mike Honda -- were among 20 members of Congress who urged Billington to set fairer rates for Webcasters. If he doesn't, they should take the next step: drafting a bill to come to Internet radio's rescue."

From today's San Jose Mercury News...read this editorial online here.

The new 1.5 version of Listen.com's "Rhapsody" music subscription service will give customers limited CD burning capability, and offers high-bandwidth subscription Internet radio, according to a company press release.

At first, subscribers are limited to digitally recording track from the Naxos Classical catalog. By subscribing to the "Naxos Classical with Burning" catalog for $9.95 a month, customers can burn up to 10 tracks per month to CD.

Listen claims the new version of its service "is the only music subscription service to support high-speed CD burning as part of its base level product, allowing subscribers to create CDs at speeds of up to 48X (depending on the speed of their writer)." Listen.com says it plans to offer CD burning through other catalogs as licensing agreements allow.

Also new is the Rhapsody "Radio Plus" Internet radio service. For $4.95 a month, subscribers are given access to 58 128-kbps commercial-free station streams programmed by Listen.com, 38 of which are unavailable on Listen's free radio service. The "pay" version of the radio service also offers the handy "skip" button. Radio Plus is included with all four of Rhapsody's on-demand music subscription services.