In a last-ditch effort to protect smaller Webcasters from what they describe as unfair royalty obligations, three influential U.S Congressmen on Friday introduced the "Internet Radio Fairness Act," a new law seeking to change existing Web radio laws.

Carrying through with a promise to introduce legislation that would essentially codify "fair use" provisions of law, Rep. Rick Boucher (D-VA) joined with Reps. Jay Inslee (D-WA), George Nethercutt (R-WA) to introduce the new legislation.

The bill is designed to make the Arbitration Royalty Process (CARP) "more fair for smaller entities," the Congressmen said in an announcement that the Bill would go before the House of Representatives' Judiciary and Small Business Committees.

The three have been among the most vocal critics of the controversial CARP royalty rate structure that sets the per-performance fee at 0.07 cents per performance, retroactive to October 1998.

In a statement, Rep. Inslee said, "Congress should support creative and innovative uses for new technology, not drive small web radio broadcasters out of business with huge fees. We need to refine the current law on digital technology quickly, before more small web radio broadcasters are forced out of business."

"Changing the standard for setting royalty rates is crucial to the survival of this innovative sector. We seek a balance between just compensation and Internet development. This process must be fair but not free," he argued.

Rep. Nethercutt joined in blasting the CARP ruling which was effectively forcing smaller Webcasters out of business. "No one wins under the current CARP standard -- Webcasters will close shop, consumers lose access to a wide selection of programming, and holders collect nothing," Nethercutt said. "Our legislation protects small businesses from the onerous CARP ruling, ensuring the continuation of Webcasting, and incidentally, creating a long-term revenue stream for holders."

Rep. Boucher described the law that produced the royalty rate "flawed" and said the Bill would seek to fix the process that he said was weighed heavily against the Internet radio industry.

Highlights of the "Internet Radio Fairness Act" include:

Small businesses (six million dollars in gross revenue) will be exempted from the CARP fees for web radio. The royalty ruling, which was accepted by the Library of Congress, would stand for larger Web radio providers.

All future CARP processes must change the royalty rate standard from the "willing-buyer/willing-seller" to the "traditional" standard that was enacted by the 1976 Act. Royalty payments for the small businesses that have been exempted from the current CARP decision will be calculated using the traditional standard, and rolled into the next CARP.

Small businesses will be exempted from the payment requirement for participation in future CARP proceedings. During the most recent arbitration process, all participants were forced to pay an equal share of the total costs, forcing many small businesses out of the process.

All future CARPs must eliminate fees for temporary recordings ("ephemeral recordings") that Web radio broadcasters create to facilitate the transmission of the song to users. "The Registrar of s has determined that these temporary recordings have no independent economic value, and should not be subject to a separate royalty payment," the Congressmen argued. Broadcasters should not be charged for temporary storage files that listeners never hear and which are not saved.

All future CARPS must comply with the Regulatory Flexibility Act. This will require CARPs to specifically consider the impact of any decisions on small businesses.