Internet Radio Fairness Act would end the music monopoly

Bill Wilson Board Member, Americans for Limited Government
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“One likes to believe in the freedom of music,” Rush’s Geddy Lee crooned in the 1980 hit “The Spirit of Radio,” “but glittering prizes and endless compromises shatter the illusion of integrity.”

These words are proving eerily prophetic as the United States Congress debates a piece of legislation aimed at expanding the “freedom of music” on the Internet — while at the same time attempting to break up a foreign-owned monopoly that’s inhibiting innovation and expansion in the broader American marketplace.

U.S. Rep. Bob Goodlatte (R-Virginia) is holding hearings this month on the Internet Radio Fairness Act, a bill sponsored by U.S. Rep. Jason Chaffetz (R-Utah). This legislation seeks to end unfair, anti-competitive royalty rate discrimination that’s currently being practiced by the U.S. Copyright Royalty Board (CRB) — an unaccountable Washington bureaucracy that’s in the pocket of a trio of foreign-owned record labels.

These three labels collectively control roughly 80 percent of the music that’s played over America’s airwaves — and for years they have relied on the CRB to impose music rate structures that guarantee the preservation of this monopoly. While Chaffetz’s legislation isn’t perfect, it would go a long way toward eliminating the corporate cronyism that lies at the heart of this inherently anti-competitive arrangement.

First, Chaffetz’s bill makes the constitutionally dubious CRB more accountable to the public by requiring that the U.S. Senate confirm its appointees. More importantly, the legislation would compel the board to reassess royalty rates paid by Internet radio providers like Pandora, TuneIn and IHeartRadio, bringing their costs more in line with fees paid by cable and satellite providers.

Chaffetz’s legislation acknowledges that the current discriminatory rate system inhibits growth and innovation — stifling the delivery of new music to the public and inhibiting the ability of new artists to find audiences independent of the three powerful record labels.

Chaffetz’s pro-free market credentials are unimpeachable. Earlier this year, he led the fight in the U.S. House against the Orwellian “Stop Online Piracy Act” (SOPA), which in his words was nothing but an effort to “rewrite the current laws regarding the Internet and remake it into a place where innovation no longer happens.”

For his efforts, Chaffetz was recently hailed as a “staunch advocate for free enterprise.”

But not everyone is happy with Chaffetz’s bid to break up the foreign music monopoly. In fact, one prominent conservative is attempting to portray Chaffetz’s legislation in a distinctly anti-free market light.

“When the government sets the rate for music, it is enacting price controls, in opposition to what should be the agenda of a Congress that supports the market economy,” Americans for Tax Reform’s Grover Norquist said recently, adding that rates “should be allowed to emerge according to supply and demand.”

Norquist is referring to the CRB’s so-called “willing buyer/willing seller” standard — which in actuality is a “here’s what we charge/take it or leave it” standard that relies on government to artificially raise rates. The problem with Norquist’s so-called “market” solution is that it perpetuates the unchecked power of the existing foreign-owned monopoly to decide which music distribution systems live — and which ones die. That in turn dictates which bands break through, and which ones don’t.

Rather than organically promoting supply and demand within the free market, the current system is based on the government imposing an unfair and discriminatory burden on one segment of the economy so that another might benefit.

Grover Norquist and his group have helped foster free markets and liberty on many occasions, but in this instance they are clearly lobbying against the “market economy” and in favor of a handful of special interests hell-bent on preserving their anti-competitive position. Meanwhile, far from imposing “price controls,” Chaffetz’s bill merely seeks to impose checks and balances on a government board that has been manipulating the market for years.

In other words, Chaffetz would substitute market-based fairness for the rigged government methods currently being used to set these royalties. It’s also worth noting that the so-called “market” solution advocated by Norquist does not include anti-trust or anti-competitive restraints against price-fixing — the very thing he accuses Chaffetz and his allies of pushing.

The Internet has become a vibrant component of virtually every marketplace on earth — removing barriers, expanding consumer choices and enhancing economic competitiveness. True free market conservatives believe that its competitive spirit — and the “Spirit of Radio” — should be embraced, not unfairly constrained.

Bill Wilson is the president of Americans for Limited Government.