August 1, 2013

Dear Representative:

The undersigned organizations wish to reiterate our opposition to the so-called “Internet Radio Fairness Act,” which would require the government to grant subsidized, below-market rates to Internet radio companies for their input costs. This approach moves in the wrong direction by rejecting free-market based rates and involving the government more subjectively in the compensation paid to property owners.

While consumers have more choices than ever before in how, where and when they listen to music services, many of which are licensed in the free marketplace, artists and recording companies are still subject to government compulsory licensing with respect to digital radio services that compete with the market services, with rates set by the government. In other words, digital radio services get special favored treatment compared with their competitors. Currently, Internet radio companies at least must pay a government rate that is based on the rate paid by their competitors in the marketplace. The “Internet Radio Fairness Act” would instead have the government subjectively set a rate that would protect entrenched incumbent services. The proposed standard, created in the 1970s, is intended to prevent disruption of established services, according to supporters of the legislation. Therefore, the bill would deliberately keep new, young, innovative services from replacing current industry leaders.

As long as the government is involved in setting rates, a truly free market cannot exist in compensating music owners and creators for their work. The best way to achieve parity among music distributors is to get the government out of the rate-setting business, rather than to further involve government by granting below-market rates to favored entities. Competitive companies can flourish under a rate set by a true free market because successful on-demand music services such as iTunes, Spotify, Rhapsody, and Rdio already pay rates set by the marketplace. At the very least, the current system of setting rates based on market indicators is certainly better than government-forced below-market prices to benefit a particular company or service type.

There is nothing fair about government picking winners and losers in the music industry or any other marketplace. Therefore, we urge you to oppose the “Internet Radio Fairness Act.”

Sincerely,

Al Cardenas
American Conservative Union

Duane Parde
National Taxpayers Union

Tom Schatz
Council for Citizens Against Government Waste

Phil Kerpen
American Commitment

Jeff Mazzella
Center for Individual Freedom

David Williams
Taxpayers Protection Alliance