Broacasters fear legislation that restricts hi-def usage.

RIAA head Mitch Bainwol and Clear Channel chief legal officer Andrew Levin engaged in a rapid-fire debate over broadcast audio flag legislation and fair use during a House subcommittee hearing on Capitol Hill today (June 27).

Members of the House Energy and Commerce Subcommittee on Telecommunications and the Internet held a hearing on whether content protection and technological innovation could co-exist. The main focus was on digital radio services -- high-definition radio and satellite broadcasters -- that provide high-quality music to devices that record, automatically compile, store and play hours of music.

Bainwol testified that the RIAA had been trying to negotiate with broadcasters for more than 40 months to resolve issues over fair compensation and content protection. He said that broadcasters only came face-to-face at the bargaining table in March after Congressional leaders expressed interest in the issue.

In March, Subcommittee member Mike Ferguson (D-N.J.) introduced the RIAA-supported Audio Broadcast Flag Licensing act of 2006. The bill would give the FCC authority to stipulate certain terms in license agreements between digital radio providers and companies that provide the underlying technology to create an up-to-standards device. The license provisions must include the prohibition of unauthorized copying and redistribution of content, and the use of a broadcast flag or similar technology in connection with that copying and redistribution restriction.

The broadcast flag system is two-pronged. The "flag" is a technical method to mark content as copy-protected. The second aspect involves the creation of standards and rules that define how devices must handle flagged content (e.g., restricting or allowing certain uses like multiple copying or playback).

Speaking on behalf of the National Assn. of Broadcasters, Levin noted that 800 stations have successfully rolled out high-definition radio after nearly 15 years of development. There are 1,200 more stations that will convert to HD at a cost of $100,000 per station; broadcasters will spend $100 million in the next two years to promote the services, he said. Broadcasters do not want legislation that requires a particular technology be used to protect content or strict usage controls, he added.

"We need to take a hard look at what consumers are entitled to and what their expectations are before we agree on usage rules -- before they get memorialized in statute or regulations," Levin said. He blamed a long "laundry list" of usage rules proposed by the RIAA as one of the reasons negotiations have not been completed.

Bainwol responded that the negotiations had been productive, and they are very close to reaching some agreement on these rules. In response to questions by Subcommittee members, Bainwol agreed to include in the negotiations other interested parties, such as device manufacturers, if they are willing to help find solutions.

The RIAA position is that high-definition radio and satellite broadcasters are becoming download services by delivering music to devices like the Sirius S50, the XM Helix and the HD radio with a hard drive. While the broadcasters pay performance royalties to rights holders to broadcast the music, they do not pay additional royalties that services like Apple iTunes and RealNetworks Rhapsody pay to the music industry for a distribution, i.e., permanent and temporary downloads.

Broadcasters take the position that their services should not trigger an additional payment. The recording and storing are fair use (i.e., permissible home recording and time-shifting for later listening); the device manufacturers pay a royalty to creators for the recording.

Bainwol testified that services which permit consumers to "cherry pick" which songs they save to the devices and keep for as long as they subscribe to a service should require a license and payment for this distribution. Record companies do not object to consumers recording a block of programming or manually recording songs, he said.

Levin said that broadcasters agree that consumers should not be able to cherry pick which songs they want to record and save without listening to the radio at all, but that the RIAA is making certain unacceptable proposals regarding the recording of a big block of time. Satellite broadcasters and manufacturers of consumer devices have not taken the same position regarding the individual picking of songs, Bainwol said.

The RIAA wants Congress to pressure broadcasters to reach a faster solution to the issues, while the broadcasters want legislators to stay out of private negotiations so they can find an industry solution. When a number of Subcommittee members pressed Levin to estimate how long it would take to find a solution, he said that he hoped an agreement could be nailed down in 6-12 months.

"The motto of Congress is if it's worth doing, it's worth overdoing," said Rep. Barbara Cuban (R-Wyo.). "We hope it can be worked out. But if it can't be, we're ready to get to work to fix it."