Report says collecting societies hamper online biz.

The European Commission will unveil controversial plans next week to boost the online music sector by opening up licensing and royalty collecting systems.

The Commission -- the European Union's executive authority -- will publish a public discussion paper that suggests relaxing the inflexible association collecting societies have with musicians and writers.

In the paper, the Commission says that the complicated bureaucratic system involving national societies in all 25 EU countries is impeding the growth of online music. It also says artists and music publishers should be allowed to deal with collecting societies outside their EU home country, if they feel the service would be more efficient.

The document claims the national royalty collecting systems are an unnecessary burden to Web-based music services such as Apple's iTunes Music Store and suggests a single European licensing system covering the Internet. If the EU can develop a successful system to manage copyright, the Commission is confident that it could kick-start other such schemes.

The collecting system is also looked at from an anti-trust perspective. The paper says cross-licensing arrangements that the collecting societies have between themselves lead to an effective lock-up of national territories.

Last year, the Commission warned that the so-called Santiago Agreement was potentially against EU competition rules. The Santiago Agreement is effectively a cross-licensing arrangement across the collecting societies.

European authors group GESAC has criticized the Commission's new draft plans as draconian. "We are very worried," says GESAC legal advisor Isabelle Prost. "We don't agree with the Commission's diagnosis of the music sector, and we don't agree with the prescription."

Prost says the slow development of online music sales was more related to uncertainty about secure payments, the reluctance of music majors to put their catalogs online, and the proliferation of pirate online material. "This will have serious consequences for those trying to promote online music and protecting cultural diversity," she said.