The most powerful company in radio isn't Clear Channel, Viacom or any of the other obvious suspects. It's Arbitron, the company that produces the ratings "book" by which commercial radio stations live and die. No other company knows more about how radio stations make money than Arbitron because no one, other than the station owners, gets a bigger hunk of commercial radio's take.

So naturally Arbitron has an interest in the future of the internet radio business. That's why the company has come down hard on the CARP report , which proposes fees and other requirements for internet radio that effectively prohibit the business from ever establishing itself, an effort made relatively cheap and easy by Linux and other open-source software.

In an open letter to Congress (addressed to F. James Sensenbrenner, Jr., chairman of the House Judiciary Committee), Arbitron shows how CARP's fees will simply prohibit stations from broadcasting on the Net:

If one of the top-rated radio stations in New York rebroadcast its programming online and had the same audience on the Internet as it does over the air, that station would pay approximately $15 million per year in digital rights fees. Thus, the digital rights fees would be over 25% of what that station currently derives from selling traditional over-the-air advertising revenue (approx. $56 million per year). If that online station had original programming on the Internet (versus a rebroadcast), its digital rights fees would be approximately $30 million, or over half of the revenue a top-ranked music station in New York derives from its over-the-air advertising revenue.

Furthermore, the retroactive nature of the fees and the excessive data and reporting requirements set forth by CARP add overwhelming start-up and ongoing operational costs.

Here's how it concludes:

...we believe there should not be any digital rights fees implemented or, at a minimum, there should be a five-year moratorium on digital rights fees for streaming media. In addition, the retroactive aspect of the current proposal should be eliminated. Little would be lost by giving the industry the breathing room it needs to grow since streaming media has not yet generated significant revenues and since the streaming of music on the Internet does not pose a threat to retail music sales. Furthermore, a moratorium would enable the popular but fledgling streaming media industry to grow. Most importantly, the public interest will be better served by assuring the broad distribution of programming needed to stimulate competition, foster innovation and promote diversity.

The letter is signed by Bill Rose, vice president and general manager of Arbitron's Webcast Services division. It is also featured on the company's front page, under the headline "Arbitron Speaks Out Against Proposed Digital Rights Fees".

This is a very big deal: there is no other large company with a deeper claim to objectivity than Arbitron. It will be interesting to see if Congress listens to reason.

We already know what happens when they listen to money.

For more background, here are some links:

Bizarre vs. Bazaar
Webcasting Legally
When Elephants Dance
Death of Web Radio
Another Punch for Copy Protection

Doc Searls is Senior Editor of Linux Journal.