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NAB vs. Economic Darwinism

Ars Technica recently broke the surprising news that NAB and the record industry have joined forces to promote new legislation mandating FM receivers in cell phones and other personal devices.
This opens yet another schism with CEA which as recently as last year was aligned with NAB to profit off the DTV transition. Ars Technica begins their post,

Music labels and radio broadcasters can't agree on much, including whether radio should be forced to turn over hundreds of millions of dollars a year to pay for the music it plays. But the two sides can agree on this: Congress should mandate that FM radio receivers be built into cell phones, PDAs, and other portable electronics.

The Consumer Electronics Association, whose members build the devices that would be affected by such a directive, is incandescent with rage. "The backroom scheme of the [National Association of Broadcasters] and RIAA to have Congress mandate broadcast radios in portable devices, including mobile phones, is the height of absurdity," thundered CEA president Gary Shapiro. Such a move is "not in our national interest."

“Rather than adapt to the digital marketplace, NAB and RIAA act like buggy-whip industries that refuse to innovate and seek to impose penalties on those that do.”

This is basically just another effort by NAB to resist economic Darwinism with new federal regulation, odd from a group that consists mainly of right wing Republicans who espouse both market place forces and limited government. I certainly hope that Rupert Murdoch’s man on the NAB board opposed this move at least. Maybe Glenn Beck can preach against it on his show as yet another encroachment of “big government”. What would Sarah Palin think about such an idea?

This effort is reminiscent of NAB’s pressure on FCC during the Sirius/XM merger that resulted in FCC’s odd Notice of Inquiry captioned “In the Matter of Development of Devices Capable of Supporting Multiple Audio Entertainment Services”, Docket 08-172. Pandering to NAB pressure, FCC asked about

“ requiring devices capable of receiving SDARS to include digital audio broadcast (“DAB”), or HD RadioT, or any other technologies capable of providing audio entertainment services; and requiring devices capable of receiving HD Radio to include SDARS or any other technologies capable of providing audio entertainment services.”

In that NOI FCC presented no legal basis at all why they might have authority to adopt such a regulation. In its comments (at p.9), NAB only cites Section 7 of the Communications Act. Besides the fact that the Commission has consistently ignored Section 7 since it was adopted in the 1980s, a simple reading of the text shows no basis for such authority.

So having promoted HD Radio as new technology for saving FM’s franchise -- with little net effect, NAB is now looking to Capitol Hill as salvation for its radio members. Why not try making the programming more interesting/compelling?


• It gets more bizarre. It appears that the NAB/RIAA proposal/deal is not a free standing one, but part of a larger compromise package by the 2 groups on music royalties and involves streaming audio services. AppleInsider explains,

Currently, only songwriters are paid performance royalties for music played by over the air radio stations, although satellite and Internet radio stations are required to pay performance fees to the artists and labels as well.

Negotiations between the two trade groups have found agreement on a plan that requires radio stations to pay new, limited performance rights fees to the studios annually, but that plan is tied to the ability of the two groups to pass laws forcing mobile device makers to add FM radio features to their devices.

It also reduces the jurisdiction of the Library of Congress’ Copyright Royalty Board with respect to terrestrial broadcasting and streaming. While NAB and RIAA were working out their problems, they thought they would put the FM “chip” requirement on consumer systems unrelated to the problem at hand -- perhaps to preserve their “buggy-whip” business as CEA would say.

• Ars Technica now reports that CEA members might back off from their objections if they are “paid off”. This is a good example of why the public interest is not always what the directly affected parties can negotiate among themselves.

FierceMobileContent.com article
PublicKnowledge article
WirelessWeek article

Winner of most humorous article award: TinyMixTapes.com. A sample:

There has been a bitter war between the armies of music and radio. The taxes that the Recording Industry Army of America (RIAA) demand of radio duchies across the country remains a contentious enough issue to have the National Army of Broadcasters (NAB) strike at them at every opportunity, and neither side has been willing to give in to the argument fully. With their plans for inward expansion on each others' small kingdoms at a standstill, they look outward and see vast amounts of territory around them, territory they once knew and loved but now filled with the unclean and ignorant masses that were once called "potential listeners."

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