If you want to know why the public has such a low opinion of Washington these days, consider the insider deal that could affect every American with a cell phone. In a scheme that can truly be described as “backroom,” the music and broadcast industries are asking Congress to mandate that every cell phone double as a radio.
Don’t bother asking how this helps cell phone users – it doesn’t. Radio broadcasters and the big record labels drove their businesses into the ground. Now, they are trying to dig out by redesigning your smartphone.
This newfound industry collusion is actually borne of a dispute around a bill called the Performance Rights Act. The bill is the Recording Industry Association of America’s – representing big record labels – answer to declining profits. Broadcasters have never paid royalties because record labels receive “free” publicity from radio airplay of their songs.
But now the RIAA argues that the shift from over-the-air to online music listening means that such publicity is not valuable, and stations should start paying a fee for each song they play.
The logical solution is to let radio stations play only that music that copyright owners allow them to, which would settle the debate over whether radio stations provide promotional value. They clearly do.
The radio stations, represented by the National Association of Broadcasters, not surprisingly opposed the legislation, arguing the bill would impose big costs on stations.
The reality is that both industries are struggling to find equilibrium in the Internet age, for which I sympathize. As the head of the Consumer Electronics Association for the last 20 years, I have seen hundreds of companies fail because they couldn’t adapt to newer technologies. It is a painful process, but free market failures are necessary to keep the United States the most innovative nation in the world.
Which is why the deal the two industries are discussing is so patently absurd. The NAB suddenly reversed course on the bill, and in exchange for accepting some form of royalty payment to record labels, the NAB wants Congress to mandate inclusion of a radio chip in all mobile phones and portable electronic devices.
This is not a small, inconsequential mandate. With 91 percent of U.S. households owning a mobile phone, the NAB’s proposal will affect – quite literally – nearly every single person in the United States. And unnecessarily so, as most mobile phones can play music and even access radio stations over the Internet – without the static.
Grasping at straws, about the only justification for this mandate that supporters can conjure is that it will somehow help public safety. But the technology for public-safety announcements, which is what they have in mind, has already moved beyond radio signals. In fact, Congress rejected using FM signals when it debated the WARN Act, which will provide emergency signals over the much more efficient wireless networks. And with most radio stations now unmanned at least part of the time, emergency warnings are better provided by text via carriers, by the Internet and by local TV stations.
Some 150 million cell phones will be sold in the United States next year. Imagine if every one of these needed a new special antenna simply to receive old style FM broadcasts? It’s as if a century ago, Congress would have required a buggy whip and horse be put in front of every car.
Why should America’s fastest changing new media industry be hobbled by the competitive failures of an old industry? With mobile technology, companies like Apple, HP-Palm, LG, Motorola, Nokia, RIM and Samsung and many others have competed fiercely with each other to produce devices that are so much more than phones. With the ability to email, access the Internet, take pictures and videos, and play music, the cell phone is an indispensible article of daily life for millions of American consumers.
But why stop with an FM chip in cell phones? Why not require them in pillows, bicycles, all new home construction and in computers? Just where does this absurdity of government intervention stop?
To some Washington lobbyists, the cell phone is nothing more than a bargaining chip to be used by Congress to shore up an older technology.
I value the radio industry and want it to survive these tumultuous times. But the American way must be to let businesses fail and avoid government bailouts.
Radio broadcasters already use borrowed public spectrum – and if they can’t make it they should consider returning that spectrum for a better use rather than hatching backroom deals at the expense of another thriving industry. Congress should do the right thing and leave this pathetic deal to die in the backroom where it was hatched.
Gary Shapiro is president and CEO of the Consumer Electronics Association (CEA), the U.S. trade association representing some 2,000 consumer electronics companies.
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