Internet radio has become a bastion for niche music, but if an impending government ruling on royalty fees is approved, listeners could find their favorite Webcasts silent.

The U.S. Copyright Office established a Copyright Arbitration Royalty panel (CARP) to decide what fees Webcasters should pay — and will owe retroactively to 1998 — to record companies. And now CARP's recommendations, which include paying a fraction of a cent every time a song plays, are up for a vote next month. The decision will be forwarded as a recommendation to the Library of Congress.

But Webcasters say the proposed fees would require them to pay more than half their revenue, and could signal the end of online radio.

"The CARP rates as they are proposed right now would make it impossible for Beethoven.com to continue operation or to even formulate any viable business model for Internet radio," said the classical music site's director, Kevin Shively. "They want to charge us per listener, per track played — every time one listener hears one track they want 14/100th of a cent."

Internet radio proponents say the people who would suffer the most from the new rules would be online music audiences.

John Jeffrey, lead lawyer for Live365, the largest Internet radio provider, explained: "If you want to listen to anything other than Top 40 music [on the radio] there's nothing to listen to, but you can find any type of music on the Web."

The music sites have benefited from the vast number of people who can access the Internet, making less popular genres flourish online, he said.

"The percentage of classical music listeners in a small market would be very low. There just aren't enough people in their broadcast range to make it viable," Jeffrey said. "But when you can make your music available to the world, you have a much bigger net to amass a bigger audience."

Yey, despite quickly growing audiences, the stations are still struggling. Most are not turning a profit yet and 1,100 have already gone out of business in the past year, Shively said. "Anything that would be overly aggressive in terms of royalty would just push the rest of us over the edge."

But the Recording Industry Association of America (RIAA) said in a recent statement that it "wants all Webcasters, large and small, to succeed" and "the CARP rates will not put Webcasters out of business."

The statement also asserts that the consequences of the proposed royalties are being blown out of proportion.

"The CARP rates have become the subject of an intense misinformation and propaganda campaign (so called 'grassroots' but really ginned up by sophisticated lobbyists in D.C)," the RIAA stated.

Kurt Hanson, publisher of Rain: Radio and Internet Newsletter, disagreed with the description. "We're a bunch of small, independent Webcasters who wouldn't have a clue how to be sophisticated lobbyists," Hanson said. "The RIAA is trying to position themselves as the little guy — an approach that smacks of desperation."

But the CARP Report assures music fans of its sincerity. "The subject matter underlying this proceeding — access to music — spans from ancient antiquity to state-of-the-art-technology.... The Panel is cognizant that the decision it renders....could significantly affect citizen access to music for years to come."

Hanson created SaveInternetRadio.com to educate people about the impending legislation.

"The clock is ticking," he said. "The copyright office has to accept, modify or set aside the CARP recommendation by May 21."

Hanson said this ruling is an important one for the music industry as a whole. "If the CARP rule is accepted, it looks like it favors the RIAA, but I think they would win the battle but lose the war," he said. "If 50,000 stations go off the air, the RIAA is going to look like the enemy to music fans."

The RIAA's statement puts a positive spin on the situation, saying that Webcasting represents an "important and growing source of revenue for record labels, as well as for artists and performers."

But Webcasters like Shively are nervously awaiting the May decision. "Our entire industry is hanging in the balance," he said.