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8/23/2010
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Deal Would Mandate FM Radios In Cell Phones

Compromise agreement between National Association of Broadcasters and RIAA headed to Congress.

There may be an FM radio in your next cell phone whether you want it or not. The National Association of Broadcasters is lobbying Congress to stipulate that FM radio technology be included in future cell phones.

In exchange, the NAB has agreed that member stations would pay about $100 million in so-called performance fees to music labels and artists. Radio stations would be required to pay performance royalties on a tiered schedule with larger commercial stations paying more than smaller and non-profit stations.

The agreement is part of a compromise between the NAB and the Recording Industry Association of America, which will take the deal to legislators mulling changes to the laws that govern the music and radio industries.

Under the proposal, non-profit stations and small commercial stations with less than $50,000 in annual revenue would pay $100 or 1% of revenue, whichever is the lesser amount. On the other end of the spectrum, stations with more than $1.25 million in annual revenue would pay 1% of their revenue.

The fees haven’t been approved yet and there is no guarantee the proposal will pass in this session of Congress, or even in any session.

“It is important to note that stations with incidental music use – news, talk and sports radio – would not pay for music,” said NAB spokesman Dennis Wharton earlier this month in a statement.

“Additionally, religious services – not religious music – would be exempt from music fees.” Broadcasters have also argued that FM radio access on cell phones would have public safety benefits by alerting and informing citizens in crisis situations.

Online radio already is required to pay performance fees and many online music providers have said the fees caused them to abandon their service or sharply curtail it.

The proposed legislation would require all future cell phones to include an FM chip – representing an estimated cost of about $1 for each chip. Although most cell phone manufacturers oppose being mandated to supply FM chips, many cell phones already include FM chips.

A coalition of six technology industry associations announced their opposition to the “chip mandate” on Monday. “Calls for an FM chip mandate are not about public safety but are instead about propping up a business which consumers are abandoning as they avail themselves of new, more consumer-friendly options,” according to a coalition statement.

The coalition consists of the CTIA – the Wireless Association, the Consumer Electronics Association, the Information Technology Industry Council, the Rural Cellular Association, TechAmerica and the Telecommunications Industry Association.

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