THE U.S. SENATE has approved legislation that gives small webcasters the ability to negotiate lower royalty rates than those dictated by federal regulators earlier this year, providing substantial relief to many webcasters who feared that they would be forced to shut down in the face of cumbersome fees.

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The "Small Webcaster Settlement Act of 2002" was approved by the Senate in the wee hours of Friday morning, after a prolonged legislative session begun Thursday.

The Senate's approval was met with a sigh of relief from industry players who have already been negotiating with the music industry to set lower royalty fees.

The bill suspends royalty fee payments for small webcasters until Dec. 15, giving them an opportunity to hammer out the new fees.

"Today's congressional approval of the Small Webcaster Settlement Act is a victory for all consumers and all providers of Internet radio," Jonathan Potter, executive director of the Digital Media Associations (DiMA) said in a statement.

The bill was introduced in an effort to calm the storm surrounding new royalty rate fees set by the Librarian of Congress and Copyright Office earlier this year.

Those fees sent shock waves through the webcasting industry as many small webcasters protested that they would almost immediately be forced off the air when the rates took effect on Oct. 20.

Responding to the webcasters' cries, new legislation was introduced in the House, offering small webcasters a reprieve from the new rates. With the Senate's approval of the Small Webcaster Settlement Act, small webcasters will now be able to negotiate lower rates without running afoul of the rate scheme set by the Librarian of Congress.

A new royalty rate plan has already been proposed for the small webcasters, and, according to Potter, will likely be adopted.

The proposed rate plan would allow the small broadcasters to pay royalties worth 10 percent of their revenues, or 7 percent of their expenses, depending on which is higher, on revenue up to $250,000 a year. For revenues exceeding $250,000 a year, the small webcasters would pay 12 percent of royalties or 7 percent of expenses in royalties.

Although the new bill is being seen as a win by the webcasters and the record industry, Potter pointed out that the consumers are the real winners.

"The ultimate victory here is for consumers ... this will maintain the maximum diversity of Internet radio and programming," he said in a conference call Friday.