Mr. Chairman, Representative Berman, and Members of the Subcommittee:

Core Values. From its inception, DiMA's efforts have been guided by two core principles:

Copyright owners and performing artists deserve fair and reasonable compensation for commercial uses of their content.

Occasionally these values conflict, such as when existing media companies do not pay copyright royalties for certain actions that trigger royalties for DiMA members. Over time, we are hopeful that this Subcommittee will recognize that consumers and content owners are indifferent, or should be indifferent, to the technological means by which content is delivered, so long as the content is of a high quality, is reasonably priced, is secure, and is accounted for. Rather than focusing on fiber versus satellite versus copper wire versus coaxial cable, the law should ensure fair payment based on the value of the work and the use.

By contrast, Mr. Chairman, look at the state of radio on the Internet. Right now, on the Internet you can listen for free to thousands of radio stations broadcasting live from around the world. Thanks to the compulsory license enacted by Congress in the Digital Millennium Copyright Act of 1998, consumers can enjoy broadcasts of copyrighted sound recordings over these radio stations over the Internet, and the artists and copyright owners are being paid. You cannot do the same with television.

There is a danger, Mr. Chairman, in allowing the Internet video market to remain unserved much longer. While DiMA companies have worked within the system to perform and market sound recordings under copyright licenses, the dearth of popular music offerings over the Internet created an opportunity for uncompensated trading of music files. Because of the recording industry's reticence to proactively and cooperatively create legitimate Internet delivery systems, the pirates got there first. So instead of capitalizing on the technology, recording industry lawyers playing Whack-A-Mole, sending cease and desist letters and filing lawsuits to shut down every new unlicensed site that rears its unauthorized head.

No matter what opinion one may have of the concept and execution of iCraveTV.com, that service demonstrated that the technology and the public demand for Internet video are ready for prime time, and of course the technology is only improving. Nature abhors any vacuum, Mr. Chairman. Unless licensed network video content begins to flow over the Internet, soon my fellow panelists may hear that giant sucking sound of an iCraveTV that is transmitting from a country with laws that do not require it to be shut down.

Existing Law Regarding Internet Video Compulsory Licensing.

Notwithstanding Congressional attention to laws and public policy, DiMA members do not view compulsory license laws as the most significant impediment to full network programming on the Internet. Rather, we view technology and consumer readiness as larger impediments, though we anticipate those problems will quickly recede. According to The Industry Standard, cable modem access is expected to double this year to 2.4 million households, and an estimated 53 million adults will use the Internet this year for entertainment. We are a giant step closer to the transition of Internet television from a novelty into a media outlet capable of competing effectively against cable or satellite video services.

To our knowledge, no Internet company yet has sought the compulsory license to carry network television programming. Yet, with improvements in technology and the burgeoning new Internet market, the first Internet license cannot be far away.

In truth, Mr. Chairman, the technological orientation of the broadcast compulsory licenses make less sense as the technologies evolve. For example, are RoadRunner and @Home cable services or Internet services? What is WebTV particularly after announcing a deal with Direct TV? How does the law distinguish between technologies when they all carry the same encrypted digital video data? The set-top box with a cable or satellite service is really a limited purpose computer. And if we put a tuner and smart card authentication into a personal computer, and deliver an encrypted conditional access signal to that PC, then there is no meaningful distinction between the functions of a cable or satellite television service and an Internet-based television service.

Mr. Chairman, we have seen cable and satellite television services competing to offer Internet access to their video customers. Traditional over-the-air broadcasters are considering using their digital spectrum to offer Internet content to the public. In light of the convergence of traditional media into the Internet space, there is no principled basis for Internet media companies to be precluded from competing in the market for providing television service over the Internet.

Marketplace Licensing is Best. Let me be perfectly clear: as young, entrepreneurial companies, DiMA members believe that video content licensing likely is best left to the marketplace. Accordingly, DiMA believes that the Internet video marketplace should be given time to mature and work, so as to allow content owners and webcasters to strike commercial licensing deals that bring high-value video content to the Internet audience.

However, DiMA members also recognize that audio and video compulsory licenses are part of the fabric of U.S. copyright law, and that video compulsory licenses have served notable and useful purposes: first, by ensuring that rural Americans could access traditional network and local television through cable systems; and second, by ensuring satellite competition to the limited channels and market dominance of cable distribution. Thus, where the music and video content marketplace has failed, either because the parties are too numerous or, conversely, the industries too concentrated, the Congress has employed compulsory licensing to promote consumer interests, including to encourage the development of pro-consumer competitive entrepreneurs.

Ensuring the Future of Competitive Consumer Choice. While DiMA members believe that marketplace licensing provides the best opportunity to bring video programming to the Internet, we also should ask ourselves what the scope of any licenses could be. One model to consider is whether broadcast television retransmitted over the Internet should emulate the model of Internet retransmissions of broadcast radio, which seems to be working equally well for consumers and content owners.

Initial concern that Internet radio might diminish localism has simply failed to materialize. Surveys taken by Arbitron and Edison New Media suggest that most listeners to Internet radio retransmissions tune in their favorite local stations. Other listeners look for specific sporting events (such as games played by their favorite college or professional teams) or musical genres otherwise unavailable in their local markets. Many listeners use the Internet to connect with radio stations in places they used to live, or places they are about to visit. Still others listen for major news events as reported by local stations -- a flood in Grand Rapids, a home town sports team winning a state championship, or election results back home.

The proven benefits to consumers and broadcasters from the nationwide availability of radio retransmissions suggests that a similar regime could be equally appropriate for licensing of broadcast television retransmissions over the Internet. Clearly consumers would prefer full access to local and network television programming from any station, anywhere in the country. From the broadcasters' and content owners' point of view, major obstacles will include how to assure reasonable compensation for these retransmissions, how to avoid signal piracy and other unauthorized retransmissions.

DiMA members do not pretend that these issues are simple. We do suggest that there are licensing and technical negotiations that are well worth having. And, again, in light of the recent experiences of the recording industry, if we do not constructively engage in finding legitimate ways to enable public Internet access to high-value network programming, we risk being overtaken by the innumerable noncompensable threats that such programming will find its way onto the Internet. DiMA members clearly favor legitimate means to meet marketplace demand.

Thank you again, Mr. Chairman, for the opportunity to testify today. I will be pleased to answer any questions that you or the Members of this Subcommittee may have.