The House Judiciary Committee is holding a hearing this week on proposed legislation that could lock in the way people currently listen to Internet radio, preventing the development of new business models. The hearing will address royalties that are paid by Internet, cable, and satellite radio stations for the music they play. Owners of copyrighted material are subject to compulsory licensing, which means that an individual or company that wants to use valuable commercial copyrighted music can do so without seeking consent from the owner, as long as they are willing to pay a fee fixed by the government. Nothing prevents a digital radio company and a music owner to negotiate a free market deal outside the compulsory license, but most use it. This is how an artist or record label gets paid and is a critical concept when it comes to listening to digital radio on-line or via cable or satellite. Currently, Pandora, and all other digital radio services, pay this government-set fee for the music they use to support their businesses. The rate standard used by the government to set this fee was established under a 1998 law, and it requires that an “expert panel” use the free market as a benchmark to determine what should be paid to owners for the use of their music. Three companies (satellite and cable radio companies) were “grandfathered” in under a lower rate standard, because they existed before the new law was passed. This lower standard assures that the fee set by the government for the use of music by these three companies will not “disrupt” their business models or technology. Unhappy with their current financial arrangement, which they actually worked out in the marketplace with music creators, Pandora now wants to lower the market-based rate standard that applies to all companies launched after 1998 to the lower standard that prevents disruption of their current model so they can pay below-market rates.