I had thought that NAB’s ludicrous proposal to mandate - by federal law - FM receivers in all cell phones (and possibly other mobile equipment)was either a late April Fool’s prank or a kind gift to bloggers to give them something to write about in August. Doesn’t NAB listen to their own newscasts about how the electorate is fed up with the growing role of the federal government and its intrusion into our lives? Isn’t Fox represented on the NAB board? (Indeed,Jack Abernethy, CEO, Fox Television Stations Inc. is on the NAB Board. Rupert M., remember you called me twice in the 1990s trying to arrange a rendezvous with Chmn. Hundt in Hong Kong? I tried hard to arrange it. Could you return that effort by talking to Mr. Abernethy about this? If you’re too busy perhaps you could ask Glenn Beck to call him for you?)

I thought this proposal would disappear off the radar screen. It didn’t!!!

It’s back for Halloween!

Tuesday NAB released a summary of actions at its 10/25-26 board meeting cryptically announcing:

PERFORMANCE FEE DISCUSSION AND ACTION
The NAB Radio Board voted in favor of presenting musicFIRST representatives a legislative "Term Sheet" designed to resolve the longstanding performance fee issue. The Radio Board conditioned their support for the Term Sheet on the understanding that all provisions would remain part of any legislative package.

The cryptic NAB wording was explained by Politico reporter Jennifer Martinez in an article on Thursday:

The board of the National Association of Broadcasters voted this week in favor of paying musicians a royalty fee for playing their music over the radio.

But there’s a catch: If Congress doesn’t vote to force mobile phones to come equipped with radio tuners — a measure that the wireless and consumer electronic industries vehemently oppose — the size of the royalty fee would ultimately depend on the percentage of U.S. mobile phones with built-in radio tuners.

Although CTIA has been quiet publicly on the issue, CEA hasn’t been this week. The recent NAB/CEA DTV Transition cooperative spirit now seems like ancient history. The letter shown at the top of this post was lobbed across the Potomac from CEA’s Arlington bastion to NAB’s DuPont Circle fortress on Tuesday. CEA writes:

We realize that you are under pressure from the RIAA, musicFIRST coalition and Congress, but assure you that your strategy of using us to kill this legislation is failing. Members of Congress rightly judge their constituents to be in no mood for government mandates or interference with the marketplace. We have yet to identify one member of Congress willing to support your attempt to impose old FM technology on new portable products. As the representatives of an innovative and forward-looking industry, CEA will vigorously oppose any effort to force manufacturers by legislative fiat to include legacy technology in devices.I therefore write to urge you to reject this proposal and work instead toward a marketplace solution.

If you insist on taking this proposal to Congress as approved by the NAB Radio Board, we will continue to point out the following:

• Radio is a legacy horse and buggy industry trying to put limits on innovative new industries to preserve its former monopoly. The industry’s refusal to innovate to the benefit of consumers raises questions about the ongoing wisdom of broadcaster use of publicly owned spectrum that could better be used for broadband services that serve the public interest.

• At a time when popular new digital media platforms like satellite radio and online music services are required to pay performance royalties to copyright owners, it is unclear that the royalty exemption for broadcast radio stations can be justified. Indeed, fairness requires that the royalty rate paid by broadcasters should the same as that assessed to online music streaming services and other new technologies.

• Many local radio stations are unmanned, particularly at nights and on weekends, rendering the alleged emergency alert benefit of FM tuners in mobile phones unreliable and raising questions about the wisdom of permitting such unattended operation.

• The additional inclusion of HD radio in the proposal will likely be harmful to manufacturer enthusiasm for and adoption of this technology.

• The threat to make this a step toward a similar requirement for mobile TV implied by Senator Smith in the town hall meeting will quell this nascent market and diminish TV makers’ enthusiasm for mobile products.

We do applaud your recognition of political reality that this proposal is dead-on-arrival on Capitol Hill and your willingness to embrace a more marketplace approach toward compensation. Indeed, we keep hearing from NAB members uncomfortable with the technology mandate approach.

Rarely does one see this type of candor and threat in a public letter from one massive trade association to another. I hope that the TV members of NAB realize that the simultaneity of this FM/cell phone dispute and the Cablevision/Fox dispute during the World Series is a PR disaster for broadcasting as a whole. They are lucky that the election news is limiting coverage somewhat.

Here is Ars Technica’s analysis of the CEA letter:

There's a lot to parse here. The first paragraph appears to threaten to oppose the whole concept of analog broadcasting itself, or at least to encourage Congress and the Federal Communications Commission to extend its relentless search for 500MHz of new licenses for wireless broadband to the FM radio zone (88-108MHz). Thus far that band hasn't been part of the scenario.

The second raises the specter of reviving the FCC's pretty much dead-in-the-water localism proposals, which recommend making the nation's largely automated broadcast stations staff their operations 24/7 ("staff" as in "with human beings").

Ironically, while the broadcasters are quite enthusiastic about mandates for other industries, they're implacably opposed to mandates for themselves—such as minimum staffing and hours for local programming, or a rule requiring license holders to keep their "main studio" in their signal area.

In any case, the record industry is not impressed with NAB’s new “compromise”:

MusicFIRST has completed a preliminary analysis of the new term sheet. In it the radio broadcasters unilaterally cut their digital royalty rates and lowered their terrestrial royalty payment. Those changes by themselves undermine the fundamental economic equation that was core to the July agreement. The NAB’s term sheet gives the idea of a sweetheart deal a bad name. It might even be worse for the music community than the status quo.

Fortunately, Congress writes the laws, not trade associations like the NAB. The musicFIRST Coalition will continue to press forward.

But perhaps the root causes of this problem are the overly macho trade association CEOs who try to justify their high salaries by erratic actions rather than acting like statesmen for their industries. Perhaps a pay cap on such CEOs would help return reason to telecom policy deliberations. Maybe Jon Stewart will propose that tomorrow.