Web radio broadcasters were granted a temporary reprieve from controversial new royalty rates just two days before the revised fees were scheduled to take effect.

SoundExchange, the not-for-profit agency charged with collecting the fees, announced on Friday that it would hold off with small webcasting firms while a new royalty system was being negotiated. 

The current system, which includes a provision to charge stations $500 per channel, became active on 15 July and has been widely criticised by smaller broadcasters.

The system would raise royalty costs by as much as 1,200 per cent, according to the broadcasters, and in some cases leave them with charges exceeding total revenues.

Not all companies were spared from having to pay the new fees, however, and SoundExchange said that it will still be holding large broadcasters to the new fee structure.

One of those large broadcasters, Yahoo, confirmed to vnunet.com that it is complying, but will continue to support efforts to draft a new royalty system. 

The broadcasters have been backing an alternative plan which would charge a flat percentage of total revenues.

SoundExchange's latest offer would place a cap on the per-feed charge as long as broadcasters agreed to implement copy-protection technologies to prevent users from 'ripping' audio feeds.

Tim Westergren, founder of Pandora, told vnunet.com that it is not the per-feed cost that scares broadcasters. "That was never the main problem, It has always been the rates," he said. 

Westergren also downplayed the clout held by SoundExchange, noting that the company only collects fees. Even if SoundExchange wanted to declare the rates null and void, it would not have the authority to do so.

The main hope for broadcasters, according to Westergren, is the Internet Radio Equality Act (PDF) which would require broadcasters to pay royalties based on a percentage of total revenues rather than a per-song fee.