Pandora founder Tim Westergren, however, strongly disagreed.

"It's an utterly ridiculous ruling that renders any form of Internet radio non-economic," Westergren wrote in his blog on the Pandora Web site. "This is a terribly ill-conceived attempt to crush a powerful and positive grassroots movement that is sweeping across the music world. The record labels' struggles have nothing to do with online radio and killing it will further hurt their business, not help it."

In a statement e-mailed to Computerworld, Pandora CEO Joe Kennedy added, "The rates are disastrous. I'm not aware of any Internet radio service that believes they can sustain a business at the rates set by this decision. The only reason the services are not shutting down today is the belief that rationality will ultimately prevail here, either through appeal or congressional intervention. If these rates are left standing, satellite and broadcast may be all that are left. Broadcasters pay no sound recording royalties at all and, at the new rates, Internet radio would have to pay four to five (times) the rate that the satellite companies pay."

Broadcast radio station KCRW in Santa Monica, Calif., a nonprofit, tax-exempt organization and an affiliate of National Public Radio, also is affected by the rate change because it streams its programs online. For nonprofits like KCRW, the board set a $500 annual flat fee per radio channel for a certain number of listening hours per month.

"According to our calculations, we would owe $188,000 in royalty fees alone for 2007, and we would owe $138,000 in royalties in 2006," said KCRW spokesman Anil Dewan. "One of the questions is will we have to put the programs behind a gateway that is available to members only? But that runs antithetical to who we are as public broadcasters, and it's not where we want to go."