When the smoke clears ...
If this goes all the way, we might be in an interesting situation, at least in America, where this is an issue ... you offshore pirates can continue going about your business ..
1) The Internet broadcasters will be reduced to royalty-free or public domain music (certain classical music releases come to mind) and independent musicians hawking their own wares. "Commercial" webcasting, i.e. meatspace radio replacements, will be knocked off.
2) As a result, traditional radio broadcasters will regain nearly the position the held pre-webcasting, and advertising revenues will soar as iPods and iPhones and Zunes add radio reception capability. Maybe the Walkman will make a brief comeback ... oh wait ... that's the iPod with radio support ...
3) Of course, the US Government will mandate that all radio broadcasts be digital-only (no more rabbit ears) by 2012, as they are doing with television broadcasts, at which time the radio stations will fall into the webcasting category, forcing them to pony up the fees associated with the current legislation, and driving them into bankruptcy.
4) Finally, commercial music artists will revolt against the pricing scheme and beg the US Government to cancel the program, at which point the artists will once again have a broadcast medium to promote their physical recordings and touring schedules ... just like traditional radio has done for decades.
At this point, commercial webcasting will re-emerge, and the artists will start complaining about "lost royalties", all over again.
The moral of the story: Radio and webcasting are PROMOTIONAL VEHICLES, not end-point sales items and should be treated as such. Killing the goose won't make the golden eggs she used to lay any more numerous.