SoundExchange, the group that collects performance fees on behalf of hundreds of major and independent record companies, said Tuesday that it would give “small” Webcasters the option of paying “below market” royalty rates on the songs they play. Their offer would keep royalty rates essentially the same as they are under a 2002 law called the Small Webcaster Settlement Act.

“The net result of this proposal is that small Webcasters would be guaranteed no increase in royalty payments for 13 years, from 1998 to 2010,” SoundExchange general counsel Michael Huppe said in a statement.

Small webcasters would pay 10 percent of all gross revenue up to $250,000 and 12 percent for all gross revenue above that amount. Those rates would hold until 2010 and be retroactive to 2006, SoundExchange said.

The proposal has been rejected by several groups representing webcasters.

SaveNetRadio said the idea of offering privileges to companies that keep their revenue below government-set caps would stunt the growth of smaller firms and gut the Internet radio industry.

“Under government-set revenue caps, Webcasters will invest less, innovate less and promote less,” SaveNetRadio spokesman Jake Ward said in a statement. “Under this proposal, Internet radio would become a lousy long-term business, unable to compete effectively against big broadcast and big satellite radio–artists, Webcasters and listeners be damned.”

The Electronic Frontier Foundation is pushing for laws more favorable to webcasters.

“The offer announced today would essentially extend the much more reasonable statutory licensing terms that small webcasters have relied on for the last five years,” said EFF in a statement. “But commercial services like Pandora and Live365 are still in deep trouble, as are small webcasters that may want to expand their business over time. And when SoundExchange’s offer expires in 2010, small webcasters may once again be threatened with extinction.”

EFF is backing the Internet Radio Equality Act as a way to help sustain music webcasting and fix the statutory licensing process on which most nonsubscription, noninteractive music webcasters rely.