The third Sunday in July was designated as the day new music royalty fees for Internet radio would kick in. However, 11th-hour talks between SoundExchange – the organization designated to collect royalties for online music streaming – and webcasters continued beyond the deadline with both sides indicating progress with talks scheduled to resume Friday, July 20th.

Under the new rates, webcasters would pay .08 of a cent per song per play, retroactive to last year, rising to .19 of a cent by 2010. Small music streamers like Pandora.com have claimed the new rates represent a more than 300 percent increase and predicted many webcasters would go dark as a result of the increase.

Congress is also interested in the new rates. Both houses have bills that would set rates for webcasters similar to that of satellite radio.

Perhaps out of the goodness of their collective hearts, or perhaps fearing a scenario where politicians set rates, SoundExchange has tossed webcasters a couple of carrots.

In May, SoundExchange offered to allow small webcasters an opportunity to pay fees based on income rather than the previously announced set rate, saying the offer was “in direct” response to Congressional inquiries. However, both sides differed on what constituted a “small” business.

Another controversial aspect of the new royalty fees is a $500 per channel charge. Considering that both small and large webcasters have several, even hundreds of channels, a per-channel charge was more than enough for Internet streamers to start circling the wagons.

Now SoundExchange is offering a cap on the $500 per channel charge, and there are indications that such a limitation might strike the right chord with webcasters. However, SoundExchange and the recording industry are also concerned about other matters, such as improved record keeping by webcasters and protecting streams from being saved on hard drives.

“These issues are all on the table,” said David Oxenford, a lawyer representing the smaller companies. “We hope that we can come to some resolution in the near term.”