I'm sure you're upset that someone has mislead you, but where on earth are you getting your information? It might have made you look less ill-informed had you started the question with "I've heard..." and ended with "...is this true."
Is this just a rant? What is it you want us to do. You don't make that very clear. Just posting a very inaccurate comment like that and leaving it, doesn't really ask a question - other than "Do you listen to internet radio." Which would be better in Polls & Surveys. It makes a not very coherent statement - an incorrect one. And potentially misleads people.
Here are some facts.
A group representing Internet radio is currently in negotiations with the powers that be (mostly record labels, having nothing to do with any "government" as this is a civil matter) with regard to paying any legal and appropriate royalties to the people who spend their lives and devote their careers to writing, publishing and making the music we all love.
As a matter of fact, in the US, terrestrial and satellite radio both pay dearly to ASCAP/BMI/SESAC, the organizations that negotiate on behalf of the writers, composers and publishers of music. But not the artists, unless they are one in the same as many singer-songwriters are.
In the past, a symbiotic relationship has existed between radio and records. Radio plays the songs, giving them exposure and moving them up the charts creating record sales. The labels and artists benefit from this exposure that causes the records to sell. Everybody wins.
Radio and Internet Radio are now involved in a heated battle with greedy record labels who want the hard-pressed radio stations to pay money to them and the performers they represent. Including the Gazillionaires.
These performers would not be where they are without radio airplay, yet they want to bleed the stations for more money. This is outrageous and could be a crisis for radio, especially streaming radio.
IMHO radio stations should make a point by charging the labels for airplay, announcing the fact to make it legal (and not payola) and give them a little of their own treatment right back. This actually may happen - just to make a point.
Eventually WiFi and WiMax will make Internet radio ubiquitous and portable. That will result in an interesting situation as traditional Terrestrial, Internet and Satellite radio all compete for the same ears. My personal opinion is that satellite will probably be the overall winner.
I don't mean to come down so hard on you, man, but you would be better served to get your facts straight before posting material. Someone has led you astray, you're way off base and the information in your question is just plain wrong. But now you can go back to the bozo who got you all riled up and give him what-for ;<)
-a guy named duh