Is anyone out there listening?

That is what radio advertisers want to know, and why many stations for years have turned to Arbitron Inc., the radio-rating service, despite their frustrations with its old-fashioned method of tracking listeners with paper-and-pencil diaries.

Particularly irritated has been Arbitron's biggest client -- Clear Channel Communications Inc., which owns 1,200 radio stations. Now, Aribtron is on the verge of updating its system with a new high-tech measurement device. But Clear Channel is actively seeking alternatives -- threatening to rob Arbitron of its most crucial client, which accounts for about 19 percent of Aribtron's revenue.

The showdown comes as the industry has decided that the old diary system is an antiquated, unreliable embarrassment. Spurring the desire for change is the lackluster growth in radio advertising revenue, along with competition from advertising media like the Internet, which can show exactly how many people visited various Web sites and how long they stayed. "We're in an electronic age," says Joel Hollander, chairman and chief executive of CBS Radio. "We need more instantaneous measurement."

Radio companies say they could win a bigger chunk of ad dollars if they could prove exactly how much people listen to the radio. Arbitron's solution is the People Meter, a small device that clips onto a belt loop or slides into a purse. It automatically detects what stations its wearers are tuned in to and beams back that information to the number crunchers.

Arbitron had been testing the People Meter for years but couldn't interest the radio industry, which spent most of the go-go 1990s and early 2000s harvesting fat profits and didn't see the need to invest in expensive technology. The People Meter will cost radio companies in some cases around 65 percent more than the diaries.

The ratings debate has important implications for both the radio industry and Arbitron. The new devices come with the ability to measure more than simply who's listening to what radio stations. Some versions could include global-positioning systems or radio-frequency identification, potentially allowing advertisers to track whether people, after hearing an ad, then followed up by going to the appropriate store or car dealership or fast-food restaurant. Knowing the likely follow-through behavior of a given group of listeners would, ironically, make it less important to know how many people listen to a station.

Arbitron says the People Meter is ready to go, and earlier this year created an uproar when it said it would begin phasing it in this summer in Houston. Existing Arbitron clients said that was presumptuous and got Arbitron to hold off on the launch until the device wins accreditation from an industry group, which will come next fall at the earliest. The clients had concerns ranging from what the changes would be on their listening numbers to how well the device measured Hispanic audiences.

Arbitron says it has spent years refining the People Meter, the technology is cutting-edge, and the industry has much to gain by adopting it as early as possible. "We have a functioning system. It's ready to go," says Pierre Bouvard, president, sales and marketing, at Arbitron. "We're just waiting on (industry) accreditation."

The biggest obstacle to Arbitron is Clear Channel, whose contract is up at the end of 2008. Not willing to simply go along with Aribtron's plans, Clear Channel last summer requested proposals for alternatives to Arbitron's diary system. By the end of the year, it had narrowed down 34 initial proposals to seven candidates, and rounded up most of the radio industry, along with media buyers and advertisers, to join its evaluation committee. "We are in a very big hurry to do the right thing," Jess Hanson, senior vice president of research at Clear Channel and head of the evaluation team, told broadcasters at a recent conference, explaining why the process took time. "There's billions of dollars (at stake) here."

Today, there are three finalists. Arbitron's People Meter is one, but so is a similar, cheaper system proposed by Germany's GfK AG and its units Eurisko and MRI. And Houston-based Media Audit Inc., a unit of International Demographics Inc., is working with Paris-based Ipsos AG on a cellphone-based measurement gizmo known as the Smart Phone, which Media Audit estimates would cost only 15 percent more than Arbitron's diaries.

One important test of the technology measures for all systems is whether encoded identifying signals on stations are truly inaudible to humans. To get the skinny on its system, Media Audit, for example, will gather some musicians from the Houston Symphony into a room next week for a test known in the industry as "Golden Ears."

Phillip Beswick, Media Audit's executive vice president for media sales, says that integrating the system into a mobile phone makes most sense, because people carry it around with them anyway. But Arbitron and MRI counter that giving people the souped-up phones would change their behavior. They also say that users don't carry phones everywhere -- for example leaving them downstairs at home while spending time upstairs or in the yard.

Arbitron has one big advantage because the People Meter has been tested extensively in this country, while the Smart Phone and MRI's Media Monitor still need to go through market trials. Both the latter contenders are balking at the millions such trials would cost, trying to get the radio companies to foot some of the bill or provide more of a commitment to adopting their ratings services before they sink so much money into the research. Last month, MRI formally withdrew from the process, citing the expense of the tests. People familiar with the matter say there is still a possibility the radio industry would cough up enough to bring it back into the race.

Further complicating the issue: Many key radio players signed up for Arbitron in recent weeks, notably CBS Corp.'s CBS Radio. If Clear Channel and other holdouts like Cox Communications Inc. and Radio One Inc. go with an alternative, the radio industry could end up with two different standards for measuring audiences, creating confusion among advertisers.

That wouldn't be unprecedented. Arbitron used to have competitors, including companies like Hooper and Pulse. The last serious rival, Birch, was shut down at the end of 1991 by parent VNU. And some people in the industry say that two services are needed, to provide checks and balances on Arbitron.