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ACI’s Center for Citizen Research has established a Florida-focused website that will serve as an educational resource for Floridians on major statewide issues, www.aciflorida.org.  The website is part of a broader initiative by the national group to spotlight consumer issues in key states.  In addition, ACI plans to tap state experts and establish a presence within the state. 

“Florida is dealing with a number of important issues and public policies, some of which are currently having adverse consequences on consumers in the state,” said Steve Pociask, president of the American Consumer Institute.  “ACI will serve as an educational resource and a voice that represents the best solutions for all Florida consumers.”

As part of the announcement, ACI named Florida State University Associate Professor Patricia Born as Research Fellow.  Dr. Born is a professor in FSU’s Department of Risk Management/Insurance, Real Estate and Business Law and is the Director of the FSU Center for Insurance Research.  She is also a Research Associate in the Florida Catastrophic Storm Risk Management Center and an Associated Member of the Munich Risk and Insurance Center.

“I’m thrilled that a well-respected, national organization such as the American Consumer Institute is willing to focus on issues in our state which have a major effect on all Floridians,” said Born.  “I look forward to working closely with them to identify solutions within our perilous insurance market.”

“We are pleased to add Dr. Born to our team, as she will provide valuable expertise on Florida’s significant insurance issues,” added Pociask.  “Our continued focus in Florida will be to support sustainable policies that benefit consumers, spur competition and encourage innovation, while maintaining reasonable and necessary consumer safeguards.”

In recent years, Pociask testified in front of the Florida Legislature on nine occasions, urging policymakers to consider steps to increase market entry and competition for telecommunications and cable TV services, and for reform of outdated price regulations that have stifled competition and pushed jobs out of the state.

In 2010 and beyond, ACI will be reviewing state-specific issues in a variety of other states.  ACI focuses on policy issues that affect consumers by using economic tools and proven principles to determine which policies provide the greatest benefit for consumers. 

 For More Information, Visit www.ACIFlorida.Org

Special To The Tampa Tribune

Published: March 3, 2010

If an insurance company sold you a homeowner’s policy knowing that, if disaster was to strike, it probably couldn’t pay your claim, you would call that “consumer fraud” - plain and simple. If private insurance companies were to instigate such a scam, the insurance commissioner would be the first to step in and halt these insolvent business doings, even going so far to working to put these crooks behind bars. At least, that is what the public expects.

But when Florida’s state-operated homeowners’ insurance company, Citizens, sells you a policy knowing that it may not have the financial reserves to cover your claims should a major catastrophe occur, what would otherwise be considered a fraud is just business as usual. The fact is that Citizens is selling policies to Floridians at predatorily low rates - rates so low it may not be able to pay claims should a major catastrophe occur. Ironically, however, the scheme under way in Florida is occurring with full knowledge and consent of the state insurance commissioner and key state policymakers ….

(For the full article click here)

The survey results also find that 90% of consumers believe that they should make their own decisions about healthcare coverage, but, when separately asked about the government’s role, 14% agreed that the government should make decisions about their healthcare coverage.  On related issues, 70% of consumers support tort reform to reduce malpractice costs (15% against), 79% support allowing health insurance companies to compete across state boarders (15% against), and 83% support coverage for pre-existing medical conditions (14% against).  In terms of how to pay for universal healthcare costs, 66% of consumers are against increasing taxes, and 77% are against using Medicare cuts.

The national survey of 1,001 adults and is part of the Institute’s 2010 Consumer Pulse Survey.  These survey results have an accuracy of plus or minus 3%.

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Jobs, Jobs, Jobs
At the State of Union Address, President Obama identified jobs as the “number one focus” for the year – and no wonder. While the unemployment rate dipped from December to January from 10.0% to 9.7%, the rate is still twice as high as it was just two years ago and, since that time, nonfarm employment has fallen by 8.4 million jobs.

At the same time that the Administration considers jobs legislation and a second stimulus, the Federal Communications Commission (FCC) is considering the imposition of Internet regulations (so called “net Neutrality” regulations) on “core” or broadband network companies, regulations that numerous studies show would reduce investment, consumer welfare and economic growth. Proponents of regulation assert, without much supporting data and analysis, that these regulations would produce offsetting benefits at the “edge” of the networks, particularly applications companies, like Google, eBay and Amazon.

A Study on Broadband Employment
A recent American Consumer Institute study, “The Internet Ecosystem: Employment Impacts of National Broadband Policies,” authored by Larry Darby, Joseph Fuhr and Steve Pociask shows that network companies create twice as many jobs and invest twice as much, dollar for dollar, compared to non-network (edge) IT companies. Specifically, historical data suggest that for every $1 billion in revenue, “core” network companies provided 2,329 jobs, while non-network “edge” companies provided 1,199 jobs (about half as many). While networks create more jobs and investment relative to cash flows, edge companies make significantly more profits. In terms of size, as the table below shows, Google is larger in terms of market capitalization, but it invests much less and creates significantly fewer jobs than network companies. It is also worth emphasizing that jobs at the “edge” depend on investment in “core” networks.

table-1 on Employment, Investment and Market Capitalizations for Leading Firms in the Internet Ecosystem

The evidence is clear – stimulating network investment is a better way to create jobs. In fact, a new report by the Democratic Leadership Council (DLC) pinpoints lagging investment for a decade-long decline in job creation. The DLC observes that the job creation problem pre-dates the recession and says that “to promote a sustainable recovery and to create jobs we need to create an economic climate for business to invest and innovate again.” The net neutrality regulations moving forward at the FCC would do just the opposite.

Broadband Policy Implications
Numerous studies have shown that Internet regulations, as proposed, would dramatically increase market risk, lower expected growth, suppress network investment and raise consumer prices. This ACI study demonstrates that these regulations threaten job creation by shifting opportunities, incentives, and earnings prospects from the core providers who generate the largest number of jobs and the most investment. On balance — taking into account their net impact – the regulations are likely to destroy more investment and jobs in the core than they will create at the edge.

Based on the ACI study, which showed that “core” companies earn at lower rates, invest more and create more jobs per dollar than do “edge” companies, regulations that shift value away from network providers to non-network providers reduce investment in network infrastructure. Therefore, these regulations conflict with consensus requirements of a National Broadband Policy and with our macroeconomic policy goals, and they refute regulation proponents’ claims of offsetting benefits from net neutrality. Simply put, Internet regulations will cost America jobs.

Summary
The study’s results raise concerns that the imposition of Internet regulations by the FCC would almost certainly work at cross-purposes with the imperative to create and save jobs. Regulations that favor edge vs. core IT companies will lead to less investment and employment. This is being considered at a time when the economy suffers from high unemployment and when Congress has asked the FCC to develop a plan to encourage broadband deployment as a means, in part, of creating good jobs.

(For a printable version of this ConsumerGram with its chart and footnotes, please click here … jobs-final)

Chairman Julius Genachowski
Commissioner Michael J. Copps
Commissioner Robert M. McDowell
Commissioner Mignon Clyburn
Commissioner Meredith Attwell Baker

Regarding GN Docket No. 09-191 and WC Docket No. 07-52

Dear Commissioners:

This letter and its attachment respond to recent comments filed by parties that cite a study by the S. Derek Turner of the Free Press titled “Finding the Bottom Line: the Truth about Network Neutrality & Investment,” a study that concludes, in part, that net neutrality regulation would encourage network investment. The Free Press study is seriously flawed in its analysis and is, in many places, at odds with generally accepted principles of economics, accounting, and corporate finance. Its conclusions, to the extent they rely on data, misconstrue linkages between causes and effects. Given the Commission’s laudable insistence that this proceeding be fact-based, comments by various parties that rely on this study as evidence that regulations would encourage investment should be carefully reviewed for their probative value.

Attached is Dr. Larry F. Darby’s analysis of the Free Press study. Dr. Darby is a former FCC Common Carrier Bureau Chief, Chief of its Economic Division, and now a Senior Fellow at the American Consumer Institute.

If you have any questions about the attached analysis, please feel free to contact either me or Dr. Darby directly.

Respectfully submitted,

Stephen Pociask
President
The American Consumer Institute
Center for Citizen Research
1701 Pennsylvania Avenue, NW
Washington, DC 20006

cc: Sharon Gillett
Jonathan Baker
Ruth Milkman
William T. Lake
Colin Crowell
Bruce Gottlieb
Priya Aiyar
Sherrese Smith
John Giusti
Jennifer Schneider
Renee Crittendon
Carol Simpson
Christine Kurth
Christi Shewman
William Freedman

ATTACHMENT (click here fp-crit-aci)

Because the deal would give Google the first and only online search book deal and allow Google to use some authored works without compensation, and because Google already has a formidable share in the search and search advertising markets, the settlement would hand Google a market advantage that other competitors can not overcome.  We believe that these anticompetitive risks outweigh any public benefits.

“Considering that this process began with Google allegedly violating author copyrights by scanning and putting books online, it would seem that the current deal is a reward for illegal behavior when punishment is in order,” noted Steve Pociask, president of the American Consumer Institute.  “For other firms to compete against Google, they would need to violate copyright laws, be sued and settle on their own, losing valuable first mover advantage.  The public benefit of an online book database should not be a justification for permitting illegal activities and using the court’s class action process to cement a profitable business venture.”

The American Consumer Institute believes that Google should be required either to: 1) destroy the copyrighted materials that it illegally copied; or 2) provide all would-be competitors the same materials that were illegally scanned and give all competitors the same settlement terms as Google.  Then all competitors would be free to add works, differentiate their product and customize their service offerings to the public.  “Our approach would put these author’s works online for the benefit of the public, without sacrificing the benefits of market competition,” added Pociask.     

ACI agrees and would emphasize the major risks to be the monopolization of ”orphan works” and potential market power in the “book search” market.

To read Consumer Watchdog brief — click  here.