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Updated: 55 min 42 sec ago

Auto insurance is cheaper in St. Louis

September 11, 2014, 4:52 PM

From St. Louis Post-Dispatch:

“There is definitely correlation between population density — and thus traffic density — and insurance rates,” said Eli Lehrer, president of the R Street Institute, a free-markets research group, said in a press release. “That’s why you see really crowded cities like Los Angeles and New York near the top of the list, while cities like Charlotte and Cleveland are near the bottom.”

What’s new with TRIA? Nothing at all

September 11, 2014, 4:46 PM

From PropertyCasualty360:

R.J. Lehmann, editor-in-chief and a senior fellow of the R Street Institute, a conservative Washington think-tank, said House Republicans appear to have been unable to secure enough votes to push through legislation reported to the floor by the House Financial Services Committee in July over the next two weeks.

That legislation, H.R. 4871, is already onerous, effectively phasing out terrorism risk insurance for anything over than for nuclear, biological, radiological, and/or chemical (NBCR) events.

There appears to be some momentum in the House, according to Lehmann, to support passage of legislation in the current session that would raise the threshold for a federal backstop for terrorism risk insurance from the current $100 million to $250 million.

Reform and renew terrorism risk insurance

September 11, 2014, 11:42 AM

With Congress returning from its August recess this week for an abbreviated two-week session, one of the lingering bits of unresolved business is the fate of the 12-year-old Terrorism Risk Insurance Program, which is set to expire at year’s end.

Established in the wake of the Sept. 11 terrorist attacks, when many insurers and reinsurers pulled back on the availability of terrorism coverage, TRIP is a $100 billion federal backstop. The program was created by the Terrorism Risk Insurance Act of 2002, which also requires insurers in commercial lines of business to make terror cover available to clients who wish to purchase it. The act has been extended twice before, in 2005 and 2007, both times with modifications that shifted more of the burden from taxpayers to the private sector.

As the reauthorization debate plays out once again – a fight that unites conservative budget hawks with those on the left concerned with corporate cronyism, just as it unites both Democrats and Republicans from big city districts with the insurance and commercial real industries – we believe a responsible middle ground can be found to extend the program with reforms that further shrink its size and scope.

The global insurance and reinsurance industries have changed dramatically in the past decade, and the federal terrorism insurance program should be updated to reflect those changes. Faced with record levels of capital, the reinsurance industry has been clamoring for the opportunity to take on more catastrophe business, including coverage for terrorism.

In a report issued earlier this year, reinsurance broker Guy Carpenter found that multiline terrorism reinsurance capacity is now about $2.5 billion per program for conventional terrorism and about $1 billion per program for coverages that include nuclear, biological, chemical and radiological attacks. That far exceeds not only the $100 million threshold that currently triggers coverage under TRIA, but it even exceeds the more aggressive $500 million trigger for non-NBCR events proposed in legislation passed in June by the House Financial Services Committee.

Indeed, as the Financial Times noted earlier this summer, it has become increasingly common for reinsurers to withdraw the terrorism exclusion clauses on which they once insisted. More recently, the head of war and terrorism coverages at the insurance brokerage Lockton Cos. observed that the London market “remains highly capable and willing to offer capacity to almost any country in the world, with 158 countries enjoying the comfort of terrorism cover currently.”

These changes in the fundamental market dynamics suggest a significant shift of risk to the private sector is in order. Among the changes we at the R Street Institute have proposed are that Congress require private insurers pay an upfront premium for the terrorism reinsurance they receive from the federal government. Currently, the only payments required are post-event reimbursements for a portion of the funds expended, which in the case of a particularly large attack may be waived by the Secretary of the Treasury. We also believe TRIP should cease offering coverage for commercial liability insurance, as there may be moral hazard involved in subsidizing firms that are reckless in their preparations for terrorism.

Alas, neither of those ideas are currently on the table, either in the TRIA extension bill under consideration in the House or the one passed by the Senate in July. Of these, the House bill comes much closer to the kinds of significant but responsible reforms needed to protect taxpayers and ensure a functioning private market. In addition to raising the trigger level for conventional terrorism attacks, the House bill would lower the federal government’s share of payouts and peg the amount of risk the industry retains to the amount of coverage private insurers write.

In an early test of the House bill’s prospects, it reportedly failed to pass a whip count, suggesting it will be challenging for leadership to find a balance between members who believe the reforms go too far and those who insist they do not go far enough. More recently, reports have emerged that members on converging on a compromise that would raise the trigger level to $250 million.

Whatever numbers Congress ultimately agrees to, lawmakers should be aware of this: markets are fully capable of taking on more terrorism risk and it clearly would be in taxpayers’ interest to let them.


Lehmann: It’s time to both renew and reform terrorism risk insurance

September 11, 2014, 9:49 AM

From PropertyCasualty360:

R.J. Lehmann, the editor-in-chief and a senior fellow with th R Street Institute, a conservative think tank in Washington, DC, writes in Thursday’s edition of The Hill, that the Terrorism Risk Insurance Program not only needs to be renewed this session, it needs to be reformed as well.

The problem? The program as it stands is simply too big.

Metro Denver has sixth-least expensive car insurance in the nation

September 11, 2014, 8:50 AM

From the Denver Post:

Eli Lehrer, president of the nonprofit research group The R Street Institute, said there is a correlation between insurance rates and population density — and thus traffic density. “When you have more cars on the road, you have a greater likelihood of accidents and claims.”

This explains why cities like Los Angeles and New York have among the highest insurance rates, he said.

New York ranked second among the 25 cities with premiums that averaged 36 percent above the average. Los Angeles ranked fourth with premiums 25 percent above average.

State regulations also influence prices, Lehrer said in the study.

“Metropolitan areas centered in Illinois — where there’s no rate regulation — and Ohio — where there’s very little — have lower average rates than those in California, where rates are regulated in a great detail,” said Lehrer.


Nicki Minaj and the rule of law

September 10, 2014, 2:34 PM

Conservatives have long stood for the principle that the state ought to abide by the rule of law. Application of the law ought to be uniform across all actors and it should sufficiently transparent that pleading ignorance is equivalent to pleading negligence.

This has been true throughout history, from Edmund Burke denouncing the English throne’s violations of the American colonists’ rights right on through to modern conservatives’ jeering of Nancy Pelosi;s infamous “we have to pass the bill to find out what’s in it” gaffe. As Justice Antonin Scalia observed in Crawford v. Washington:

We have no doubt that the courts below were acting in utmost good faith when they found reliability. The Framers, however, would not have been content to indulge this assumption. They knew that judges, like other government officers, could not always be trusted to safeguard the rights of the people; the likes of the dread Lord Jeffreys were not yet too distant a memory. They were loath to leave too much discretion in judicial hands. 

Judge George Jeffreys, to whom Scalia alludes, was famous as the “Bloody Judge,” known to hand out death sentences for practically any offense. So iconic is Jeffreys’ menacing image that Christopher Lee even played him in an exploitation horror film which centered on the judge as the villain.

Were he alive today, one imagines Judge Jeffreys would have felt perfectly at home with the thoroughly nontransparent and often arbitrarily applied copyright damages regime. Not only do U.S. courts frequently hand out draconian punishments to those who fall afoul of copyright law, but they do so with neither predictability nor transparency. In line with Rep. Pelosi’s thoughts on Obamacare, the theory underlying copyright damages seems to be “you have to steal the property so you can find out who owns it.”

By way of example, consider Nicki Minaj’s song “Anaconda,” which currently stands at number the on the Billboard Hot 100 chart. The tune samples heavily from Sir Mix-a-Lot’s sleeper 1992 hit “Baby Got Back,” which itself drew from the 1986 single “Technicolor” by Channel One. The most prominent borrowing in Minaj’s song can be found in the chorus, which repeats Mix-a-Lot’s line: “My anaconda don’t want none unless you got buns, hun.”

Minaj’s army of agents, lawyers and other entertainment professionals no doubt were able to track down the rights-holder for Mix-a-Lot’s music, and there’s almost no doubt that Minaj could afford the rights to the song in question. However, if Minaj had been an independent artist and mixed exactly the same song – which, I repeat, is currently number three on the Billboard Hot 100, and so clearly has been judged to have artistic value by the market – the process might have taken an entirely different turn. She might never have found who owned the rights, and could have been sued for anywhere from $0 to a life savings’ worth of money for infringing this inaccessible owner. One of the year’s most popular songs likely could only have been made by an already-wealthy celebrity.

Unlike other forms of intellectual property, like patents, copyright claims in the United States do not have to be registered. That’s been true since 1989, when the United States signed onto the 19th century Berne Convention for the Protection of Literary and Artistic Works. Even for those copyrights that are registered, unlike patents, there is no comprehensive database where ownership can be checked.

As a result, the ownership of most copyrighted works – including songs, films, or even novel – cannot be publicly verified. In the case of music, private licensing agencies do maintain databases, but there is no guarantee that these are comprehensive or up-to-date, nor any requirement that they be. If you plan to sample music either as a musician, in your place of business or even on a karaoke machine, the only way to be absolutely safe is to pay membership fees to all three performing rights organizations – ASCAP, SESAC and BMI — even if you’ll never use the music that one provides. If you make a mistake, all the liability is on you.

This wouldn’t be so bad if it was possible to know how much you’d be expected to pay for violating a copyright, however unintentionally. But as Mitch Stoltz of the Electronic Frontier Foundation points out, this is exactly what you wouldn’t know if you got sued for a copyright violation:

U.S. law lets copyright holders ask for “statutory damages” in an infringement lawsuit. If a copyright holder proves its case, and asks for statutory damages, a jury decides how much the defendant must pay—anywhere from $750 to $30,000 per copyrighted work.1 If the court finds that the infringement was “willful,” the maximum per work jumps to $150,000.

A copyright holder who asks for statutory damages doesn’t have to show any evidence of harm, or that the defendant made any profit from the infringement. A copyright holder can, if she chooses, simply ask the jury to come up with a number…

The Copyright Act doesn’t give judges and juries any guidance on how to choose a number within the $750-$150,000 range. It only says that the amount should be “as the court considers just.”

Imagine if this were applied to any other system. Say you walked into an unlocked house, thinking it was abandoned. A stranger then walks in, has you arrested by claiming it’s his house (but produces no deed to this effect), claims you broke in (but never shows any sign of a broken lock) and the court not only believes him, but sentences you to between one year in prison and life in prison, leaving it up to your accuser to make the decision for them.

Judge Jeffreys couldn’t have designed a more dysfunctional system. Conservatives understand that, if copyright is going to be respected in the same way as other forms of property, its violation must be treated with the same predictability and transparency as other violations of property.

One excellent first step in this regard would be to at least add some guidance for courts on what damages should be. At least then, if any independent artists write the next “Anaconda,” they’ll know whether the rights holder will take a pound of flesh or their whole body.

This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

Turkish rights and digital delights: an IGF recap

September 10, 2014, 11:13 AM

The annual Internet Governance Forum was established to foster an open, inclusive dialogue among the parties that “govern” the Internet. IGF is a conference designed, somewhat counter-intuitively, to maintain a unified Internet by decentralizing control. This year’s conference, held Sept. 2-5 in Istanbul, itself prompted spinoff events — the Internet Ungovernance Forum and the “Bye Bye Internet Freedom” press conference — that focused on government efforts to use the Internet to violate freedom of expression and rights to privacy, particularly in Turkey, the IGF host country.

Though they featured less than a quarter as many sessions as the official IGF, the spinoff events and Turkey’s free speech violations dominated the online narrative emanating from Istanbul last week. The most popular Tweets from the conference focused on the Turkish government’s censorship of the Internet:

Sad to learn of 51,000 websites currently blocked in #Turkey – not just Twitter, YouTube and sexual sites – and no transparency. #IGF2014

— Neelie Kroes (@NeelieKroesEU) September 2, 2014

Twitter users on trial while #Turkey hosts key UN Internet summit http://t.co/Nqd3B5usWm #IGF2014 #humanrights

— AmnestyInternational (@AmnestyOnline) September 2, 2014

Rogue cell phone base stations? Welcome to Turkey. #IGF2014 HT @ioerror pic.twitter.com/4R6JQWBML9

— Kevin Bankston (@KevinBankston) September 3, 2014

The Turkish government’s increasingly intense violations of freedom of expression and privacy rights were covered comprehensively at the “Bye Bye Internet Freedom” press conference organized by Reporters Without Borders. Representing the Turkish Association of Journalists, Human Rights Watch, Reporters Without Borders, Amnesty International and Turkey’s Alternative Informatics Association, the panelists itemized the government’s laundry list of human rights violations, both on- and offline. These include increased censorship of media, massively expanding powers of the national intelligence agency (MIT), increased surveillance of citizens and other privacy violations.

Amnesty International’s Andrew Gardner emphasized that Turkey’s increased censorship of social media platforms such as Twitter and YouTube should not be viewed in isolation; they are merely the online manifestation of a government that is intolerant to dissent in any format. His point, reiterated throughout the conference, was that we can’t talk about Internet freedom without talking about basic political freedoms and holding governments accountable for violating them. Cynthia Wong of Human Rights Watch warned that digital technologies leave citizens much more vulnerable to surveillance, as we leave digital trails that can be used as tools for greater government control. Turkey’s current prosecution of 29 Twitter users for nonexistent incitements to violence nicely illustrates the points.

Many at the spinoff events criticized that main IGF as too exclusive, purportedly having rejected nearly all workshops proposed by Turkish activists to advocate for freedom of speech. One attendee with organizing experience explained the proposed workshops did not follow IGF protocols, which place priority on panels and sessions that represent people from multiple countries with diverse viewpoints.

Garnering publicity by being staged “in protest,” the IUF and the press conference were more supplementary than incendiary in practice. They both provided more appropriate platforms to lodge pointed, critical attacks at government programs, notably in Turkey, that violate an open Internet and free expression.

Can a unified, global information network be maintained when we can’t even have a unified discussion about it? Does the fragmentation of the IGF discussion portend dangerous fragmentation of the Internet, in which splintered groups have separate but unequal access to information? Is the freewheeling multi-stakeholder ecosystem crumbling before our eyes and becoming too fractured to function?

I would argue no. Steeped in comedy, irony and identity crises, the IGF remains a place for players in all areas of Internet governance to come together in a necessary dialogue. With no cost to participate, the vast majority are truly there to build and grow a free and open information network. If only the same could be said for the ITU Plenipotentiary Conference.

This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

Ray Rice’s knockout punch is ample reason to teach boys never to strike a woman

September 09, 2014, 2:13 PM

This week, the Baltimore Ravens released Ray Rice, their star running back, after additional video emerged of him knocking out his future wife, Janay Palmer, in an elevator altercation in Atlantic City, N.J. The National Football League also suspended Rice indefinitely.

The irony is that the NFL only suspended Rice for two games after a previous video of the same incident showed Rice dragging the unconscious Palmer from the elevator. After public backlash, NFL Commissioner Roger Goodell conceded that Rice’s punishment was too lenient and subsequently strengthened the NFL’s domestic violence policy.

Sadly, the difference between the two responses highlights the failed reaction to domestic abuse by many Americans.  It was not until Rice was caught on camera actually hitting Palmer that he truly felt the consequences of his actions.

Rice’s violent act is a more public example of a larger problem in our society. How many Americans have seen bruises and the look of fear in a woman’s eyes and thought of every plausible explanation other than the obvious?

Is that the best we can do for our wives, sisters and mothers?

If callously dragging someone’s unconscious body can plausibly be interpreted as “an argument that got out of hand,” then we need to reconsider our perspectives. Do we really need to see the blows on tape before we can respond?

I teach my boys that physical violence is never acceptable except to protect themselves or others from bodily harm. Admittedly, that exception is a hard line to walk and an even harder concept to convey to growing boys. The same strength that can be used to protect can quickly turn into a dangerous weapon.

That protective maxim has a further clarification: NEVER strike a woman. My boys ask all sorts of follow-up questions. What if she makes me mad? NEVER strike a woman. What if she hits me first? NEVER strike a woman. What if she takes my toys? NEVER strike a woman.

That life lesson is may not be politically correct or gender sensitive, but a man has no business ever striking a woman. Period.

The lesson carries important corollaries. If you see a man hitting a woman, stop him. If you suspect abuse, confront it. Men can have a significant impact on reducing domestic violence by setting an example and being willing to oppose domestic abuse as they encounter it.

We cannot afford to accept more excuses or continue to believe that a victim’s contributions to a conflict somehow mitigate extremely violent physical responses.

Tempers flare, people yell and they sometimes do things to hurt one another. That is a sad reality of humanity. At the very least, men should hold onto one rule no matter how tough situations become:

NEVER strike a woman.

Letter to U.S. Congress on the Electronic Communications Privacy Act

September 09, 2014, 2:06 PM



The Honorable Harry Reid
Majority Leader
U.S. Senate
Washington DC 20510

Dear Leader Reid,

We write to urge you to bring to the floor S. 607, the bipartisan Leahy-­Lee bill updating the Electronic Communications Privacy Act (ECPA).

Updating ECPA would respond to the deeply held concerns of Americans about their privacy. S. 607 would make it clear that the warrant standard of the U.S. Constitution applies to private digital information just as it applies to physical property.

The Leahy‐Lee bill would aid American companies seeking to innovate and compete globally. It would eliminate outdated discrepancies between the legal process for government access to data stored locally in one’s home or office and the process for the same data stored with third parties in the Internet “cloud.” Consumers and businesses large and small are increasingly taking advantage of the efficiencies offered by web‐based services. American companies have been leaders in this field. Yet ECPA, written in 1986, says that data stored in the cloud should be afforded less protection than data stored locally. Removing uncertainty about the standards for government access to data stored online will encourage consumers and companies, including those outside the United States, to utilize these services.

S. 607 would not impede law enforcement. The U.S. Department of Justice already follows the warrant‐for‐content rule of S. 607. The only resistance to reform comes from civil regulatory agencies that want an exception allowing them to obtain the content of customer documents and communications directly from third-party service providers. That would expand government power; government regulators currently cannot compel service providers to disclose their customers’ communications. It would prejudice the innovative services that we want to support, creating one procedure for data stored locally and a different one for data stored in the cloud. For these reasons, we oppose a carve‐out for regulatory agencies or other rules that would treat private data differently depending on the type of technology used to store it.

S. 607 was approved by the Judiciary Committee last year. We urge you to bring it to the floor. We believe it would pass overwhelmingly, proving to Americans and the rest of the world that the U.S. legal system values privacy in the digital age.




ACT | The App Association
American Association of Law Libraries
American Civil Liberties Union
American Library Association
Americans for Tax Reform
A Small Orange
Association of Research Libraries
Autonet Mobile
Brennan Center for Justice at NYU Law School
BSA | The Software Alliance
Center for Democracy & Technology
Center for Financial Privacy and Human Rights
Cheval Capital
Code Guard
Coughlin Associates
Competitive Enterprise Institute
Computer & Communications Industry Association (CCIA)
The Constitution Project
Council for Citizens Against Government Waste
Data Foundry
Digital Liberty
Direct Marketing Association
Discovery Institute
Distributed Computing Industry Association (DCIA)
Endurance International Group
Electronic Frontier Foundation
Engine Advocacy
Future of Privacy Forum
Golden Frog
Information Technology Industry Council (ITI)
The Internet Association
Internet Infrastructure Coalition (i2Coalition)
Kwaai Oak
Less Government
Media Science International (MSI)
New America’s Open Technology Institute
Newspaper Association of America
Peer1 Hosting
Records Preservation and Access Committee
R Street Institute
Software & Information Industry Association (SIIA)
Taxpayers Protection Alliance
Tech Assets
U.S. Chamber of Commerce
Yahoo! Inc.

The inequality of unisex pricing

September 09, 2014, 12:34 PM

Equality before the law is a foundational principle of American democracy. Many policymakers are proud to pursue efforts to realize that principle. Perhaps that is why, cloaked by a sense of constitutional righteousness, California legislators have adopted a high level of deference for proposals intended to achieve equality.

As a matter of politics or philosophy, their devotion is laudable. As a matter of policy development, their enthusiasm is sometimes misdirected.

One such equality-inspired proposal, A.B. 1553, seeks to prohibit long-term care insurance premiums from reflecting the cost differences between insuring men and insuring women. Authored by Assemblymember Mariko Yamada, D-Davis, AB 1553 may be well meaning, but by restricting insurers from using actuarially sound rating factors, it does more harm than good.

The very nature of insurance demands concessions to distinctions based on immutable physical realities. For instance: women live longer than men.

In the case of long-term care insurance, the product is designed to provide insurance coverage to people as they age and become infirm. It does so by spreading the cost of their care among a pool of similarly situated individuals. The fact that policyholders are charged a premium that reflects the risk of similarly situated individuals ensures that those who pose a greater risk of utilizing the coverage do not inflate the premiums of others, whose risk is less.

Because women live longer than men, and are more likely to utilize their coverage, their rates must be higher. In fact, according to the Society of Actuaries, their premiums should be between 15 and 30 percent higher than men. Failing this, adverse selection can occur.

Adverse selection is what happens when insureds have more knowledge about the likelihood of loss than an insurer does. Even the best case outcome of adverse selection – one group paying to subsidize the risk of another, more expensive group – is problematic. The worst case outcome is a “death spiral,” which becomes progressively more expensive until the market simply collapses.

The risk that unisex pricing poses to long-term care insurance is different than the doomsday scenarios espoused by the right concerning the Affordable Care Act. Unlike the health-care market under the ACA, which compels participation and in which the possibility of a death spiral is contingent upon the failure of the law’s penalties and subsidies, the long-term care market is structurally vulnerable to a death spiral as a result of its voluntary participation.

Consider the following scenario. Faced with prices that do not reflect the true cost of their risk, lower-risk individuals (men) choose not to purchase long-term-care insurance. They steadily abandon the market. When only high-risk candidates (women) enter or remain in the pool, policy premiums inevitably increase, since those providing subsidies are gone. Higher prices result in a cascading decrease in both demand and product availability, as companies withdraw from unprofitable lines of business.

Because there is such a strong actuarial case for treating men and women differently in long-term care, the consequence of not doing so is the potential removal of the product from the market. Therein lies the great calamity of Yamada’s bill.

Sham equality hurts those that it claims to help. Thus, in the context of long-term care rating, treating men and women differently is not pernicious – it is essential. Fortunately for California women, the bill died in the Assembly Insurance Committee, for lack of a second motion to proceed to a vote.

This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

Official policy on ninjas

September 09, 2014, 8:42 AM

The R Street Institute, a free market think tank located in Washington, D.C., stands opposed to ninjas. Firmly. We believe that excessive fanboy/fangirl interest in ninjas is inconsistent with our free market ideology.

While we acknowledge that some ninjas may have a number of reasonably cool attributes—such as the ability to use shuriken and fukiya to carry out silent assassinations of those who opposed their daimyo—we do not encourage ninjas to work here. We will never hire an office ninja to carry out assassinations or offer employee training in ninjitsu. While we reimburse gym membership for employees, the reimbursement may not be used for any type of ninja training. Those who hold college degrees in ninja arts need not apply for any jobs that R Street offers.

In short, we discriminate against those who work as professional ninjas.

Our reasons for opposition to ninjas are many:

  1. Ninjas were not involved in the market economy. They swore oaths of fealty to their liege lords, usually daimyos. Since daimyos represented the state, they were basically just government bureaucrats. And we favor fewer bureaucrats, not more.
  2. Ninja’s covert ways of waging war were not consistent with our desire to get ourselves in the media. A ninja would not do well during a talk radio interview, for example.
  3. Pirates are much, much, much cooler than ninjas in all respects. We explain why here.

We have likewise refused to swear fealty to any daimyo and, indeed, maintain a firm policy against any participation in the four-tier system of Japanese feudalism.

Local governments should reform to encourage broadband investment

September 09, 2014, 8:03 AM

WASHINGTON (Sept. 9, 2014) – Local governments should explore ways to cut taxes, fees and regulations to spur renewed investment in broadband infrastructure, according to a new paper released today by the R Street Institute.

The paper, “Alternatives to Government Broadband,” authored by R Street Associate Fellow Steven Titch, argues that government-run broadband projects have largely failed. By contrast, the recent example of cities cutting through red tape for the roll-out of Google Fiber serves as a model that should be expanded to all competitors in the broadband market.

While the U.S. broadband industry invested $1.2 trillion in capital expenditures from 1996 through 2012, investment plummeted during and following the dot-com crash of the early 2000s, falling from a peak of $118 billion in 2000 to just $57 billion in 2003. Annual nominal capital expenditures have been roughly flat since 2005, still coming nowhere near their turn-of-the-century peaks.

“As service providers make decisions about where and when to build or add broadband capacity, upfront and ongoing costs are a significant factor,” writes Titch. “Cities and towns that make adjustments and reforms to their legacy utility regulations and fees will reduce barriers to investment and signal they want the private sector to succeed.”

Titch lays out several ways municipalities can achieve this goal, including abolishing unnecessary taxes and fees to enter the market; to the extent feasible, making requirements uniform across all broadband technologies; and making it easier to use the existing infrastructure and build new infrastructure where needed.

Google Fiber has been able to strike attractive deals with cities it has chosen for its new 1 Gbps broadband service, and 34 new cities have applied to lure Google Fiber to their area in the next round of development. Municipalities would do well to extend similar breaks on franchise fees, right-of-way costs and other regulations to incumbent service providers and any other new competitors who can provide the same level of service.

“Perhaps the ideal solution is being missed because it is so obvious. Reduce or repeal taxes, eliminate outdated regulations and bureaucracy, and broadband investment will increase,” Titch wrote. “Competitors will be willing to enter a market against entrenched incumbents. Incumbents will raise investment.”

The full paper can be found at:


Alternatives to government broadband

September 09, 2014, 8:00 AM


Universal access to high-speed broadband is a desirable social goal. There is no question that broadband brings incalculable utility and value to individuals, businesses and organizations. Because broadband expands the Internet as a whole, it also creates a “network effect,” in which each marginal addition to the network substantially multiplies the value of the network as a whole.

While there is little debate that widespread broadband access has social value, there has been considerable policy tension about how best to accomplish it. This tension is rooted in the massive telecommunications deregulations of the early-to-mid-1990s that were designed to introduce competition and steer the industry away from the monopoly-utility model that had been the rule since the 1920s. The concurrent expansion of the Internet and introduction of the World Wide Web upended traditional monopoly phone models, as well. The development of the early browsers, such as Mosaic, gave users a point-and-click interface to the Web and opened the Internet to images, video and other applications that called for more bandwidth than copper land lines could handle. Service providers had to alter their long-term network-evolution plans to accommodate developments beyond their control. They faced huge capital outlays to upgrade their networks and to meet the burgeoning demand for household broadband.

Up until deregulation, U.S. telephone companies guaranteed universal phone service in return for a regulated monopoly. The standard utility thinking applied: telephone service was a social good that could best be met with one network per franchised area. Universal service goals could be met through a variety of subsidy formulas: business subsidizes residential; long-distance service subsidizes local service; urban subsidizes rural and so forth.

The emerging trends of long-distance competition, followed in short order by cable entry into broadband and, finally, the transition of telephone users from wired to wireless and Voice over Internet Protocol (VoIP) all upended the monopoly-utility model. The upshot was that, by the mid- to late 1990s, it was clear that broadband infrastructure was going to be expanded by companies with private investment, taking risks in a competitive market.

As a result, concern arose that many high-cost areas would be left behind, as telecom companies pursued wealthier communities in more densely populated areas. One idea that took hold to alleviate this perceived problem was municipal broadband. Local governments would take responsibility for financing and building broadband networks, as well as providing service and support. As a model, supporters cited telephone and electric co-operatives that brought service to many rural towns in the 1930s and 1940s. Their belief was that broadband could be done just as easily.

However, some correctly feared that municipal broadband was too risky. However laudable the goal, a municipal system would require a small city to borrow millions of dollars against projected revenue streams 10 to 20 years out. There also would always be the lingering threat that a private-sector competitor would enter the market at some future date, placing the municipality in direct competition with a deep-pocketed commercial provider with a national footprint and the accompanying marketing and technological clout.

While some local governments explored municipal broadband, others looked to exploit market forces that were in the process of transforming telecom’s value proposition from a one-size-fits-all utility to a tool that businesses and individuals could shape in line with their own needs. Private enterprises operating in a competitive environment could respond to opportunities more quickly, meet customer needs more efficiently and, if need be, react more decisively to changing market conditions. Rather than invest taxpayer money in government-run broadband operations, the alternative approach to encourage broadband expansion would be to make local investment in infrastructure as attractive as possible.

Yet to do so meant revisiting some long-held tax and regulatory shibboleths of the monopoly era. These included special taxes and fees on service, franchise fees and onerous charges for rights-of-way and pole attachments. Under the monopoly model, these costs were passed along to captive customers, so local governments saw an easy way to raise revenue without resorting to higher sales or property taxes. But now that broadband service providers were in competition, these extra costs created barriers to entry in local communities.

The latest major entrant into the broadband market, Google Fiber, has upped the stakes of this contest. In response to Google’s promise to build 1 Gbps fiber-optic broadband networks in select cities, municipalities across the country have fallen over themselves to make their towns attractive. In some cases, the efforts have become theatrical, such as when Topeka, Kan., temporarily renamed itself Google and Greenville, S.C. arranged for 1,000 citizens to use glow sticks to spell out the name “Google” large enough to be visible from the air.

As discussions between Google and prospective fiber cities have gotten serious, the company has generally asked that various fees and requirements that are imposed on incumbent broadband providers be waived. The emergence of Google Fiber is helping local governments understand how their legacy of regulations inhibits broadband investment. Unfortunately, for the most part, cities have thus far mostly only been willing to make regulatory accommodations for this one competitor. But Google is not the only broadband player. If certain changes in local regulatory requirements are enough to spark investment from one major company, there’s every reason to believe the same approach would work with others.

This paper will review reasons government broadband largely have failed and why, despite continued cheerleading from some corners, its prospects are worse now than they have ever been. It will then look at some of the major legacy costs and regulations that inhibit the spread of broadband and how cities are beginning to confront them. Finally, it will look at the lessons that can be learned from Google Fiber’s entry into broadband service provision.

Letter to Congress: Oppose the Marketplace and Internet Tax Fairness Act!

September 08, 2014, 4:10 PM



Dear Member of Congress,

On behalf of the millions of citizens represented by the undersigned organizations, we write in strong opposition to S. 2609, the so-called “Marketplace and Internet Tax Fairness Act.” This confused legislation is a strange combination of a common sense extension of the federal ban on state efforts to tax Internet access with highly unpopular and misguided legislation to grant states cross-border tax authority for businesses located outside their jurisdiction. While we support a ban on Internet access taxes, the provision previously known as the “Marketplace Fairness Act” would dismantle proper limits on state tax-collection authority, while causing serious damage to electronic and interstate commerce.

The “Marketplace Fairness Act” would countenance an enormous expansion in state tax-collection authority by wiping away the “physical presence standard,” a baseline protection that shields taxpayers from harassment by out-of-state collectors. Far from a “loophole” intended to advantage the Internet, it is the result of a Supreme Court decision grounded in a bedrock foundational principle of tax policy: states must not be allowed to extend their taxation and regulatory authorities beyond their borders. Dismantling this protection for remote retail sales would create a very slippery slope for states to attempt collection of business or even income taxes from out-of-state entities.

Furthermore, the bill would create a decidedly “unlevel” playing field between brick-and-mortar and online sales. Brick-and-mortar sales across the country are governed by a simple rule that allows the business to collect sales tax based on its physical location, not that of the item’s buyer. Under the “Marketplace Fairness Act,” that convenient collection standard would be denied for online sales, forcing remote retailers to determine the appropriate rules and regulations in as many as 46 different states with sales taxes, and then collect and remit sales tax for that distant authority.

Imposing this unworkable collection standard on remote retail sales but not on brick-and-mortar retail sales would not only be unfair, it would result in enormous complexity while damaging interstate commerce. Online sellers would be weighed down by substantial compliance burdens and the bill’s paltry “small seller exception” of just $1 million (when the Small Business Administration sets the limit as high as $30 million in some cases) in remote sales does little to mitigate the damage.

In seeking to address the failures of the “use tax” systems employed by states, the “Marketplace Fairness Act” ends up giving a federal blessing to a massive expansion in state tax-collection authority, the dismantling of a vital taxpayer protection upon which virtually all tax systems are based, while harming a segment (online sales) that despite its dramatic expansion still only accounts for roughly $0.07 of every $1 in retail spending.

We urge you to oppose attaching this destructive language to an uncontroversial extension of a ban on Internet access taxes and moving it through procedural sleight-of-hand, once again bypassing the committee of jurisdiction.

Andrew Moylan
R Street Institute

Phil Kerpen
American Commitment

Brent Wm. Gardner
Americans for Prosperity

Grover Norquist
Americans for Tax Reform

Norm Singleton
Campaign for Liberty

Andrew F. Quinlan
Center for Freedom and Prosperity

Jeff Mazzella
Center for Individual Freedom

Tom Schatz
Citizens Against Government Waste

Wayne Crews
Competitive Enterprise Institute

Katie McAuliffe
Digital Liberty

Matt Kibbe

Joe Bast
The Heartland Institute

Mike Needham
Heritage Action for America

Tom Giovanetti
Institute for Policy Innovation

Seton Motley
Less Government

Pete Sepp
National Taxpayers Union

David Williams
Taxpayers Protection Alliance

Alabama’s Uber failures showcase big brother bureaucracy over consumer opportunity

September 08, 2014, 10:42 AM

First it was Birmingham that refused to accommodate Uber, the popular app-driven transportation service, and then the Tuscaloosa Police Department began enforcing the city’s transportation regulations against drivers working with the company.

While the Birmingham City Council has managed to bungle a badly needed economic opportunity for the city, the Tuscaloosa Police Department is simply enforcing the regulations as they read them and highlighting the need for Tuscaloosa to revisit the issue.

Birmingham and cities throughout Alabama need jobs of any stripe. Not only do Uber and companies like them create employment, but they offer even more value by providing a tech-savvy convenience to move about Alabama’s cities. Many of the state’s cities are less walking-friendly than larger metropolitan counterparts around the nation. These transportation innovation companies sound like the kind of business opportunities politicians would be begging to have.

Instead, the message from Birmingham and Tuscaloosa is that Alabamians need to be protected from the likes of Uber. They claim that public safety is at stake.

Uber and similar app-based transportation services function by contracting with drivers in cities where they operate. Uber, for example, manages a web-based interface that connects passengers and contract drivers. Some of the contract drivers are simply interested in picking up some part-time cash.

That is where city governments start to have conniptions. For many politicians, bureaucracy must be preserved. After all, there is paperwork that needs to be filled out, inspections to be performed, background checks to conduct. Without layers of government, some city leaders apparently feel that Alabamians would not be able to make reasonable decisions.

Never mind the fact that Uber already requires proper insurance, a valid driver’s license and passage of DMV and background checks. City leaders feel that they must protect the taxi industry public from the growing transportation menace.

Since I discovered Uber, I have not taken a taxi in a city where they operate. Safety is a big reason why. My family or I could get into a taxi with precious little information about the fare, route or driver. On the other hand, I could take Uber, where the ride is tracked and information about the driver and passenger is retained. Not only am I able to access my account and see a record of all my trips, but the service radically improves my chances of recovering items I might accidentally leave behind in the car. Most importantly, I am able to focus on getting my family or myself out of the car safely rather than fiddling with a cash transaction.

If private citizens are able to get into a car with a complete stranger at any time, why are they incapable of making that same decision when it comes to a private transportation service?

Alabama’s cities should find ways to expand employment opportunities and choices for consumers, rather than maintaining an unyielding devotion to a one-size-fits-all regulation, especially in a situation where there is no clear and immediate danger to the public.

Taxis should have same opportunities as companies like Uber, but Alabamians, not city bureaucracies, should be able to decide which type of transportation meets their needs, ensures their safety and is more reliable.

Survey: Ky. against Internet tax

September 05, 2014, 4:57 PM

From the Bowling Green Daily News:

States rely on taxpayers to report their online purchases and remit the taxes that are due, but few do. Online retailers that have a physical presence in the state where a purchase is made usually collect and remit the tax, as is the case with Kentucky. The National Taxpayers Union and R Street Institute conducted a poll among several states, including Kentucky, to gauge how state taxpayers felt about legislation that could be passed someday to change the current sales tax laws.

“When we looked at all the demographic background … we found pretty consistently across the board not just opposition, but double-digit opposition,” said Andrew Moylan, executive director of R Street Institute.

Letter to Senate on USA FREEDOM Act

September 05, 2014, 11:31 AM



Majority Leader Harry Reid
Minority Leader Mitch McConnell
U.S. Senate

Chairman Patrick J. Leahy
Ranking Member Charles E. Grassley
U.S. Senate Committee on the Judiciary

Chairman Dianne Feinstein
Vice Chairman Saxby Chambliss
U.S. Senate Select Committee on Intelligence

Chairman Thomas R. Carper
Ranking Member Tom Coburn
U.S. Senate Committee on Homeland Security and Governmental Affairs

Dear Majority Leader Reid, Minority Leader McConnell, Chairmen Leahy, Feinstein, and Carper, Ranking Members Grassley and Coburn, and Vice Chairman Chambliss:

As Congress begins its next work session, the undersigned civil liberties, human rights, and other public interest organizations are writing to urge the Senate to quickly pass the USA FREEDOM Act (S. 2685) without adding new data retention requirements, and without further consideration of the gravely concerning Cybersecurity Information Sharing Act of 2014 (CISA, S. 2588).

On July 30, 2014, many of the undersigned groups sent a letter to Congressional leadership voicing a unified statement of support for the new version of the USA FREEDOM Act (S. 2685). Though further reform will still be needed, it is an important first step to reining in the National Security Agency’s (NSA) overbroad surveillance authorities.

As that letter explained, S. 2685 in its current form would provide significant transparency and privacy safeguards while preserving the tools intelligence agencies need to protect national security. The bill would prohibit “bulk” and limit large-scale data collection under the USA PATRIOT Act Section 215, the FISA pen register authority, and National Security Letter authorities. The bill would also enhance public reporting of surveillance orders by the private sector and the government, and reform the FISA Court to provide more accountability and transparency, including by appointing a special panel of civil liberties and privacy advocates to the court. Additionally, this version of the USA FREEDOM Act would permit the new call detail records (CDRs) authority under Section 215 to be used only for counterterrorism purposes, and avoid implicitly codifying controversial “about searches” under Section 702 of the FISA Amendments Act that implicate the privacy of millions of Americans. Based on these important improvements, a wide range of major technology companies and public interest groups spanning the political spectrum is eager for Congress to pass this legislation swiftly and without weakening the bill.

However, as we made clear in both our July 30 letter and our previous letter of June 18, the broad consensus in support of the USA FREEDOM Act among companies and advocacy groups would be severely disrupted if any new mandatory data retention requirement were added to the bill. Data retention requirements pose significant threats not only to privacy and civil liberties, but also to data security, as stories of data breaches at major corporations like Target, Neiman Marcus, UPS, and major banks demonstrate.

There is no evidence that such a mandate is necessary to protect national security. Rather, as Attorney General Eric Holder and Director of National Intelligence James Clapper made clear in a letter earlier this week, and as NSA Deputy Director Richard Ledgett testified before the Senate Select Committee on Intelligence in June, the NSA does not need a new data retention requirement to maintain its current level of effectiveness.

At the same hearing, Verizon Vice President and Assistant General Counsel Michael Woods stated unequivocally that Verizon would strongly oppose a new data retention requirement because it would be burdensome to business and pose a significant threat to Americans data and privacy. We agree, and reiterate our strong opposition to the inclusion of any such mandate in the USA FREEDOM Act, which we urge the Senate to pass without delay. Ironically, just as Congress is struggling to pass meaningful surveillance reform to rein in the NSA, the Senate Select Committee on Intelligence has approved a problematic bill that would give the NSA even more access to Americans’ data: the Cybersecurity Information Sharing Act (S. 2588). Dozens of members of the advocacy community have joined in three coalition letters to the Senate and to the president opposing that bill, which would authorize companies to share with the Department of Homeland Security broadly defined “cyberthreat indicators” from the communications of their users and subscribers. That information would be immediately and automatically disseminated to the NSA and a host of other government agencies. The companies would not be required to affirmatively look for and remove personally identifiable information that is not relevant to the threat before the information is shared. Among other problems, CISA also authorizes companies to monitor their customers’ activities on their networks and employ a range of dangerous countermeasures that could affect innocent Internet users.

Despite the serious privacy problems with CISA, especially in comparison with the last, more privacy protective, cybersecurity information sharing bill considered by the Senate, the Cybersecurity Act of 2012 (S. 3414), its proponents are urging that the Senate take it up in the limited time that remains after this August recess. Instead, the Senate should make passing the USA FREEDOM Act (S. 2685) a key legislative priority for September. Passing effective and comprehensive surveillance reform is necessary not only to protect our privacy, but also to restore the trust of Internet users around the world who rely on, and are relied upon by, the U.S. Internet industry. The USA FREEDOM Act, as reintroduced last month, would substantially advance both of those goals, whereas CISA would undermine them.

We therefore urge the Senate to swiftly pass the USA FREEDOM Act (S. 2685) without any amendments that would weaken its protections or create any new data retention mandates, and without taking up the Cybersecurity Information Sharing Act (S.2588) in its current form. The Senate cannot seriously consider controversial information-sharing legislation such as CISA without first completing the pressing unfinished business of passing meaningful surveillance reform.


Advocacy for Principled Action in Government
American Association of Law Libraries
American Booksellers Foundation for Free Expression
American Civil Liberties Union
American Library Association
Arab American Institute
Association of Research Libraries
Bill of Rights Defense Committee
Brennan Center for Justice
Campaign for Digital Fourth Amendment Rights
Center for Democracy & Technology
Citizen Outreach
Competitive Enterprise Institute
The Constitution Project
Constitutional Alliance
Council on American Islamic Relations
Defending Dissent Foundation
DownsizeDC.org, Inc.
Electronic Frontier Foundation
Freedom of the Press Foundation
Free Press Action Fund
Government Accountability Project
Hon. Bob Barr, Former Congressman
Human Rights Watch
Liberty Coalition
Media Alliance
National Coalition Against Censorship
National Security Counselors
New America’s Open Technology Institute
PEN American Center
Project on Government Oversight
Public Knowledge
Republican Liberty Caucus
R Street
The Rutherford Institute
Student Net Alliance

It doesn’t take much to imagine that campaign cash is buying influence in the courtroom

September 04, 2014, 10:42 AM

Imagine for a minute that a corporation with an effective monopoly in the State of Alabama became the target of litigation initiated by a state prosecutor. Not only does the corporation use their cash to fight the litigation in court and by lobbying legislators, but they also go after the prosecutor politically in the middle of the legal proceedings.

In an attempt to find a more favorable prosecutor, the corporation funnels $1 million to the prosecutor’s political opponent through a series of vaguely named political action committees (PACs) managed by a former felon.

Why not make it even more interesting? What if the transfers and the amount of money were legal under state law and the manager received a pardon a few months after his conviction?

While the hypothetical might seem like the latest legal fiction thriller, it happens to be reality in Alabama politics. The state prosecutor is none other than Attorney General Luther Strange, the business is the Poarch Band of Creek Indians that operates casinos in Alabama, and the A, T, and Speed PACs the tribe funds are managed by former state Sen. John Teague.

Saying that gambling is a controversial issue in Alabama is an understatement, but the fact that the litigation involves gambling does not change the hypothetical situation above.

Nobody believes that the Poarch Creek money is funding Strange’s opponent for any reason other than their legal battles. Even if the Poarch Band of Creek Indians and Teague are operating within the law, the scenario still seems off. In Alabama, where we have elected judges and prosecutors, should we permit litigants to make political contributions in support or opposition to officials within the legal system when they have pending litigation involving them?

Contributing to public officials in the legal system to generally shape the legal climate is common in Alabama. For example, trial lawyers and the business community have waged political war for decades in an effort to influence Alabama’s legal system. Political fights over general legal philosophy are a different matter altogether than using campaign cash in response to unfavorable legal proceedings.

Preventing political contributions in a direct conflict situation is already recognized under Alabama law. Utilities regulated by the Public Service Commission (PSC) are prohibited from making political contributions to candidates for the commission.

If anything, elected state prosecutors and judges have more discretion and individual autonomy over decisions impacting litigants than PSC members have over regulated entities. There are some general ethics rules for attorneys and recusal issues for judges, but none of them squarely take the issue head on.

The very presence of elected public officials in the legal system carries with it politics, campaigns and financial contributions. The question for Alabamians is whether we want to make legal changes that keep those campaign conflicts out of the courtroom.

NEJM irresponsibly damns e-cigarettes as gateway to cocaine, based on mouse nicotine studies

September 04, 2014, 10:33 AM

The New England Journal of Medicine yesterday published an incendiary anti-e-cigarette article that tags nicotine as a gateway to cocaine use… in mice. It’s another sad day for tobacco truth.

The authors are Drs. Denise and Eric Kandel, the latter a Nobel Prize-winner for his work on the physiological basis of memory storage in nerves. Since 1975, Dr. Denise Kandel has aggressively promoted a gateway theory that adolescent use of legal drugs like alcohol and tobacco causes use of illegal drugs, starting with marijuana and progressing to cocaine and heroin. The theory is highly contested among addiction research and policy experts because it is not supported by human studies.

The NEJM presents the Kandels’ laboratory data on how nicotine and cocaine affect the mouse brain at the cellular and molecular level. Their experiments involved force-feeding nicotine to and injecting cocaine into mice. Post-mortem studies on the rodent brains led the authors to conclude that nicotine/tobacco causes cocaine use.

Following a nine-page technical discussion of their research that made no mention of e-cigarettes, the authors inserted a concluding three paragraphs claiming that smoking, vaping and even passive smoke are gateways to cocaine.

In a crass attempt to heighten interest in the publication, the Kandels and the NEJM offered the media a press release with an attention-grabbing e-cigarette-bashing headline and inflammatory quotes that exceed and distort the authors’ scientific work.

Shame on all parties for allowing marketing to trump the truth.

Poll: Kentucky voters reject Internet sales tax law

September 04, 2014, 9:37 AM

FRANKFORT, Ky. (Sept. 4, 2014) — When it comes to a federal law allowing out-of-state tax collectors to reach into the pockets of Kentucky’s online merchants, by a 55 percent to 34 percent margin, Bluegrass State voters have a resounding and simple answer: No way! That’s just one of several findings from a statewide poll released today by National Taxpayers Union and the R Street Institute.

In the survey of likely 2014 general election voters in Kentucky, strong majorities across many ideological and partisan persuasions also indicated their belief that the Internet should remain as free from regulation and taxation as possible (by an astounding 58-point margin). One of the most lopsided results concerned federal legislation in Congress called the “Marketplace Fairness Act.” When told (factually) the plan “would allow tax enforcement agents from one state to collect taxes from online retailers based in a different state,” 71 percent of respondents were opposed, with just 22 percent in favor.

“It’s no surprise that Kentucky voters are opposed to legislation that would effectively force e-retailers across the state to serve as tax collectors for other jurisdictions, like New York and California,” said Andrew Moylan, executive director of the R Street Institute. “Moreover, our polling finds that the belief that the Internet should exist to benefit Kentuckians, not other states’ bottom lines, is not a partisan issue.”

“Our poll is designed to explore the specific – and sophisticated – opinions of Kentucky voters on this critical issue,” said Pete Sepp, president of National Taxpayers Union. “Kentucky politicians of all persuasions and philosophies should take note of the results, and understand that supporting proposals like the Marketplace Fairness Act puts them out of step with the majority of their constituents; that’s why Sens. McConnell and Paul should be applauded for standing with Kentucky voters on this critical issue.”

A statewide survey of 400 likely voters in Kentucky was conducted June 2-3, 2014 by live telephone interviewing. Thirty percent of the interviews were conducted using a cell phone sample. The margin of error is ±4.9% at the 95% confidence level.

For the full list of NTU-R Street state-level polls on Internet sales tax laws, visit: rstreet.org/donttax.