The sharing economy: The challenge of regulating ridesharing
Phuah Eng Chye (4 November 2017)
The rapid expansion of sharing caught the taxi industry and regulators by surprise. Sharing blurs boundaries and increases organisational permutations. This disrupted the traditional regulatory paradigm based on segmentation, licensing-ownership and fixed fares.
Juliet Schor points out it is nearly impossible to have a “solid definition of the sharing economy that reflects common usage.” “There is great diversity among activities as well as baffling boundaries drawn by participants. TaskRabbit, an “errands” site, is often included, but Mechanical Turk (Amazon’s online labor market) is not. Airbnb is practically synonymous with the sharing economy, but traditional bed and breakfasts are left out. Lyft, a ride service company, claims to be in, but Uber, another ride service company, does not. Shouldn’t public libraries and parks count? When I posed these questions to a few sharing innovators, they were pragmatic, rather than analytical: self-definition by the platforms and the press defines who is in and who is out.”
It is difficult to pigeon-hole the sharing business model itself. They seemed more involved in intermediation than sharing. They calculate fares, process payments and facilitate transactions in ownership (matching rather than sharing) of “use-time”. They don’t employ but contract drivers. They don’t own assets but that could change with the advent of driverless cars.
By stretching or intruding into definitional boundaries, ridesharing poses considerable challenges to policy formulation and regulation of a highly fragmented taxi industry. License specifications can vary due to geographical jurisdiction (national, state, city). The taxi service is a spectrum of services ranging from hailing, pre-booked, dispatch, apps, hire, carpooling, rental, limousine and carsharing. Precise demarcation of the actual service being performed borders is no longer possible as distinctions between services blur and the permutations of business form multiply.
Ridesharing sceptics point to the apparent immovability of the features of the taxi industry as a reason for rejecting change. In debunking the proposition ridesharing platforms could radically transform the landscape, Hubert Horan notes “when traditional taxi regulations were established in big cities in the 1920s and 30s, multi-destination options were banned because the (then privately owned) transit operators didn’t want competitors weakening low density routes. When libertarian/anti-public transit advocacy groups fought for taxi deregulation in the 90s, they prominently pointed to these vestigial protections and claimed that regulation had stifled industry innovation for example these jitney/paratransit services. These rules were eliminated everywhere; absolutely no innovative services emerged.”
But the taxi industry is not unique. No industry has been immune from technological disruption which makes obsolete regulatory models attempting to regulate pricing and supply. This was true in the airline, hoteling, retail, entertainment, finance and media industries. It will also apply to the taxi industry though maybe differently.
Hence, disruption is already causing regulatory policy to drift into a dilemma. Delaying the launch of new business models will leave everyone in a paralysing no-win situation in an environment experiencing decay. The pressures on the transportation system did not start with ridesharing. The transportation industry was already facing pressure from worsening congestion, rising costs, budget constraints and a deteriorating transportation infrastructure. Badly thought-out interventions will not only prevent the expansion of new services to meet public needs but will likely to lead to even more adverse outcomes.
Juliet Schor (October 2014) “Debating the sharing economy”. Great Transition Initiative. http://www.greattransition.org/publication/debating-the-sharing-economy.
Hubert Horan (Nov-Dec 2016) “Can Uber ever deliver? Parts One to Five”. Nakedcapitalism.com