Why ride-sharing apps frustrate government reach

In a city that prides itself on being among the nation’s most “techie,” there has been a decidedly un-techie reaction to the arrival of two ride-sharing companies that have challenged the status quo of traditional taxi services.

The City of Madison has cast a wary eye on the arrival of Lyft and Uber, companies that use smartphone applications to match riders with drivers who use their private cars. Young professionals love the idea; city regulators with worries about driver safety, insurance, and even the redlining of poor neighborhoods are much less enamored.

It’s just the latest example of how technology is outrunning the ability of regulators to keep pace. If regulators are truly intent on protecting the public, trying to stay ahead of the curve is legitimate. It can be counterproductive and even futile, however, if regulators seek to “fence in” incumbent markets and to limit consumer choice.

Lyft and Uber, themselves competitors, have been the darlings of venture capitalists of late, raising hundreds of millions of dollars to fund expansion in the United States and beyond. The companies have gained traction in some U.S. cities — Lyft launched in Milwaukee last week to much less controversy — but have been banned or practically so in others.

Still, investors are betting on the long-term customer appeal of being able to use a mobile phone app to connect with a willing ride versus calling a snarly dispatcher who may not care how long you wait at the airport.

In Madison, Mayor Paul Soglin has said he’s not buying the notion that Uber and Lyft only seek “donations” for ride-sharing services. Cab companies agree, saying ride-sharing is really a matter of bringing a passenger from Point A to Point B for a fee — which sounds a lot like a taxi service to them.



The ride-sharing companies contend they’re really technology companies making the marketplace more efficient. In some cities, they’ve been adept at gaining crowd-sourced support, with many of their customers openly accusing local officials of having grown too cozy with existing cab companies.

The clash between technology and regulation is not confined to ride-sharing, of course. Consider these issues in which the global nature of technology is changing how, when, and where governments can exert regulatory influence:

  • Bitcoin is a peer-to-peer payment system, introduced as open source software in 2009, that could shake up how the world moves money. The digital currency created and used in the system is also referred to as a virtual currency, electronic money, or crypto-currency because cryptography is used in its creation and transfer. The bitcoin system is not controlled by a single entity, such as a central bank, which prompts concerns it may be used for illegal activities. Proponents see bitcoins as long-term investments or a hedge against their own country’s unstable currencies. While some governments have taken a hands-off approach, others have moved to regulate bitcoins or similar crypto-currencies.
  • The Internet has been largely a sales-tax-free zone for years, primarily due to a 1992 U.S. Supreme Court decision that said mail-order merchants did not need to collect sales taxes for sales in states where they did not have a physical presence. Local resistance to that rule has grown, over time, in part because traditional merchants think it is unfair and local and state governments want the revenues. The Streamlined Sales and Use Tax Agreement has aligned about 40 state governments, including Wisconsin, in finding Internet taxing solutions that simplify a complicated process.
  • “Net neutrality” is a debate that often gets lost in legalistic terms, but it boils down to the notion that the electronic pipes carrying our information online should be “dumb” — just like our phone lines. If the pipes are too smart, Internet service providers could discriminate or prioritize some content, websites, apps, or users over others. While it’s largely a federal issue, some state and local governments have gotten involved because they fear a widening of the “digital divide” between rich and poor, or the loss of educational services that cannot compete for Internet bandwidth.

Global markets and technologies have created new challenges for regulators, and for consumers who must decide if they need to be “protected” or given more choice to think for themselves. Cities such as Madison, which promotes itself as a haven for young, tech-savvy professionals, should recognize that embracing innovative industries and people sometimes means taking a fresh look at regulation.

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