Category Archives: Blog
by Kish Rajan
On Tuesday, Los Angeles City Hall was the hot spot for anyone who cares about the future of the sharing economy in the City of Angels. I made the trek in order to testify on behalf of the companies that are revolutionizing consumers’ lives as part of what we call the personal enterprise economy.
This new economy lets people work on their own terms. People can work when and where they want with no duty to clock in or out or report to a boss. Undoubtedly, there are issues to work out given the recent decision handed down by the California Labor Commission saying Uber drivers should be considered employees. But that issue might ultimately be better resolved by creating a new classification of worker that will decouple benefits from employers. This would allow people to “work” for multiple companies (or, more precisely, platforms) while still benefiting from things like Social Security, unemployment insurance and workers comp.
Back to the issue at hand…the morning session before the full City Council was all about rideshare, while the afternoon (and early evening – it was a long one) was focused on homesharing before the Planning and Land Use Management Committee (“PLUM”).
There were many arguments in favor of the new technologies; and there was a basic consensus that these new business models are here to stay. So the question wasn’t whether to allow these businesses to operate — but under what rules.
The City Council was, for the most part, thoughtful and tried to understand the facts and to consider the right ways to regulate the app-based engines of the new economy.
But at times, the council defaulted to the standard thinking of trying to apply existing regulatory approaches to new models. Some council members certainly understand that new approaches are needed. CALinnovates looks forward to continuing to educate Los Angeles’ councilmembers on appropriate ways to blend smart regulations into the public policy process rather than defaulting to outdated thinking.
Dozens of supporters turned out to argue passionately about the sharing economy. Hundreds of Angelenos showed up to urge their elected officials to consider the issues and make informed choices about the future of Uber, Lyft, Sidecar and Airbnb.
The stars of the rideshare session were Councilmembers Mike Bonin and Bob Blumenfield. While Bonin was more outspoken, Blumenfield masterfully navigated the chaos and delivered a vote by the slimmest of margins that allows Uber and its brethren the right to pick up passengers at LAX. Without these two standing up for innovation, the vote would have swung in the opposite direction. Silicon Beach should take note of the two protectors of innovation:
“People are baffled that they can take ride share to the airport but can’t take one home.” – Mike Bonin
“We need a uniform standard.” – Mike Bonin in pointing out that limousines, town cars, fly away shuttles and courtesy shuttles do not require background checks.
“There are terrible anecdotes on both sides. I don’t want to legislate on anecdotes, but data.” – Bob Blumenfield
Ultimately, the data trumped the anecdotes and those wishing for a world-class airport (it’s coming) can rejoice that LAX does offer world-class transportation options.
While there was full clarity on the rideshare issue, the home share discussion will continue as the council considers a bill co-authored by Bonin and Council President Herb Wesson.
In the end, Los Angeles’ elected officials showed that they understand that innovation is critical to the city’s future. The council wants to get it right. They need ongoing help and encouragement to get there, and we’ll be there every step of the way.
Los Angeles Times
Los Angeles Times – Readers React: Yesterday’s taxi and hotel laws don’t work for today’s Uber and Airbnb
To the Editor: Dave Rochlin’s op-ed article on the sharing economy misses the mark. (“When ‘innovation’ means rule-breaking,” op-ed, July 27)
Rochlin ridiculously compares the sharing economy to the drug trade, saying both are “gray markets” that form when there is an unmet need within regulated industries. The sharing economy is bringing desperately needed jobs and innovation to regulated markets while serving consumers’ needs. It’s not a dangerous underground market.
Rochlin insists that regulations need not stifle innovation, but that’s exactly what we’ve seen in the taxi and hotel industries. Uber and Airbnb are dragging these industries into the modern world and bringing economic opportunity along with them.
Of course we need regulations, but those regulations need to be smart and modern. Regulating new companies under laws that were written for bygone eras is old-school thinking that will limit society and the economy. Sharing-economy companies are exposing the need for modernizing government. This is the way change happens.
Mike Montgomery, Pacific Palisades
SAN FRANCISCO, June 29, 2015 /PRNewswire-USNewswire/ — CALinnovates executive director Mike Montgomery announced today that Kish Rajan and Tim Sparapani have joined the organization as chief evangelist and senior policy fellow, respectively. Representing companies across the Golden State, CALinnovates advocates for businesses that are improving industries and expanding economic opportunities for Californians through innovative technologies.
Building on expansive experience in California technology and public policy, Rajan serves as CALinnovates’ chief evangelist, leading the organization’s statewide business and economic development programs. Most recently, Rajan served as director of the CaliforniaGovernor’s Office of Business and Economic Development (GO Biz.) under Governor Jerry Brown. As a public advocate, he shaped the state’s economic development efforts, working with policy makers, business leaders and communities to advance economic growth and a positive business climate in California. Previously, Rajan was elected city council member for the City of Walnut Creek in the Bay Area.
“Innovation is the new heartbeat of our economy. As California asserts its global leadership, we want this boom to create opportunity for every Californian,” Rajan said. “At CALinnovates we are developing a robust work plan to increase public awareness and shape policy discussions about the imperative to build a more modern economy that can benefit all.”
A prominent privacy advocate, Sparapani joins CALinnovates as a champion of consumers at the federal level, and will serve as senior policy fellow. A self-described “tech optimist”, Sparapani has helped innovators and entrepreneurs navigate the world of D.C., state and international regulation for over a decade, first as director of public policy at Facebook, then as vice president of law, policy and government affairs at the Application Developers Alliance. Sparapani formerly served as senior legislative counsel for the American Civil Liberties Union.
“The bridge between California technology and Washington policy has never been more important than it is today,” said Sparapani. “The tech community’s ingenuity and disruptions echo through Capitol Hill. It is important that regulations power innovation while providing certainty and competition and ensure consumer protection and choice.”
“Kish and Tim are well-regarded thought leaders in technology policy matters and bring immense knowledge and experience to CALinnovates,” said Montgomery. “In having colleagues with their expertise on both coasts, CALinnovates will continue to expand its tech advocacy and leadership on behalf of innovators and entrepreneurs at every level of government.”
Located in San Francisco, CALinnovates is a non-profit tech advocacy coalition working with innovative companies across the Golden State that are improving industries and expanding economic opportunities across the nation.
CALinnovates’ Comments Regarding The “Sharing” Economy: Issues Facing Platforms, Participants, and Regulators A Federal Trade Commission Workshop
June 19, 2015
CALinnovates appreciates the opportunity to provide comment following the Federal Trade Commission’s (“FTC”) workshop on the sharing economy. We are encouraged that the FTC recognizes the significant economic contribution that this rapidly growing sector is having and will continue to have as it expands opportunities and creates economic impact for people to engage in and receive benefit from the app-based economy consumers currently enjoy.
Given the Commission’s expertise as a competition and consumer protection agency, along with its significant economic expertise, the FTC is uniquely equipped to examine this important topic by convening the right contributors from business, stakeholders, academia, and the general public. The FTC is the only entity that can review – case-by-case – and deter potential challenges to the flourishing of this market that may be anti-consumer or anti-competitive. Beginning with this workshop, the FTC can also recognize that the innovative companies comprising the sharing economy will advance consumers’ welfare while simultaneously disrupting entrenched markets and mindsets.
CALinnovates represents companies across the Golden State that are improving industries and expanding economic opportunities for Californians through innovative technologies. Sharing economy companies are our partners, including Transportation Network Companies like Sidecar, Shuddle, and Uber. The evolution of the economic and entrepreneurial landscape is accelerating to the benefit of the economy and consumers. We find ourselves in a golden era of the new economy, or what we refer to as the personal enterprise economy.
The sharing economy is an economic and social reality, embraced by tens of millions of Americans including the electorate’s largest generation, Millennials. According to a survey by Zogby Analytics commissioned by CALinnovates, more than half of Millennials, age 18-34, have used sharing services like Uber, Sidecar, Lyft and Airbnb. Fifty-four percent of Millennials say they expect ride and home sharing services to become even more popular in the coming years. Popularity isn’t the only appeal of the sharing economy, either. This industry has turned itself into a powerhouse job creator, accounting for 466,000 jobs in 2012 when just four short years earlier there were none.
The sharing economy is one of the contributing factors driving 2015’s emergence from the recession. CALinnovates encourages the FTC to embrace the sharing economy and encourage its development for the benefit of consumers throughout the U.S., not just in California. The FTC can advance the public interest and ensure the realization of this golden era of personal enterprise economy by taking at least four actions. The FTC should:
– Prevent the novel application of existing regulations or the creation of new rules that are de facto incumbency protection schemes by unmasking parochial or local or state interests that are anti-consumer;
-Block the institution or application of rules that are justified in the name of public safety or welfare but are applied unevenly and primarily as a protection of monopolists or entrenched market participants;
-Stand against local scams, tying arrangements or similar agreements between local businesses to limit market access, or similar market distortions by incumbent interests; and,
-Deter and prevent scams against tourists or business visitors to a locality
The FTC is a unique actor and it bears a great responsibility for ensuring the flourishing of the sharing economy, not just policing its leading companies. CALinnovates assumes that the success of these new companies is closely aligned with the public interest. Our sharing economy companies are driving down prices, advancing individual and community safety, fostering innovations that increase rather than erode privacy, and delivering additional value to consumers in the form of enhanced services and platforms. The FTC can act as a sort of super cop or appellate court to review anew actions in states or localities that are intended to forestall sharing economy companies’ entrance into market and detract from the growth of this economic sector.
Local businesses everywhere often build strong relationships with state and local governments to advance their interests. This usually leads to mutual benefits; the companies have champions in government that review proposals in light of whether they will advance or harm those businesses while elected officials may be able to claim some credit for job growth and local or regional economic expansion.
The FTC should be on the lookout for de facto incumbency protection schemes that harm rather than advance the public interest by using these relationships to thwart competition. When businesses that have been successful over years face new competition, they may resort to relying on those political relationships to fend off challengers. One likely outcome is that the local businesses, which may be campaign supporters of elected officials, seek legislative or regulatory burdens that could slow or stop their new competitors. Every business wants to succeed and companies facing new challenges to their market positions are likely to request assistance from politicians that are tied into their communities. The result can be the imposition of laws, rules, fees and similar burdens that are designed to protect local businesses from competition rather than advance the public’s interest, which is more properly measured by how much benefit is produced for each individual consumer and the public writ large.
The FTC should also be watchful for novel application of existing regulations or the establishment of new regulatory burdens that are justified in the name of protecting consumers but are intended to thwart new competitors in the market. For example, incumbents argue that regulators should not allow new competitors to enter the ridesharing marketplace until the government has completely reformed the incumbent industry by solving all the existing problems. In many municipalities, regulators have required sharing economy companies to comply with all the regulatory regimes in place for incumbents even when they don’t make sense or they haven’t been applied for a lengthy amount of time. For example, in California, the Department of Motor Vehicles threatened to apply an ancient, little-used law that would have required rideshare drivers to display commercial license plates on their personal vehicles at all times, even when the drivers were using the vehicles for personal use.
These regulations among many others wielded at the behest of entrenched market participants could be a sword against competition rather than a shield to protect the public. These provisions may take many forms and be advanced in the name of increasing public welfare, safety, health, privacy or consumer protection. The FTC should be watchful for the indicia of regulations being misused. Where an old, un-utilized or rarely utilized regulation is dusted off and applied to a sharing economy company the FTC ought to examine not just the regulation itself but also the context in which it is suddenly being applied. Similarly, the enactment of a new law or regulation by a state or locality that deters competition rather than creating equal responsibilities for market participants should be scrutinized closely and with skepticism.
We all agree that advancing consumer protection and public safety are important policy goals. Sharing economy companies invest a great deal of their capital ensuring that members of their communities are safe. In many respects, the technological innovations brought to bear provide consumers with advanced safety that is greater than is offered by incumbents in the market who, heretofore, lacked any impetus to compete on safety and consumer protection. Sharing economy
Companies know that in order to succeed commercially, they must positively impact the customers and communities they serve, conducting their business in ways that exceed public expectations that were established by market incumbents’ behavior, services and offerings. CALinnovates expects that the FTC will be able to identify the pro-safety and pro-consumer protection advances achieved by the rise of sharing economy companies and calculate their value when evaluating the sharing economy phenomenon as a whole. As a matter of routine practice, the FTC should measure and include in its analysis for the unusual advances made in these important public policy matters produced by each sharing economy sector or company it scrutinizes.
Local businesses may resort to other anti-competitive actions to delay, deter or thwart competition from new sharing economy companies that want to enter a local or state market. Due to their entrenched nature, local businesses may be willing to team up with other local competitors to block market access to a new market entrant. They may partner with key customers or offer anti-competitive pricing or offerings to diminish the attractiveness of new market entrants. Some of these actions may benefit consumers in the short run, but taken to extremes, market collusion, tying arrangements and similar anti-competitive behaviors will ultimately harm the public interest. CALinnovates urges the FTC to be on the lookout for these market distortions that may have little national economic effect but may do great injury to local consumers in the long run.
Finally, CALinnovates believes the FTC can identify and take action against scams and other fraud perpetrated against tourists and business visitors to particular locations. The FTC is uniquely situated to overcome unfair or predatory pricing for tourists and other visitors, such as those traveling for business to a distant city. For decades visitors to American cities were sure to be left to the whims of businesses charging them a “tourist tax” and the FTC can help the sharing economy overcome either false or deceptive advertising, unfair pricing, or outright fraud. These examples were routine and consumers everywhere suffered due to local businesses not being challenged by true competition or required to provide actual transparency about pricing and services. Examples include:
a. a meterless taxi fare or one without a credit card machine,
b. driving through multiple zones in a city or taking a longer route to substantially increase a fare;
c. listing a hotel as near a major tourist site even though there was no easy route from the hotel to the site or the hotel was in a dangerous neighborhood or next to a freeway; or,
d. adding on unexpected, one-time hotel costs to bills while pricing.
Just as the FBI must occasionally police the police or the DOJ must occasionally police a local government agency when endemic discrimination is feared, so too must the FTC evaluate the appropriate value that should be produced for consumers and business customers in a truly free and fair local market. The FTC must divine what a market would look like absent local or state rules designed to lock in local
monopolies, duopolies or collusive practices. Whether it be the imposition of additional fees on lodging, hidden taxes not stated for advertised rates, special surcharges or fees for transportation or the like, the FTC must be prepared to stand in the shoes of consumers and eliminate scams that harm consumers. Nearly every business traveler or tourist has experienced some of these upcharges. Information asymmetry is to blame; the local businesses have all the information and travelers have far less. The sharing economy, with its advanced transparency relative to that provided by incumbent local businesses regarding prices, services and offerings can help, but the FTC should actively police meritless surcharges, false advertising or hidden costs imposed by local businesses that harm consumers.
These technologies are adapting and adjusting to the market quicker than regulation can keep up, and it is the Commission’s responsibility to ensure that regulations are responsive to the business models, technologies and consumer behaviors emerging from these innovations. CALinnovates’ members want to work with regulators to create and adhere to contemporary and adaptable rules of the marketplace.
In order to do so, however, there must be clear and fair rules for both businesses and consumers, rules that apply equally to both legacy and upstart companies. Unfortunately, the legislative process isn’t designed to keep up with quick and disruptive innovation.
We feel there is a middle ground between technology and policy, and we hope that the FTC can craft innovative and thoughtful policies – if, any are needed – that protect Americans while encouraging innovation. Applying legacy regulations developed in a different time for different technologies would be akin to attempting to access one’s email with a rotary phone. It just doesn’t work.
In closing, CALinnovates believes the FTC is uniquely situated to attack parochial or hide bound interests. Local commissions may impose peculiar or Byzantine rules in the name of ‘fairness’, or add extra fees and permissions to prevent free and fair competition but the FTC can see the matter from a distance and identify unfair barriers to competition that are limiting competition. CALinnovates appreciates this comment period, and wishes to keep the conversation going. We feel this this workshop was an excellent way to continue discussion between the industry, the Commission and the public. A healthier sharing economy marketplace is a healthier American economy, and we look forward to providing any assistance and feedback on this matter.
When the FCC released it’s Net Neutrality Order last week, it cited a White Paper commissioned by CALinnovates and drafted by NERA. The authors of NERA’s White Paper issued a response. What follows is the conclusion, with a link to the full response, below:
We stand behind the basic results of NERA’s White Paper and find that, if anything, the Order has actually made us more worried about the state of competition and innovation than we were before seeing it, assuming it manages to pass its initial, and inevitable, court challenges. Although the Order is quite long, the actual new rules are very short, reflecting the difficulties that nomenclature and case-by-case analysis will bring. Further, the Order tries to describe the new rules as “light-handed,” ignoring the incentives of aggrieved parties to achieve through FCC litigation what they could not achieve in open competition. As a result, innovation is shackled with new costs that could kill, or at least severely hamper, further development of the Internet ecosystem.
Business Insider: Uber and Lyft fail to convince judges their employees are ‘independent contractors’
Here are the two most pertinent quotes from the story, both coming from California District Judge Vince Chhabria:
“The jury in this case will be handed a square peg and asked to choose between two round holes.”
“California’s outmoded test for classifying workers will apply in cases like this. And because the test provides nothing remotely close to a clear answer, it will often be for juries to decide.”
The following can be attributed to Executive Director Mike Montgomery
“The inevitable happened today – the FCC’s website broke as it tried to release its 400-page ‘Open Internet’ order, two weeks after the agency voted to approve utility-style regulation of the Internet. Who saw that coming? Errors aside, today marks the beginning of yet another chapter of the ongoing and seemingly never-ending net neutrality debate. Now that the actual document is finally here, the partisan feud about the agency’s lack of transparency on an issue dealing precisely with openness and transparency might finally be put to pasture. In the coming days, speed-readers will have their moment in the sun as the nation scrambles to comprehend the 400-page Order and its effect on the Internet ecosystem.
We hope this new stage of transparency and openness will be applied long-term, but the FCC vote will likely prove the wrong vehicle as litigation and future FCCs loom. Today, CALinnovates calls upon our nation’s federally elected officials to prove the naysayers wrong – bipartisan legislation isn’t just a pipe dream. It’s a necessity.”
From a March 6, 2015 op-ed in The Hill by Executive Director Mike Montgomery
The United States’ policy schizophrenia regarding the Internet was on full display last week in Washington. On one day, the Commerce Department explained to a Senate committee why it’s important for the U.S. government to take a hands-off approach to the Internet as a reason why it’s ending its ties to ICANN. And on the very next day, the Federal Communications Commission explained why it’s important to take a hands-on approach to the Internet by imposing net neutrality rules.
Meanwhile, other governments must be smirking at us.