On Consumers, Competition & Collusion

The first CD I purchased was Alanis Morissette’s “Jagged Little Pill.” I bought the disc at my local record store and listened to it on endless repeat. Actually, I just listened to two or three songs, but to get those I had to buy the whole album.

I would love to have been a fly on the wall during Steve Jobs’ negotiations with the labels. “One song for $0.99?!? How are we going to pay for the 13 other songs that nobody wants?” Or when Reed Hastings first told the studios he wanted to give consumers a la carte access to television shows… over the Internet no less. Or when Jeff Bezos bought the first digital distribution rights for a book, trying to convince the authors and publishers that people would ditch their beloved paperbacks.

These visionaries were vindicated by putting consumers first. They focused on what consumers wanted (one song at a time; one TV series but not the whole channel; a thousand books in my backpack please) and trusted that viable business models would emerge. They were vindicated by balance sheets that proved putting consumers first can be profitable.

But what if the holdout labels, studios, and publishers had, instead of just not doing the deal, hired an army of lobbyists? What if those lobbyists had convinced the government to appoint those producers to a public commission? And what if that commission then set the minimum price for an individual song at $3.50, required you to wait an hour before watching that episode of Game of Thrones online, and ruled that only bad serial romances could become e-books?

This laughable scenario is frighteningly real in the fight to revolutionize urban transportation.  For example, last week I testified before the Portland Private-for-Hire Transportation Board of Review, which regulates taxis and limousines in the Rose City. I was asking this official government body to do away with rules that force sedans to wait 60 minutes before picking up the requesting passenger, that explicitly prohibit the use of cost-effective vehicles, and that artificially inflate prices for sedan transportation.

I was requesting these changes of a regulatory body made up of taxi companies and their allies.

The Portland Board is what’s known as a “self-interested regulator;” representatives from taxi companies testified before the Board, which includes commissioners from those exact same companies. “I’m here on behalf of Radio Cab, and I’m asking the board member from Radio Cab to please protect Radio Cab.”

The marriage between government and industry in Portland is hardly the only example. In Dallas, Yellow Taxi’s lawyer worked with city officials to organize a fruitless sting against Uber. In Colorado, Public Utilities Commission staff proposed anti-Uber regulations after a local taxi lobbyist wrote to them pleading for “rules changes” to address the Uber “issue.” In Missouri, the chairman of the Metropolitan St. Louis Taxicab Commission is a lobbyist who walks the halls of state government on behalf of the Commission, which is primarily made up of – you guessed it – taxi companies.

This is regulation by the taxi industry for the taxi industry. Consumers’ interests are getting bulldozed by lobbyists, campaign contributions, and cronyism run amok.

Today, a group that generously refers to itself as the International Association of Transportation Regulators issued model regulations that would drastically limit consumer choice and transportation options if widely adopted. IATR counts regulators from cities like Portland, St. Louis, Denver, and Dallas as members… and fills its treasury with contributions from taxi and shuttle companies.

IATR has proposed that you only be able to pay for a ride using Uber in one-hour increments. Only take a 15-minute trip? Too bad, you’re charged for the unused 45 minutes. IATR thinks it should be illegal to measure the length of a sedan trip using a GPS device. Ignoring for a moment that GPS has been used for things like defining national borders and navigating aircraft carriers for nearly 20 years, this newfangled technology can clearly not be trusted to measure the length of your ride home from work. And IATR says you should only be able to arrange a ride through Uber way in advance. Sixty-minute rules are in vogue; so better order your ride two or three drinks before you need it.

The IATR model regulations are indeed a model. They are a tried-and-true model of anti-competitive and collusive policymaking. They are a model of serving producers instead of consumers. And they are an excellent model for cities looking to find themselves on the wrong side of history. That said, consumers ultimately will not be denied. Better, safer, more reliable transportation made possible by new technologies will prevail.

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