Not the first time we've heard the Uber story

At digital innovators leap past established companies, lawmakers must put the public interest first.

Thestar.com
July 10, 2015
By Michael Geist

For the past two decades, it has been the Internet’s never-ending story. Established, successful businesses face Internet upstarts, who leverage the advantages of a global network and new communications technology to offer better prices, more choice or innovative services.

In the 1990s, online retailers such as Amazon presented more selection at lower prices than most bookstores could offer. In the 2000s, Wikipedia brought the decades-old encyclopedia business to an end, online music services provided greater convenience than conventional record stores, and Internet telephony technologies used by companies like Skype changed the rules of international voice and video calls. Today, services such as Uber, AirBnB, and Netflix have upended the taxi, hotel, and broadcast worlds.

In these David vs. Goliath battles, the established businesses don’t quietly fade away. Using their remaining influence, they often look to laws and regulations that increase costs, prohibit activities, restrict consumers, or regulate pricing to create barriers for the new entrants.

For example, Amazon was initially prohibited from operating in Canada, as opponents cited restrictions on the foreign ownership of booksellers. The company proceeded to launch here in 2002 without a physical presence (using Canada Post for order fulfillment), and only formally entered the country over the objection of the Canadian Bookseller Association in 2010.

Similarly, the Canadian Radio-television and Telecommunications Commission tried to regulate the pricing of Internet telephone services in Canada in 2005 before the federal government overruled it on the issue.

Given that history, the current fights against popular app-based car service Uber should come as little surprise. The battle is being waged in city halls around the world as the established businesses lobby for regulations that would either block the service or require price controls to increase costs.

When faced with similar demands, some governments have tried to block the new competitors altogether through website blocking (Quebec plans to bar access to online gambling sites in order to protect its licensed service) or restrictions on new technologies. Those efforts are not only destined to fail, they also create significant restrictions on Charter of Rights-protected freedoms.

Governments that resist lobbying pressures remember that the public interest should sit at the heart of any regulatory reform. In many instances, that means getting out of the way: new competition often means better prices and more choice for consumers.

In other cases, governments will need to make sure established businesses don’t wield their existing market power in an anti-competitive way. For example, net neutrality rules that stop telecom companies from granting themselves undue preferences give new competitors a fighting chance in the market.

Too many times, though, the public interest is cast aside in favour of rules that hamstring new competitors and cost consumers, from copyright reforms that blocked online video retransmitter iCraveTV from operating in Canada nearly 15 years ago to continued calls for Canadian content requirements and fees on online video services such as Netflix. The goal is too often to use law to stop or stall new Internet-enabled competition.

As officials across the country face demands to regulate or ban Uber, they should remember that the goal of regulation is not to sustain existing businesses, but to act in the public interest. In the case of taxi services, safety-related rules such as mandated insurance, road-appropriate vehicles, and GPS capability meet that criteria.

Regulating pricing, banning services, and requiring costly licenses do not.