Protecting Consumers or Protecting Old Competitors?

NetChoice is out with their compilation of the worst Internet laws, their iAwful list. At the top?  Legacy regulations enacted long before the Internet age that hamper many new service-based Internet companies from thriving.  Many of the new Internet companies coming onto the scene have tools developed for the average consumer to find better deals or utilize a better service.  As NetChoice points out, many of these regulations were originally meant to protect consumers—now, they’re stopping consumers from having a legitimate choice in their services and protecting many of the old-guard service providers.

Uber is a new service that allows consumers to order car services through the convenience of their smartphone, and thus providing them with a low cost, convenient and comfortable alternative to what many believe to be low-quality cab service in many big cities.  A consumer can load the Uber app onto their smartphone and easily order a car service to their location, with it arriving within minutes.  The users are greeted by a usually friendly, comfortable town car that will take them wherever they need to go, hassle-free.  When the ride is over, the users credit card is billed automatically, with no currency being exchanged between the driver and consumer.  This service has drawn the ire of cab companies and the Taxi Commission in Washington, DC.  In a bid to protect the near universally hated taxi industry, the Cab Commission has attempted to rule Uber as an illegal cab company, and trying to bar it from operating within the city.

Airbnb.com is a service that allows people to rent out their home, apartment, spare room or couch to travelers coming through town.  It’s been a smashing success, generating $25 million in revenue on $500 million in sales (meaning, revenue for their listers).  Many states and municipalities are trying to regulate Airbnb.com out of business.  New York took the step to ban short-term rentals, effectively making Airbnb illegal.  What was the purpose of this?  Governor Patterson claims it:

“Fixes problems caused by illegal hotels and improves quality of life in traditional residential apartment buildings, while also meeting the needs of visitors.  By removing a legal gray area and replacing it with a clear definition of permanent occupancy, the law will allow enforcement efforts that help New Yorkers who live in SRO units and other types of affordable housing preserve their homes.“

It seems to many, however, to be nothing more than a protection of the powerful hospitality industry.

Regulations to protect powerful players in certain industries are nothing new, but the rash of regulations to hamper Internet businesses is especially vexing, as it’s one of the only areas of the economy experiencing large growth.  And these regulations, combined with the attempt to tax digital goods and services, aren’t helpful to the many new Internet startups popping up all over the country.  The Internet economy accounts for around $68.2 billion of the US GDP, and is expected to grow past $100 billion by 2016.  Imagine if Apple or Amazon or Microsoft or Google were regulated out of business by older companies–billions of dollars of wealth wouldn’t have been created and millions of jobs wouldn’t exist.  If consumers want to see Internet companies flourish and continue growing into the 21st century, government will most certainly need to relax these regulations and ignore the pleas of more established companies.

Zack Christenson is a digital tech writer for the American Consumer Insti

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