The sharing economy is growing faster than ever and becoming a hot policy topic these days. I’ve been fielding a lot of media calls lately about the nature of the sharing economy and how it should be regulated. (See latest clip below from the Stossel show on Fox Business Network.) Thus, I sketched out some general thoughts about the issue and thought I would share them here, along with some helpful additional reading I have come across while researching the issue. I’d welcome comments on this outline as well as suggestions for additional reading. (Note: I’ve also embedded some useful images from Jeremiah Owyang of Crowd Companies.)
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Just because policymakers claim that regulation is meant to protect consumers does not mean it actually does so.
- Cronyism/ Rent-seeking: Regulation is often “captured” by powerful and politically well-connected incumbents and used to their own benefit. (+ Lobbying activity creates deadweight losses for society.)
- Innovation-killing: Regulations become a formidable barrier to new innovation, entry, and entrepreneurism.
- Unintended consequences: Instead of resulting in lower prices & better service, the opposite often happens: Higher prices & lower quality service. (Example: Painting all cabs same color destroying branding & ability to differentiate).
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In mid-April, the Federal Trade Commission (FTC) requested comments regarding “the consumer privacy and security issues posed by the growing connectivity of consumer devices, such as cars, appliances, and medical devices” or the so-called “Internet of Things.” This is in anticipation of a November 21 public workshop that the FTC will be hosting on the same issue.
These issues are finally starting to catch the attention of the public and policymakers alike with the rise of wearable computing, remote home automation and monitoring technologies, smart grids, autonomous vehicles and intelligent traffic systems, and so on. The Internet of Things represents the next great wave of Internet innovation, but it also represents the next great battleground in the field of Internet policy.
I filed comments with the FTC today in this proceeding and made a few simple points about why they should proceed cautiously here. A summary of my filing follows. Continue reading →
Of all the shockingly naive and shamelessly self-serving editorials I’ve read by businesspeople in recent years, today’s Wall Street Journal oped by Netflix general counsel David Hyman really takes the cake. It’s an implicit plea to policymakers for broadband price controls. Hyman doesn’t like the idea of broadband operators potentially pricing bandwidth according to usage /demand and he wants action taken to stop it. Of course, why wouldn’t he say that? It’s in Netflix’s best interest to ensure that somebody else besides them picks up the tab for increased broadband consumption!
But Hyman tries to pull a fast one on the reader and suggest that scarcity is an economic illusion and that any effort by broadband operators to migrate to usage-based pricing schemes is simply a nefarious, anti-consumer plot that must be foiled. “Consumers and regulators need to take heed of what is happening and avoid winding up like the proverbial frog in a pot of boiling water,” Hyman warns. “It’s time to jump before it’s too late.”
Rubbish! The only thing policymakers need to do is avoid myopic, misguided advice like Hyman’s, which isn’t based on one iota of economic theory or evidence.
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You really have to hand it to the folks over at the (Un)
Ah yes, “Internet fairness.” Who can possibly be against it? Well, before you rush to click send on that UnFree Press form letter, let’s be clear what this effort is really all about. Free Press claims that the Massa bill is needed because “phone and cable giants [are] weighing schemes to hike prices, shut down the free-flowing Web and keep user innovation in check.” How are those companies doing that? Tiered pricing! Rep. Massa says that, “Time Warner has announced an ill-conceived plan to charge residential and business broadband fees based on the amount of data they download.” Oh my God, no… you mean some people might be charged for the costs they impose? What’s next? Are we going to force people to pay for their own energy use by metering gasoline, electricity, or water? Think of the horror! (This is sarcasm, folks. All those things are metered currently. And yet, somehow, the Earth hasn’t spun off its axis.)
Like all the other propaganda produced at the Free Press techno-spin factory, their latest crusade is based on a combination of outright lies and blatant economic ignorance. Metering broadband access is not an effort “to restrict Internet use,” as Free Press claims. Rather, like every other metered system under the sun, it’s an effort to price a scarce resource in such a way so as to
maximize use. Broadband operators don’t sit around all day scheming to find ways to decrease network usage. They wouldn’t make any money that way!! They need to find business models that encourage increased uptake while also investing in and growing their networks to meet new demand and competitive challenges.
Moreover, there are other pro-consumer reasons for companies to consider metering options. Unless it is your goal to allow some particularly aggressive users to be subsidized by all other users, it is sometimes sensible to price usage based on demand. If you don’t, you potentially create a perverse incentive for a small handful of over-grazers to to be feeding at the trough at everyone else’s expense. As economist Russell Roberts aptly noted in the title of a famous 1995 Wall Street Journal editorial, “If You’re Paying, I’ll Have Top Sirloin.” Thus, you would never want to make the “all-you-can-eat” pricing model the only option for the provision of a scarce resource. Even if you choose not to deploy it, it is useful to have the metered pricing model available in case you need to charge the over-grazers at some point.
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The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.