Why should the Internet be regulation-free?

Why should the Internet be regulation-free?

Summary: Uber and Airbnb are examples of a larger phenomenon, that Internet users often think they are operating outside of the legal concept of commerce. They aren't.


Sometimes the Internet enables new ways to compete in a market that would be inconceivable without it. These businesses may be new and radical, but they still provide goods and services in competition with conventional businesses. Shouldn't they be subject to the same rules and regulations as those businesses?


I'm thinking of Airbnb and Uber in particular, but there are probably other good examples. (Please comment on them and discuss the implications.) It's no surprise that conventional competitors — hotels, taxis, car services — are upset about new business intruding on their turf, but not all their complaints are entirely self-serving. Here I'm going to focus on Uber.

This subject shares a lot with my recent column on how interstate Internet commerce should be just as subject to sales taxes as brick and mortar commerce, and a debate that followed with my colleague David Gewirtz. These new businesses should compete on their own merits, but if only the old economy versions are subject to taxation and legal regulation then it's not a fair competition — government is, in effect, giving an unfair advantage to the new economy.

Consider this report from Marketplace, a business radio show from American Public Media, on the impact of ride-sharing services (basically Uber) on taxis and other conventional business. Many of the reasons people love Uber are feature, like the app, that taxis could also do. As the taxi owner in the Marketplace segment freely admits, a big part of it is customer service. People have low expectations of customer service in a taxi, and Uber plays this game at a much higher level. In fact, taxis are starting to catch on, as the glowing reviews for Hailo, an app for hailing a New York city yellow cab, show (4.8 out of 5 in Google Play, with 89% of the reviews at 5).

But there are a lot of rules that taxis have to legally follow, although these differ from city to city. Want a ride to a bad neighborhood? A taxi can't legally say no, but good luck finding a willing Uber driver. City governments love to make rules about taxis, and all of them impose cost on taxi owners and drivers. Finally, taxis also have regulated rates. Uber is a free market.

I didn't need Uber to realize many years ago that taxi regulation is largely stupid and counterproductive, and the free market is a much better solution. You know how you can't get a taxi in Manhattan in the rain? That's because only a certain number of taxis are allowed to operate (legally). If there were no such regulations new taxis would show up to meet demand, and that's soft of what Uber is.

I still feel sorry for taxi owners though. A taxi medallion in a major city is a major investment, and deregulation will, in effect, kill the value of that investment. I don't know that there's a fair way out of this; there's actually an argument for buying out the medallion owners, or at least giving them some compensation. But this shouldn't be viewed as a reason to perpetuate an inefficient, anti-competitive system.

So should the Internet be regulation-free? The question is misplaced. It shouldn't be any more or less regulated than conventional commerce, and the specifics depend on the case. In the case of taxis vs. ride-share, the rise of Uber proves the futility and counter-productivity of regulation.

Topics: E-Commerce, Government

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  • "The Internet"

    It should not be regulated because it does not exist as an entity. There is no "The" Internet.
    Internet is a name given to a set of computers that agree to talk to each other.
    Terminology matters.
  • Ummm....

    You want the government to have MORE power to regulate? Isn't the NSA enough?
    Tony Burzio
  • If you want

    the internet truly f'd up, let the government regulate it. O'care is a good example of their technological expertise.
  • I'm so tired of hearing that sad old statist argument

    Sooooo, people doing business without the burden of government ripping off a hefty chunk of their business is somehow "unfair" to the rest whose business ARE hurt by government taking a chunk of it. So naturally the only solution is to impose the same harmful restrictions on those who do not presently have them. I have an idea. If you really want to make it "fair," then how about just REMOVING the taxation from those who have them imposed on them now. Wouldn't that make it "fair?" But no, that is never considered, is it? You can't just have people running around willy-nilly doing business and making money on their own without the government getting their kick-back to waste. Where's the fairness when people you don't know (read: government) demand at gunpoint that you give them part of your business in order to keep doing business. Eliminate that and you'll have "fairness" without having to tax anybody new. I know, I know, not acceptable. After all, if we did that, how would we finance all of our fancy wars and other goodies? Oh, wait. We could just borrow more and more ad infinitum and print money. If they can do that, then what's the need for taxation anyway?
    • Read articles to the end!

      Glancing over just the beginning of posts much? That's EXACTLY what Larry suggests in the last three paragraphs of his post.
      • Thank you for pointing this out

        hello_world, if you have prevented even one misplaced rant from gracing this blog, you have done the world a favor.
      • Waht? I haven't seen any Ad Hominem attacks here...

        Larry is bringing a topic to the fore in a devil's advocate kind of way precisely so ideas can be debated vigorously and opinions be presented no matter how polarized they are and he is to be commended for taking flak head on. That's the whole idea behind starting a debate. If you don't like it, don't participate!
    • Incredibly unrealistic

      In theory I agree- but do you understand why it is nearly never considered? Because that utopia doesn't exist anywhere. Everywhere in the world, governments regulate as much as they can, and where they don't there's bribery and non-state corruption. Take away the state regulation, and in it's place you get an informal system that is sometimes more fair, sometimes less. Sometimes low-level, sometimes by large (non-state) criminal organizations Tell me of a place where that's not true, and then we can have a discussion about "Statists' arguments." Until then your anarchist ideals just have no place in the real world.
    • ... so tired ...

      of people who just don't want to pay taxes trying to make it be something else. Your being close to an anarchist at heart explains it just a bit.
  • There's a guy like this at every bar...

    There's a brick and mortar aspect to Uber and Airbnb that only exists in the "physical realm". The actual product, a car with a driver or a building with a bed, are not virtual and need regulation. The product is regulated, not the app. If I order a pizza via an app should the regulation of that food product be different than if I ordered the pizza via telephone or if I walked in off the street? How about medical services? Prescription medication? Uber is just a car service. The cars and the drivers must be regulated. The cars must be at least registered, the drivers must be licensed by the state, they must have insurance because the true product can do physical harm. There are also labor concerns. Drivers still need a living wage, regardless if they're paid via an app or in cash. It's similar in the case of Airbnb, there are HOA's, landlords and zoning issues. There are liability issues when you allow people to use your home. The issue isn't regulation of the internet, it's regulation for consumer protection and public safety.
  • Unfair Advantage to the New Economy? What a narrow minded outlook!

    The government should be giving an 'unfair advantage' to the new economy PRECISELY because it is new, needs to be built and succeed, because we depend on it for our future prosperity.

    Unless you also believe that your kids should be heavily burdened the minute they step out of school? Oops, sorry, forgot that it's how it's done in America, where you are struggling under unbelievable debt before you even graduate.

    Sorry, but your argument doesn't fly with me. Your rant sounds suspiciously like jealousy. Your energies would be much better spent questioning the wisdom of a system that imprisons its population, especially its minorities, in record numbers, and where war, violence and litigation are a way of life, even though it is the richest nation on earth with resources that could easily solve the problems of the entire world population.
    • Socialist Propaganda Rejected

      Save it for when you and your fellow comrades convene your Marxist Revolutionary Council meetings. This is a technology site, not left wing forums.
  • Stop calling Conservatives and Libertarians Anarchists!

    Educated thinkers who revere limited government are worthy of attention, not scathing rebukes as "anarchists". Libertarians believe in fairness, i.e. everyone pays the same tax and faces the same regulations. No breaks for the wealthy, middle class or poor.

    Here, for example, is a the fairest possible replacement for the U.S. federal income tax system:

    Line 1: Enter total income (wages, interest, dividends, capital gains, rents, etc.): ________________
    Line 2a: Enter $15000 if single, $30000 if filing jointly: ______
    Line 2b: Multiply number of dependents x $3000: ______
    Line 2c: Add lines 2a and 2b: ______
    Line 3: Taxable Income: Subtract Line 2c from Line 1 _______
    Line 4: Income tax: Line 3 x 20% (.20): _______

    That should be the entire federal tax code/return. NO credits, deductions, exemptions, carryovers, or incentives. After exempting basic living expenses, EVERYONE pays 20% of their income. If you are a single person starting out and making $20k per year you'll pay $1k. If you are a celebrity making $20 million per year you'll pay $4 million. And if you are a middle class family with two working parents, two kids making $100k per year you'll pay $12,800.

    That is the definition of fairness, and only a Marxist (or real anarchist) would hate it.
    • But why the subtraction for dependents?

      That's how the whole tax code thing started in the first place. People wanted exceptions and deductions.
      • Could be eliminated, but...

        ...it is a concession to the idea that families need to feed their children, and slightly lowering their tax obligation is a way to do it. I would suggest there should be a cap on that though, perhaps no more than 5 dependents can be exempted.
      • I'll tell you why

        It's not an exemption. Basic life needs like food and housing should be calculated. Take that number and subtract it from how much you make. Whatever is left over is what you pay taxes on. For every person there is in your household, that number goes up.

        Kids are people, they must be fed and housed just like everyone else.
  • The internet has nothing to do with it

    Is uber engaged in the business of livery? Then how does it get away with not following the rules? There have been gypsy cabs for as long as there have been cabs. This is nothing new.
    none none
    • The uber manipulation...

      Thing with uber is that it does not play by the rules. Its army of attorneys are working day and night to create this illusion that somehow Uber is “revolutionary” and is one of a kind - a what
      they know call "a transportation network company". It's just another scheme to avoid taxes and avoid
      all local regulations. Uber clearly hurts small local livery companies. You won't hear about it much
      because that goes against the well oiled Uber PR machine... Uber and what it does is nothing new
      so attempting to present a GPS-enabled app as a revolution is a manipulation. Let Uber pay ALL taxes and fees as local liveries do. Let them follow ALL regulations same as livery businesses do. This preferential treatment is unfair and must end. You want to hail a car through your iPhone? No problem. There are dozens of apps that do exactly that while working and enabling local liveries instead of future Walmart of transportation that cuts quite a profit and hides it all.