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Contra Costa Times
Guest commentary: State leaders should encourage innovation, not kill it
Posted: June 14, 2014 9:00 AM PDT

By Michael Beckerman

As the unified voice of the Internet economy, The Internet Association is dedicated to propelling innovation and technology forward. Our member companies have thrived in California, and consumers from across the world have benefited from the adoption of the new technologies Internet companies are creating within our state’s borders.

That is why we are concerned about legislation that is pending in the Legislature that threatens innovative California-born startups like Uber and Lyft.

AB 612 by Assemblyman Adrin Nazarian, D-Van Nuys, and AB 2293 by Assemblywoman Susan Bonilla, D-Concord, will do nothing to improve public safety, but they will severely limit transportation options for consumers as well as increase costs to drivers and riders.

While we are proudly the state where Transportation Network Companies (TNC) were born and are now relied on for jobs and ride-sharing by millions of people across the world, we are risking the ironic distinction of being the state that actually kills these same companies to protect entrenched corporate interests that view these startups as a competitive threat.

Nazarian’s bill is an attempt to protect California’s taxi company monopoly. The bill would essentially destroy the TNC model and force these tech companies to become commercial carrier companies, i.e. cab companies. Consumers and drivers do not want more cab companies; they want better, more innovative transportation options such as what is offered by Uber, Lyft and others.

Large taxicab companies are having a difficult time competing with new services offered by companies like Uber and Lyft. Not only have they been losing customers, but they have also been losing drivers. In San Francisco, Chris Hayashi with the San Francisco Municipal Transportation Agency has said she has “never seen the driver numbers so low” in the six years she has managed taxis.

But rather than innovate and adapt, cab companies want to force drivers and consumers back into the cab, and back in time, via legislative fiat.

There’s good reason drivers are leaving the cab industry. For example, drivers using the Uber app are entrepreneurs starting their own small businesses where each driver decides when and where they want to work. In addition, these drivers often make more money than taxicab drivers. For example, drivers who use the uberX platform working 40 or more hours are making a median of more than $74,000 in San Francisco, more than $53,000 in Los Angeles and more than $54,000 in San Diego.

Let’s compare those figures with the realities recently revealed in a 2013 study, “Driven to Despair,” by San Diego State and the Center on Policy Initiatives.

  • Cabdrivers make less than $5 an hour.
  • Cabdrivers only make 30 cents of every dollar including tips.
  • Nearly 90 percent of licensed taxi drivers in San Diego are “lease drivers” who rent the cars rather than own them.
  • Drivers are encouraged to drive when tired or sick and allow for “lax vehicle maintenance, putting public health and safety at risk.

And this is the business model the Legislature wants to force TNCs into? Why not instead encourage cab companies to innovate in the way California startups have?

Let’s also not forget about Bonilla’s bill. While less onerous than AB 612, the legislation is being strongly supported by the concerning alliance of big insurance companies and trial lawyers, which should be a strong indication that the outcome will not be something that helps drivers or consumers.

Through AB 2293, the insurance industry is attempting to keep the money they’ve accepted from drivers’ personal premiums, while at the same time removing their liability to pay claims. Insurance companies don’t want to go through the legal process with the Department of Insurance to change their policies, so instead they are trying to change the law to their own benefit.

We do appreciate Bonilla’s willingness to sit down and bring parties together and we are hopeful an agreement will be reached. In Colorado, we successfully worked with the Legislature to develop a public policy that protects innovation and safety. We should do the same here in California.

The bottom line is that when there is disruption and innovation in an industry, the entrenched special interests dig in and attempt to force the status quo. We are hopeful that California — the ultimate innovator and trailblazer — will see through their veiled attempts to protect their turf.

Let’s not kill innovation but encourage it and pass smart laws that ensure consumer safety and allow small business entrepreneurs to flourish.

Michael Beckerman is president and CEO for the Internet Association


To read the original aritilcle click here.