Thursday, June 2, 2016

EU Tries to Balance Disruption, Incumbent Protection

A new EU policy framework document strikes a "balanced" approach to regulating new ride-sharing or lodging-sharing services. That stance suggests regulators think the economic benefits warrant the risk of some economic disruption.

When one sees the phrase “balanced and sustainable” as an approach to regulatory policy, it means policymakers are trying to encourage innovation, while also maintaining some regulations.

A new European Union  document on the “collaborative economy” that underpins ride sharing, room sharing and other forms of what many call “sharing” shows an effort to allow innovation that might harm the interests of established economic interests.

“The success of collaborative platforms are at times challenging for existing market operators and practices,” the EU policy document says, acknowledging the potential for economic damage to existing businesses.

Significantly, the suggested framework calls for what some would call a relative “light touch” to regulations.

That has not always been the approach--in Europe or elsewhere--to new developments in the economy that are potentially disruptive.

All too often, regulators have applied legacy rules to new technologies and business models that have the effect of protecting incumbents and harming challengers.

Application of legacy common carrier rules to over the top voice or messaging services provide clear examples.

“The collaborative economy is part of the digital economy but also overlaps with other economic sectors, mainly those providing services,” a supporting document says. The point is that the new businesses are significant enough in potential size that banning the new business models is deemed unwise.

Collaborative platforms operating in five key sectors of the collaborative economy generated revenues of EUR 3.6 billion in 2015 in the EU.18 In terms of gross revenues flowing to providers and platforms, the EU says.

it is estimated that collaborative platforms facilitated EUR 28 billion of transactions in 2015 in the EU.

The largest collaborative economy sector by revenue is the peer-to-peer transportation sector, which includes ridesharing and carsharing.

The peer-to-peer accommodation sector is the largest on the basis of commerce generated.

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