The case for regulating ridehailingand dockless bicycles
Roundtable on Regulating App-based Mobility ServicesBeijing, 1 November 2018
Rex Deighton-Smith

2Introduction• The title of this roundtable points to the commonality
between these shared mobility options– i.e. Ride-hailing, dockless bikes, e-scooters, vanshare etc are all appbased & GPS enabled• They are also converging toward a MaaS model– as the increasing common ownership suggests• Suggests the need for consistency of regulatory approach– Yet this has been largely absent

3Government regulatory responses• An obvious contrast:• slow, uncertain responses in taxi/ride-hailing industry vs• a “pro-active” response to dockless bikes• Reflects very different industry/regulatory starting points•

Important in understanding responses & seeking to improve regulatory
policy4Taxis & ride-hailing• Ride-hailing caused major disruption to taxi markets– The most disrupted sector (cf AirBnB?)– A result of the size of the monopoly rents, due to high level ofregulatory capture & consequently static (moribund?) industry• Governments have struggled to “catch up”, leading to– Widely differing (sometimes rapidly changing) approaches withinjurisdictions– Significant unresolved regulatory questions in many jurisdictions

5Bike-share• By contrast, bike-share, e-scooters etc have entered alargely unregulated space– The issue of impacts on incumbents is largely absent– But there may also be a reaction to the experience with ride-hailing• Is the risk of acting too soon a substantial one?
– What is the cost of regulating something that is rapidly changing andat an early stage of development, with uncertain economics?
– Does the case for regulation meet a reasonable “threshold test”?

6Context – taxis & ride-hailing• Sustained regulatory failure, due to capture– Clear need for major regulatory change even before disruption occurred• Key characteristics of the ride-hailing model called otherelements of the regulatory structure into question– Different approaches to safety largely accepted by consumers– ride-hailing favoured on safety grounds in some countries, safety has
rarely/never been a negative for it in the market– Diminished importance of rank/hail, hence market failure

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Economic imperative to respond positively• Taxis have steadily lost market share: the distorting effects
of regulation have led to negative substitution– Significant welfare losses have resulted• Entry of ride-hailing has seen the market expand greatly;– Because these distortions are being swept away

– Because of efficiency benefits of the ride-hailing model• Seeking to exclude/limit ride-hailing via regulation thus has
substantial economic costs

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The political economy• Historically, the taxi industry has been politically highlyinfluential (as well as capturing regulators)• Strongly positive consumer responses to ride-hailing– Key benefits of speed, reliability, vehicle/driver quality and safety– Rapid growth means experience of these benefits are widely experienced• Conflict between these factors drives differing regulatory
responses

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Political economy• Recognition of the inevitable (Geradin)?
– Consumer enthusiasm means sustaining bans will have high cost

• But signs suggest many governments do not yet acceptthis– Symptoms include supposedly enabling legislation that hamstrings
the ridesharing model – e.g. France’s loi Thevenoud (Geradin),Ireland.

10Rearguard actions?
• Even where ride-hailing is well established, regulatory“backsliding” can be observed.
• Eg - NYC:
– Open entry for ride-hailing (regulated as FHVs) until August 2018
– Trip numbers exceed traditional cabs
– But a 1 year freeze on license issue was instituted– Given 25% turnover in ride-hailing, this will lead to declining supply– A review to assess congestion impact, utilisation rate & driver incomecommenced. Will potentially extend the “cap” or make it permanent– Simultaneous development of minimum driver income law

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A credible response to policy issues?
• Notional policy plausibility undercut by lack of equal treatment:– No minimum income for taxi drivers (despite low incomes)– No suggestion of broader congestion charging/regulation• An offer from ride-hail businesses of a $100m welfare fund fortaxi medallion owners was rejected– Suggests the perceived dynamic underlying the regulatory changes• Consistent with previous episodes where regulatory capture
has been reasserted after initial reform success12Re-regulation? The example of Ireland• Ireland’s example suggests the likely trajectory in NYC– Deregulation in 2000 followed strong industry opposition to moremodest reform proposals– led to (very) large increases in taxi numbers– Continued industry lobbying led government to impose a “temporary”
1 year freeze on Dublin taxi numbers, during 2009 recession– Almost a decade later, it is still in place13Re-regulation in Ireland• Licence sales were also banned in 2013
– most drivers are now in their 60s and 70s– License must be handed back (unless willed to family members!)• Fleet size down by 25% since 2009 & continues to decline• Ride-hailing is effectively prevented from operating byregulation• Supply restrictions & monopoly rents re-established by stealth

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Other examples• Withdrawal of Uber’s licence in London in 2017 (now restored)• Two cases at ECJ (from Spain & France) seeking to restrict
Uber operations (see Geradin)– Based on technical legal argument, rather than policy/regulatory principle• Increasing focus on ride-hailing as a contributor to congestion– Echoes a common argument against de-restricting taxi supply

15Conclusions on ride-hailing regulation• While many governments recognise the need to bring ridehailing into the regulatory system, others have not– Choice of second-best means of mitigating incumbents’ losses has also
led to poor choices in many cases (e.g. hypothecated levies)• Evolution of some “reformed” regulatory regimes shows thelobbying power of the taxi industry is not a thing of the past
– Proposals to further regulate the reformed industry should be consideredsceptically16Bike-sharing – and its evolution• This is an industry experiencing rapid growth& transition• This growth has quickly made it prominent – and led to a
rapid regulatory response.
– A clear contrast to ride-hailing– And perhaps a reaction?

• But the rapidly changing nature of the industry implies
significant risk for a “proactive” regulatory approach17Key questions• Is the current model durable?
• Is it rapidly becoming something else:– Purchase of major providers by ride-hailing companies– Rapid growth of mini-scooters (electric)– Introduction of electric scooters (i.e. Vespa type) – Paris, Rome, Berlin– Other possibilities (Segways, UniWheels, Hoverboards)• Implications for regulation?

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Some regulatory implications• Externalities– Likely a much smaller issue where unit cost is much higher – with lesser
proliferation of vehicles– Removal from streets for recharging, thus frequent relocations• Consumer protection– This issue has been much discussed to date – but the deposit requirement
underpinning it seems to be disappearing• Safety– Uncertain place in urban infrastructure (mini-scooters, uni-wheels) suggests“modal conflict”, with safety implications– More demanding re: technique– Higher speeds (electric scooters)

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Regulatory issues• So, two of the more prominent regulatory issues for docklessbikes may be of relatively little concern in the future– Or at least fall below the threshold for regulation• Conversely, the safety issue – secondary with bikes – may bemore significant

20Implications• Risk of regulation choking an industry which may bemarginally economic– e.g. recent bankruptcies– But buy-outs by ride-hailing companies• Risk of distorting its development– (i.e. affecting modal choice via regulatory decisions)• Broader implications for the development of MaaS?

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Synthesis – implications for regulatory policy• The common technological base and rationale of sharedmobility, suggests the need for a broadly consistent
regulatory approach– Increasing convergence – through common ownership and steps
toward MaaS underlines this point• An approach of adopting common principles is a usefulstarting point

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Regulatory principles• A common, regulatory framework– differentiated (only as much) as needed• Presumption of open markets– Implies right of entry & neutrality b/w incumbents & entrants• A clear focus on addressing market failure– This implies identification of underlying dynamics, not observation ofundesirable (but potentially transient) outcomes23

Regulatory principles• Technologically neutral– Rapid evolution & convergence make this essential– “Future-proofing” (Geradin) unrealistic – but a principles & market
failure based focus should approximate this as well as possible• Realistic (or proportionate)– Range of objectives should be limited to avoid “over-reach” &compromise of core objectives– E.g. What is the wider “cost” of pursuing integration with PT,
specifically addressing inclusion, congestion?
– In ride-hailing, avoid addressing hardship for incumbents

24Regulatory principles• Sound institutional arrangements– A safeguard against capture– History of taxi regulation points to the danger– Very strong financial backing of many players in this sector highlights
the risk– Sector-specific regulation has historically been a key weakness –notably in the taxi case
– A role for competition authorities?
– Importance of good governance, broader oversight

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Closing the policy loop
• The “policy cycle” should include sound review provisions:– Reviews should be scheduled, required to follow good process,public, consultative & accountable (i.e. feed into reform/redesign ofregulation)• This is particularly critical for emerging industries– As the risks of initial regulatory failure are significantly higher