REGULATIONOFONDEMAND

ECONOMIES(UBER/AIRBNB)

CalStateMontereyBay
EDebateProposal

Participants
MisaelAguilar
DanielDiaz
MarcusDixon
JaredFox

Assignment03:TeamDebate

Uber,AirbnbBad:1

ProblemStatement

Uber,Airbnb,andotheralternativeserviceprovidershavecreatedasharedeconomy
whichhasdisruptedtraditionalserviceprovidersmoreover,thesenewserviceshave
providedmoreopportunitiestoearnmoneybutinreturnhavecreatedcontroversywith
theeaseofbypassingtraditionalregulations.

Whatisyourteamsstrongestargument?

Precedence
Privacy
Safety
Economicalissues.
Discrimination

Whatisyouropponent'sstrongestargument?

FreeMarket
Thesenseofsafety
Morepaywithlesstime
Betterhours

Howwillyoucountertheirargument?

Whilethefreemarketmaypromiseeasymoney,itisactuallytakingmoneyfromthe
localgovernmentsincetheyareprovidingservicesthatwouldusuallytakelegitimate
trainingandlicensing,bothofwhichcostaconsiderableamountofmoney.Cabdrivers
havetogothroughtrainingandmustpayfortheirlicense,Uberdriversdonot.

NeitherUberorAirbnbpaythepropertaxesthatarerequiredfromtheirsanctioned
counterparts.Bothtaxiservicesandhotelshaveataxthatgoesbacktothecity,butin
thecaseofSanFrancisco,over3milliondollarshavegoneunpaidtothecitybecause
ofAirbnbservices.

Assignment03:TeamDebate

Uber,AirbnbBad:2

HistoricalandLegalContext

Airbnb
Historical

Foundedin2008,Airbnbhasoveramillionlistingsinmorethan30,000citiesin
theworld.Airbnbdidnotencounteranyissuesuntil2011,whenahostreporteda
robberybyanAirbnbguestwhichledvariousotherhoststocomeforwardandclaim
similarsituations.InSanFrancisco,Airbnbhostingusedtobelargelyillegalandthus
hostswereusuallyfinedorpresentedwithevictionbythelandlords.Itwasntuntil2014
thatthecitypassedalawthatrequiredhoststoregister,carryinsuranceandpaythe
14%hoteltax.Itisdeemedthatfrom20112012,Airbnbshouldhavepaid1.9millionto
thecityandhaveyettodoso(RentStabilizationBoard).

Legal

Insomecities,Airbnbhostsdonotmeetcityregulationforrentals.Forexample,
over70percentofrentalsareillegal.(WilliamsAlvarez)SimilartoUber,citiesaround
theworldsuchasNewYorkaremissingoutonmillionsofunpaidtaxesgiventhat
Airbnbhostsarenotoperatingashotels.Becauseofthisfineline,manyhostsarein
unchartedterritoryandtherecanbeconfusionastowhatyoucanandcantlegallydo.

VariedregulationofAirbnbcanresultinsomeinterestingscenariosthathave
affectedsomeofthestakeholders.AccordingtotheNewYorkPost,Airbnbisbeing
usedtoturnsomeManhattanapartmentsintobrothels.Anotherhostshomewas
burglarized,vandalizedandthoroughlytrashedbysomeoneshehadconnectedwith
onAirbnb.Lastly,acomedianrentedouthisapartmentviaAirbnbandcamehometo
findanorgy.(WilliamsAlvarez)

Uber
Historical

Cofoundedin2009,Ubernowoperatesinover300citiesaroundtheworld.D.C
wasthefirstmarketthatUberfacedanyregulatorychallenges,whichwaswellovera
yearafterUberlaunchedonJune1st,2010.Shortlyafter,thetaxicommissioner

Assignment03:TeamDebate

Uber,AirbnbBad:3

declaresUberD.Cillegal(Lashinsky).Eversince,Uberhasfacedregulatorychallenges
whenintroducingtheproductinnewcitiesparticularlyinthosewithaprominent
presenceofcabcompanies.

Legal

CaliforniarequirestransportationnetworkcompanieslikeUbertogetapermitand
commercialinsurancewhiledrivingforthemaswellasperformbackgroundcheckson
potentialnewpartners.(Eva).Inthesummerof2015,LosAngelesandSanFrancisco
districtattorneyfoundthat25Uberdriversintwocitieshadcriminalrecords.Thestate
onlyrequiresTNCstorundriversnamesandSocialSecuritynumbersthroughcriminal
databases.(Quinton).Unfortunately,Californiasregulationpreventscitiesfrommaking
theirownTNClaws.

Stakeholders

InthecaseofUber

Uber
and
Uberdrivers
andthosewhowanttobedrivers(whogenerallywantno
orlittleregulation)
Otherriderservicessuchas
Lyft
andthosewhowanttocompeteunderthe
samebusinessmodel
TaxiCompanies
and
Taxidrivers
whoworkunderregulationsmadebythe
city/state
Governments
thatareforcedtoactfororagainstthecompany.
ADA
(AmericanswithDisabilitiesAct)disabledpeoplecannotusetheirservice
becausepersonalcarsdonotaccommodate.Taxiservicesareregulatedbythe
ADA.

InthecaseofAirBnB

Airbnb
and
Airbnbhosts
andthosewhowanttobehosts(whogenerallywant
noorlittleregulation)
ConcernedNeighbors
and
neighborhoodassociations
(whogenerallywant
toprohibitionoralotofregulation
TheCity
whowantstocollectHotelTaxandhaveapolicythatisenforceable

Assignment03:TeamDebate

Uber,AirbnbBad:4

VacationRentalowners
,
managementcompanies
and
tradeassociations
(whowanttooperatelegally)
TraditionallicensedBnB
(whoarelookingforalevelplayingfield)
BudgetHotels
(whostandtolose5%to10%oftheirbusinessforvalue
consciouspersonaltravelers)

CompetitiveAnalysis

Uberstartedoutasatransportationcompanythatwasdisruptingtheunreliable
highcosttaximonopoliesbutithasnowbeenaccusedofusingunfairtacticsagainstits
rivals.Taxicabdriversmustsubmittofingerprintingforcriminalbackgroundchecks.
ThoseprintsareranthroughtheDepartmentofJusticecriminalrecordsandcan
uncoveradriverscriminalhistory.WithUber,backgroundchecksaredonethrougha
thirdpartyandthusarelessrigorousthanthoseoftaxidrivers.Taxicabdriversmust
alsotakeawrittenexamandgothroughdriversafetytraining,whileUberoffersno
trainingorexams.Taxisalsoundergoregularvehicleinspectionsmoresothanwhat
Uberrequires.Uberhasadvertiseitselfasthesafestrideontheroadandchargesa
saferidesfeewhichtheyclaimgoestobackgroundchecks.Thesestatementsandfees
misleadthepublicwhenthetaxicompaniesdomoretoprovidesaferandmorequalified
drivers.

TechnologicalIssues

Whiletheappideallyprovidesfasterandeasierservicestoitscustomers,therearestill
issueswithhowwelltheappoperates,bothforthecustomerandthedriver.

Bothforpaymentpurposesandfornavigation,theapphashadseveralsetbacksthat
clearlymaketheappitselflessreliablethanaservicethatalreadyhasbeenprovento
work.(Bernon)

Privacy

UbercraftedatoolcalledGodViewtotrackinrealtimealltheongoingtripsin
acityaswellascustomersrequestingrides.Thetoolhasbeenusedtostalknotable
usersusingtheapplicationandithasthecapabilitytostopthetriporthedriveratthe
clickofabutton.(Condliffe)LackofprivacyregulationallowsUbertocrafttoolssuchas
GodViewandhavefreereignwithdataprovidedbyitscustomersanddrivers.

Assignment03:TeamDebate

Uber,AirbnbBad:5

Furthermore,therehadbeenaratherembarrassinginstanceofUber,through
negligence,haditssecureinformationonALLofitsdrivershackedbyastillunknown
hacker.SensitiveandprivateinformationwasstolenfromUbersserversduetotheir
onlinesecuritykeybeingleftinavulnerablepartoftheirstorage.(Bonderud)

EconomicFactors

InUbersearlybeginnings,driversclaimedtohavebeenearningalmost
$5000$6000permonthdoingfulltimedrivingfortheridesharingcompany.Now,a
majorityofdrivershaveahardtimemeetingamonthlyprofitgiventhatthesupplyof
drivershasincreasedtenfold,thusdrivingthepricesofUberdown.Recently,Uberhas
showninitiativeandstronginterestingainingastrongfootholdontheautomatedand
driverlesscarraceinapartnershipwithCarnegieMellonUniversity,Uberdrew40of
CMUsleadingresearcherstofocusonUberslongtermstrategies.TravisKalanickon
thefactthatUberdriversmightlosetheirjobsinthefuture:Thisisthewaytheworldis
going.Theworldisntalwaysgreat.(DelRey)

Recommendations

Althoughvariousregulationsarealreadyinplaceforthesecompanies,we
suggesttwomajorrecommendationstofurthercontrolthedisruptionthattheseon
demandeconomieshavecaused.

Decreasedregulationfortraditionalserviceproviders
.Asourcompetitive
analysisshowed,taxicabdriversmustmeetasludgeofrequirementsinorderto
driveforacompany.Thisoverheadandregulationpreventstaxicabcompanies
fromcompetingfiercelywithUber.Ifuniversalregulationisnotsomethingthat
willbeconsidered,thenitisimploredtohavetraditionalservicesbeableto
competewiththenewcompaniesontheblockthuspreventingapossible
movementtoamonopolisticmarketinthetaxiandhotelindustries

Welldefinedand,ifpossible,federalregulationofondemandeconomies
.Unlike
SanFranciscoandD.C.,manycitieshavenotbeenabletoprotectthemselves
againsttheongoingtaxlossbyunregulatedcompaniessuchasUberandAirbnb.
IfAirbnbhasfailedtocompensatealmost2milliondollarsduetolackof
regulation,itishardtoimaginethecollectiveamountacrosscitiesintheU.S.Ifa
federalimplementationcannottakeplace,thenitisimperativetohave
welldefinedregulationstoprotectthevariousstakeholdersinparticular,local

Assignment03:TeamDebate

Uber,AirbnbBad:6

communities,neighborsofhosts,andtraditionalcompetitorswouldgreatly
benefitfromstandardizedrulesforondemandcompaniestofollow.

ProsandCons

Pros
Federalregulationsofondemandprovidersgivesanunbreakablefoundation
andconsistentprotectionofvariousstakeholdersregardlessoflocation.
Morelenientrulesandregulationsagainsttraditionalserviceprovidersbrews
healthycompetitionwithoutgivinganunfairadvantagetoanyparty
Increasednumberofskilledworkers
Wagestability

Cons

Universalregulationmaymeanahighercostpayedbythecustomer.
Stiffercompetitionmaycosttheseondemandcompaniesresourcesthatcouldbeput
towardsfurtherinnovatingsolutionstotheirmarket
Growthofoutsourcingopportunities
Cancausealossingovernmentrevenues
Canleadtofraudandscams

References

Bernon,Justin."BigProblemswiththeUberApp."
Uberdriverdiaries.
Uberdriverdiaries,30July
2015.Web.20Feb.2016.

Board,RentStabilization."InvestigatetheLegalityofAirbnbandTraditionalRentControlled
Units."
Item5.a.(f)
(n.d.):n.pag.
CityOfBerkeley
.CityofBerkeley,23Feb.2015.Web.20
Feb.2016.

Bonderud,Douglas."UberSecurityBreach:UserAccountsTakenForaRide?"
Security
Intelligence
.IBM,31Mar.2015.Web.29Feb.2016.

Condliffe,Jamie."Report:UberCanTrackAnyCustomerUsingIts'GodView'Tool."
Gizmodo.

Gawker,19Nov.2014.Web.20Feb.2016.

DelRey,Jason."UberCEO:SelfDrivingCarsAretheFuture,DriversAreNot."
Recode
.Vox
Media,28May2014.Web.28Feb.2016.

Assignment03:TeamDebate

Uber,AirbnbBad:7

Eva."InsuranceUpdateforCaliforniaDriverPartners."
UberGlobal.
Uber,16June2015.Web.
28Feb.2016.

Lashinsky,Adam."Uber:AnOralHistory."
FortuneUberAnOralHistoryComments.
Forbes,03
June2015.Web.29Feb.2016.

Quinton,Sophie."HowShouldUberBeRegulated?"
Pewtrusts.com
.PewTrusts,24Nov.2015.
Web.3Feb.2016.

Shears,Tyler.WhatsYoursisMine?TheNewSharingEconomyandSmallBusiness
Smallbiztrends.com
.3Oct.2014.28Feb.2016.

WilliamsAlvarez,Jennifer."WhatYouNeedtoKnowaboutAirbnb'sLegalChallenges."
Engadget.com
.AolTech,11Nov.2014.Web.10Feb.2016.