Just as Silicon Valley is a hotbed for innovation, Sacramento is a hotbed for regulation. Those two impulses are clashing now over a new generation of tech companies that uses smartphone apps to connect ride-seekers with drivers. If lawmakers aren't careful, the regulations they're poised to impose could snuff innovation across the sharing economy.
At issue is whether the Legislature will impose a second layer of rules on companies such as Uber, Lyft and Sidecar in addition to the ones the state Public Utilities Commission has been setting over the past year. To its credit, the commission recognized that these "transportation network companies" are fundamentally different from taxi companies, despite similarities in the services offered. The commission's rules for driver and vehicle safety recognized the risks to passengers, but also that the drivers were freelancers using their own vehicles on a part-time basis, not full-time employees using cars dedicated to carrying passengers.
Nevertheless, some lawmakers allied with the taxi industry are now arguing that what's sauce for the goose should be sauce for the gander. With little or no evidence to show that the ride-sharing services are as risky as traditional taxis, they nevertheless are pushing to make the former comply with several of the regulations that apply to the latter — or even more stringent ones.
The current version of one bill, AB 2293, proposes that ride-sharing companies carry more insurance coverage when their drivers have no passengers than cab companies in L.A. are required to carry when their taxis are full. The amount is also many times larger than what the commission is moving to require. Another bill, AB 612, would require Uber and its ilk to use the same drug-testing procedures and background checks that taxi companies do, on top of the zero-tolerance policy and background checks mandated by the commission. The relative merits of the two approaches are debatable, but there's no sense in demanding both. Still, it's better than an earlier version of the measure, which would have required drivers for the new companies to carry, full-time, the same commercial insurance policies as cabbies, rendering the whole idea of providing the occasional ride to generate extra income economically unfeasible.
Advocates of the state's entrepreneurial high-tech industry warn that the flawed logic behind these measures could just as easily be used to choke off other emerging businesses that enable people to make occasional commercial use of their personal property or skills. That's a scary thought in a state whose reputation for nurturing technological innovation is one of its most powerful magnets for investment and employment. Rather than trying to force more rules onto ride-sharing companies because their service looks like a cab company's, lawmakers should let the utilities commission enforce its new rules unless and until there's real evidence that they don't work.