The Rise of Ride-Sharing Innovation and the Dilemma of Regulation


Digital Entrepreneurship

2021-05-05 12:49:18 1607 0

Today technology and digitalization have greatly accelerated the process of innovation and introduced new business models and concepts around the globe. Innovation is becoming increasingly central in fostering competitiveness in operations and service management. Thus, technology and innovation have become strongly associated with economic growth and central to economic development. However, these developments have created social controversy and debate, because not all people equally benefit from these new assets. This is why the role of regulation is crucial to ensure that all people in society can equally share in the benefits of technological advancement. The ride sharing economy, in particular, created economic, political, cultural, and social disruption within society. It is up to regulation, and especially Internet governance, to establish appropriate legislation which supports innovation that benefits as many people as possible and mitigates harm. Internet Governance’s Multi-Stakeholder Approach Internet governance has been an active topic of international discussion and covers a diversity of issues, ranging from access to technology, gender equality, cybercrime, global surveillance, e-commerce, cyber-security, and threats to critical national infrastructures. Many nations emphasize the positive aspects of the Internet and support traditional systems of Internet governance, which follow the principle of “multi-stakeholderism” and with which they associate the success of the Internet. There is not one particular definition for multi-stakeholder governance, but Markus Kummer, who served as executive coordinator for the Secretariat of the Internet Governance Forum, outlines the following characteristics for multi-stakeholder governance: consensus-based decision making and operating in an open, transparent, and accountable manner. The multi-stakeholder approach is fundamentally democratic: it is inclusive of all parties affected, discussion based, and aims at finding compromises. This approach echoes a common understanding in the broader governance and regulation literature. Governance gains a clear outline by focusing on intentional interventions directed towards solving public policy problems and enhancing the common good. The ride sharing economy has proved to be beneficial for some people and harmful for others, which reveals a gap between technology and ethical awareness. The staggering opportunities for growth and revenue the ride sharing economy can provide have enticed many to join this access-driven, sharing movement. However, not everyone was able to participate in this collaborative consumption methodology, since there are many people who do not even have access to the Internet in their homes or their phones. In Egypt, only about half the population has access to the Internet. The main challenge arising in the wake of this new economy is that these novel platforms do not fit the established legal categories of our current legal frameworks. Current laws were not designed to regulate collaborative relationships, transactions, and organizations. Instead, our legal system was primarily developed to manage economic, binary relationships—i.e., public versus private, employer vs. employee, property owner vs. tenant, and producer vs. consumer. However, according to Yanelys Crespo, “in the sharing economy, many of these relationships overlap.” As such, it can be difficult to determine which laws or regulations (if any) may apply. This legal gray area has created incredibly difficult legal obstacles and challenges for those seeking to enter new markets. Many cities have addressed these issues by either creating exemptions or new regulations for these companies, or simply prohibiting them from operating in their cities. I argue that it is crucial for internet governance and regulation to develop at the same pace as innovation and at the same time we need to attempt to ensure the inclusion of all relevant stakeholders in order to preserve transparency and accountability. Only this way, can we guarantee that the benefits of innovation are distributed equally among society as a whole. Ride-Sharing Innovation Innovation is considered as a major tool to enhance productivity and foster economic growth. Uber’s innovative business model is one of the technological success stories of this era. Egypt, and particularly Cairo, is an ideal market for Uber and Careem, due to its greatly congested roads, few public transportation options, recent surge in fuel prices, and urban planning that leads to many people spending most of their time in traffic. Uber launched in Egypt in late 2014, and, in just about two years, had clocked over 4 million riders and over 150,000 drivers. On one hand, Uber and other upcoming ride sharing services added a new flavor to the Egyptian economy by creating new job opportunities for the struggling unemployed youth and providing a new means of transportation. On the other hand, the rapid rise of these services also presents a great challenge for the already existing legal infrastructure: how to create a legal framework that allows those who can enjoy the benefits of Uber and simultaneously mitigates possible negative consequences for others, who are also participating in the economy, such as normal taxi drivers or rising local start-ups. The concept of ride sharing is an alternative to individual car ownership: not by sharing access to cars, but rather by accessing a ride in a car to reach a specific destination chosen by the passenger. A journal article written by Nagla Rizk, founding director of A2K4D shows that Uber provides parallel labor opportunities, with many surveyed drivers doing the job in addition to mainstream or informal employment to increase their income. Rizk argues that Uber represents both a parallel and an alternative to formal employment and to the completely unregulated informal labor market. This is enabled by the company’s low barriers to entry, drivers’ ability to control their own working hours and a broader sense of self-management, all which were praised by the surveyed drivers. Governing (Ride-Sharing) Innovation In an upcoming book chapter, Rizk builds on these insights and analyses the governments’ legislative response to the rise of ride hailing applications focusing on the case of Egypt from an A2K perspective. The chapter is called “The Sharing Economy and the Law: The Legal Environment Around Ride Hailing Services in Egypt” and will be published in 2019 in the forthcoming book Mobile Technologies & Access to Knowledge, edited by Stefanie Felsberger and Ramesh Subramanian. The upcoming chapter pinpoints a crucial difference between taxi services and Uber: while Uber provides a similar service, the company sets itself up as a technological platform and not a transport service. This presented an ongoing, disruptive dilemma for lawmakers: were ridesharing services an Internet service or a normal transportation service that should fall under the regulation of the normal taxi? This dilemma boils down to the fact that Uber driver-partners used their private cars to transport passengers in return for fees – something that the previously existing Traffic Law (Article 54) prohibits – and something that meant that Uber driver-partners did not have to pay the same fees as white taxis. It was up to law makers to develop a solution. These newly based Internet companies are transforming old industries and presenting a great challenge for Internet governance and legislation. It is true that these businesses create new job opportunities and encourage the establishment of start-ups, but they also create other concerns, such as the protection of consumer rights, the protection of other competitors, and establishing adequate means of regulation to ensure that everyone benefits equally from this innovation. These powerful technologies are altering the way society and the economic model operates, and it is the role of the regulator to balance the benefits and drawbacks from disruptive technologies. This is reminiscent of the challenge that artificial intelligence and the automation of jobs poses. It is expected to increase economic growth and overall efficiency, but at the same time there is the major question of what will happen to people whose jobs became obsolete. Some prominent critics, such as, Janelle Orsi, an activist lawyer, consider that this new sharing economy brings about a broader transformation of how goods and services are produced, shared, and delivered. Instead of the conventional model, with individual firms competing for customers, we are witnessing the emergence of a new, seemingly flatter, and more participatory model, whereby customers engage directly with each other. With a smartphone in their pocket, individuals can suddenly do things that previously required an array of institutions. This is great progress, but the role of Internet governance is crucial here to make sure that society is equally prospering from these Internet-based companies. This need is also clearly highlighted by Rizk in her upcoming chapter where she stresses the important role legislation plays. Rizk writes about the turning point in the debate on ride sharing applications in Egypt, when the taxi drivers filed a lawsuit against US-based Uber and its Dubai-based competitor Careem. Taxi drivers accused them of violating the traffic law by using privately-owned vehicles for commercial purposes. They also claimed that the two firms were registered as a call center and an Internet company, respectively, meaning they were not legally regulated as ride-hailing services. The case was filed against the two operators as well as the government and, consequently, the Cairo Administrative Court accepted the case and ordered the suspension of the two companies’ licenses in Egypt. The main challenge in drafting the legislation was the fact that there was no legal precedent. The new Law Regulating Passengers’ Urban Transportation Using Information Technology addresses this issue by imposing licensing regulations. Shortly after the court ordered the suspension, a joint parliamentary committee began discussing a new draft law to regulate the operation of privately-owned transport services. The law was casually referred to as the “Uber and Careem law“ by both the media and law makers, because it mostly focused on the large players, or in other words the international ride sharing applications. The passing of this law was not only a great success for Uber and Careem, but also an encouragement for all foreign investors, because the Uber is now officially acknowledged in the country as official provider of jobs to the youth who are greatly suffering from unemployment in the informal market. According to Careem, “in passing the law, the Egyptian government and parliament sends out a strong signal that Egypt continues to be open for business and investment and is a hub for innovation and the technology ecosystem.” The inclusion of multi-stakeholders is important and should not be ignored when tackling an issue related to Internet governance and in this particular case to the sharing economy. It does not only represent reality, it also gives rise to expectations, objectives, and benchmarks. When more stakeholders are included in the discussion, this guarantees that more voices are heard and represented from the different groups in society. The actual value of these processes is seen in the context of a general transformation of transnational regulatory practice, problem solving authority, and legitimate power. Including a multitude of relevant stakeholders usually give rise to a greater collaboration particularly between the private and the public sector, which has a great impact on legislation, transparency, accountability, and ethics. It is very important to bring all relevant stakeholders together in order to establish a regulatory system that benefits society as a whole and protects the local start-ups who cannot compete alone in the market. In case of the so-called “Uber and Careem law,” efforts were made to include many stakeholders such as the taxi drivers. But, as Rizk argues, a better effort could have been made to include local ride sharing start-ups in the process as well. In conclusion, new technologies and especially Internet-based technologies are revolutionary, disruptive, and transformative. To guarantee that as many people as possible can benefit from new technologies, we need governance that guarantees social security, privacy protection, and protection for the local market from being dominated by large international players. This way more people are able to prosper from the benefits of such innovative developments. As indicated by Rizk, the establishment of clearly defined legislation allows for rules that promote fair competition, increased guarantees to secure and protect consumer experience, and a system to ensure safety-oriented guidelines.