Who Needs Regulation?

The debate about rules for the ‘sharing economy’ creates its own kind of disruption.

There have been two great waves of the American deregulation debate. The first was during the Carter-Reagan era, when entire industries — airlines, railroads, trucking, natural gas, long-distance telephone service — were freed from government constraints on what markets they served and what prices they charged.

And the second? You’re experiencing it right now.

You might not recognize it as a debate about regulation, because the terms more commonly bandied about to describe it include “sharing economy” and “disruption.”

Nonetheless, this is a debate about the purpose and point of government intrusion into and control of markets, about whose interests are truly served by regulation, and about what’s gained and lost by adding to or subtracting from the regulatory load.

The most current and prominent controversy in the broader fight involves ride-sharing services like Uber, which has been the most aggressive in pushing back against the rules about taxi service, ignoring them or arguing they don’t apply.

Uber styles its case as a matter of its powerful technology obliterating the old market structure and its rules. Technology, though, is the least interesting and relevant aspect of the debate. Unregulated and rule-bending ride-for-hire services were around long before Uber showed up. And licensed, regulated taxi companies have smartphone apps, too; the supposedly disruptive technology is hardly unique to Uber, et al. (The countervailing argument would be in telecom, where state regulators are getting out of the business of telling phone companies what to charge for landline service because cell/mobile/wireless technology has made it largely irrelevant in the consumer marketplace.)  

Nor is the development of a supposedly cutting-edge technology necessary to touch off an argument about government regulation. The first deregulation wave wasn’t launched because someone invented a new airplane or truck. It was triggered by a sense that the existing system wasn’t benefiting customers and wasn’t working financially.

That’s where Uber is on more solid footing when it makes its case for changing the rules of the ride-for-hire business on the grounds that doing so would give consumers better service. But then, the established cab companies can argue that the rules were set up in the first place to protect consumers from being taken for a ride in both figurative and literal terms.

Concern for the plight of the consumer is nice, but protection of financial interests — the incumbent cab operators who have bought the right to participate in a government-controlled marketplace, the investors backing Uber because they see a rewarding opportunity — plays at least as significant a role. 

Those factors are colliding in other regulation debates, such as the one pitting Airbnb against hotel operators and landlords or Tesla against the car dealers over restrictions preventing auto manufacturers from selling directly to consumers.

The regulatory debate isn’t always about whether or how much to loosen. Coming up this year in Seattle will be a contentious fight over rent control — whether government has any business telling residential landlords what they can charge for homes or apartments, and whether such controls would really do anything to make the city more “affordable.”

That controversy sets up a battle over who really represents the interests of consumers and whose financial interests are rewarded or penalized by doing something or nothing. It also magnifies the uneasy political coexistence between the left-leaning segment, which believes rent control is a good starting point, and the tech sector, which contains a sizable libertarian element.

What’s also worth keeping in mind while watching these debates play out is that disruption may be the result but it’s not necessarily the disrupters reaping the spoils. The airline industry’s regulatory structure may be considerably different from four decades ago, but the surviving players are mostly names that were around then. 

Monthly columnist Bill Virgin is the founder and owner of Northwest Newsletter Group, which publishes Washington Manufacturing Alert and Pacific Northwest Rail News.

Final Analysis: The Sporting Life in 2017

Final Analysis: The Sporting Life in 2017

Three predictions for the coming year on a new arena, an old arena and the Mariners.
As every first-year business student knows, a city’s economy is not considered “world class” until said city has erected at least four shrines to professional sports and these shrines remain empty and unused most days of the year. Seattle is knocking on the door of world classiness because it already has KeyArena, Safeco Field and CenturyLink Field up and running. Occasionally. Just one more monument to appease the great mass of athletic supporters and we’re there. Hallelujah!
It’s only a matter of time because Chris Hansen, the San Francisco rich guy who wants to build a new arena on First Avenue South and bring pro basketball and pro hockey to Seattle, is this close to getting his way. In October, Hansen revealed that he and his investors are now willing to pay the whole honkin’ bill for plopping a new arena into the SoDo neighborhood a block from Safeco Field. He still wants a piece of Occidental Way vacated and also expects some tax breaks from the city, but that’s how rich guys are. (See: Trump, Donald.) Besides, the people who believe we’re not world class until the NBA returns to Seattle are salivating over this deal because it’s the best deal we’re ever going to get
Of course, these same people said Hansen’s previous offer, which would have required that $200 million in public money be plowed into a new arena, was also the best deal we were ever going to get. 
Hansen’s decision to pay more for his arena places the sports economy clearly in the local spotlight this year. Heaven knows we could use more opportunities to pay $9 for a beer and see millionaire athletes selling Jaguars and BMWs on TV. It’s the kind of economic shot in the arm that only comes around whenever a sports league is in a coercive mood. 
And so, in the spirit of this January issue’s “looking ahead” theme, we offer three predictions relating to the regional economy as the Hansen arena intrigue continues to unfold.
Prediction 1: Hansen, who has already spent more than $120 million buying up property in the area of his proposed arena, will persuade the Port of Seattle, his arch nemesis in this melodrama, to fold up its tent and send all cargo-handling operations to Tacoma. That decision will pave the way for so many trendy bars and restaurants with names like Kale & Kumquat or Cobblestone & Wingtip that Hansen will be persuaded to create a private streetcar system to connect Pioneer Square with the burgeoning Stadium District. 
Prediction 2: The city-owned KeyArena, whose very future is clouded by the Hansen proposal, will announce plans to house up to 10,000 homeless persons every day. Even on days when the Seattle Storm and Seattle University basketball teams need the building, the city believes the Storm and the Redhawks could use the attendance boost, so it becomes a classic win-win.
Prediction 3: The Seattle Mariners, who still don’t like the arena proposal, will channel their hostility onto the field of play — and still not win the World Series. (This is called pattern-recognition analysis.) However, always mindful of improving the fan experience — because it’s not whether your team wins or loses, but whether you’re inclined not to press charges for being gouged by a vendor — the Mariners will introduce several new fan-friendly food items, plus mani/pedi stations in the pricey seats and roving loan officers to assist anyone trying to finance the purchase of hot dogs and sodas for a family of four. 
JOHN LEVESQUE is the managing editor of Seattle Business magazine. Reach him at john.levesque@tigeroak.com.