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Regulatory overreach

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No Free Lunch

Regulatory overreach

/ 12:06 AM October 28, 2014

The Land Transportation Franchising and Regulatory Board (LTFRB) is under fire from irate netizens following last week’s sting operation that led to the apprehension of a private car owner hiring out rides under the Uber network. One news report described it as a case of government regulators trying to play catch-up with technology. I see it as a reason why we need to revisit restrictive laws and regulations designed for a bygone era, which technological developments have rendered obsolete if not outright counterproductive.

I first heard about Uber nearly two years ago from US-based relatives, who are all raves about the service, as are those who are now up in arms here about the LTFRB’s action. Described as a “ride-sharing” scheme, Uber puts car owners/drivers in touch with people who would be willing to pay them for a ride between pre-specified points in the city. It relies on a smartphone application to connect passengers with available participating drivers, who are carefully screened and regularly monitored. Fares are pre-agreed, payments are cashless (via credit card), and one can even track the hired car’s location in real time. The service is now reportedly available in more than 100 cities in 45 countries worldwide. The LTFRB is similarly training its sights on homegrown Tripid, described as an open carpooling system that also uses the smartphone platform to connect riders with trip providers. What makes these services so popular is that they are widely seen as a convenient and safe way to travel.

What particularly irks Uber fans is the LTFRB’s insistence that it is merely trying to protect the welfare and safety of the riding public. To many, this comes as a big joke in light of the all-too-common experience with taxis refusing passengers, and the high incidence of crimes by or in connivance with taxi drivers. It is in fact these very risks with taxis that drives people to use Uber, Tripid and their variants. The LTFRB makes no secret of how its action was prompted by a complaint from the Philippine National Taxi Operators Association (PNTOA), unhappy about competition from what is increasingly seen by riders as a superior service. But neither

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the LTFRB nor PNTOA appears able to come up with a satisfactory way to police the ranks of the taxi industry to prevent such untoward incidents. So who is the LTFRB really protecting from whom?

Even then, the issue is not unique to the Philippines. Uber, understandably, has met with similar protests from the taxi industry in other countries where it operates. The LTFRB recognizes that it has no jurisdiction over the Uber company itself, which does not directly provide transport services, but is a technology company “through whose application, private unlicensed vehicles are able to engage in public land transportation without securing a franchise from the LTFRB.”

Uber adherents counter that the LTFRB has no business meddling into private agreements between riders and trip providers, or in voluntary carpooling or ride-sharing among commuters, which are essentially what Uber and Tripid facilitate through their apps. “It’s no different from one asking to be driven by a neighbor in his car to the airport for an agreed payment,” argues a netizen, except that Uber makes it possible to find that ride well beyond one’s neighborhood. And a “Big Brother” government may be going a bit too far to insist on watching out for the involved parties all the time, when they can well watch out for themselves in such bilateral transactions. Uber and the others in fact go a step further and help protect the transacting parties via a rigorous screening process on partner drivers, and through a user-driven rating system that helps weed out known bad performers on both sides.

If government’s concern is to tax such transactions, then Uber’s cashless payments system makes it even easier to enforce a taxation mechanism not possible under informal cash-based neighbor-to-neighbor car hire or carpooling schemes. That should not be the concern of the LTFRB, however, but of the tax authorities.

There’s much wider significance to all this. There’s such a thing as regulatory overreach, and the Uber issue, to my mind, is but one example. I have also argued before that there need not be such things as “colorum” cargo trucks. I don’t see why government must have to issue franchises for a service that, like an Uber ride, amounts to a private bilateral contract, in this case between a cargo shipper and a truck owner (the same reasoning applies to cargo ships). With adequate competition—and a policy framework that fosters, not inhibits it, as franchising actually does—the market would ensure that satisfactory services are provided that are commensurate to fees paid. The less government pokes its nose unnecessarily into everybody’s business, the livelier the economy becomes.

Legally defined, a “public utility,” which by law requires a franchise, “provides a service or facility needed for present day living that cannot be denied to anyone willing to pay for it.” Electric power, water or mass transport services are clear examples. But the US Supreme Court once stated, in a ruling that has shaped our own jurisprudence as well, that “a private enterprise doing business under private contracts with customers of its choice and therefore not devoted to public use” cannot be a public utility.

It’s time that we revisited our official definition of public utilities, which is still guided by the archaic Public Service Act of 1936. Rapid technological developments demand it. And overall consumer welfare, along with our investment attractiveness, crucially hinges on it as well.

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E-mail: cielito.habito@gmail.com

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