Trash Old Rules That Preserve Outdated Business Models

Gary Shapiro President and CEO, Consumer Technology Association
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The Virginia Department of Motor Vehicles’ recent efforts to shut down ride-sharing services Uber and Lyft highlights a troubling trend of bureaucracy straining to protect outdated business models. From television-streaming services to vacation rental sites, today’s cutting-edge business models are challenging the status quo. And in this period of rapid innovation and technological growth, businesses and the regulators that govern them must adapt.

Startups across the country are leveraging the power of technology to offer consumers the services we demand in new and highly convenient ways. But rather than adapting and competing to win consumers back, legacy businesses are pushing for stricter government regulations to force these new companies out.

Examples abound:

In state after state, the taxicab industry has tried to squash car services like Uber and Lyft. Most recently, New Mexico’s Public Regulation Commission voted to deny Uber’s request for a temporary operating permit in the state, requiring the company to submit detailed driver safety and insurance records first. And earlier last month, the Virginia DMV issued cease-and-desist orders to the two companies based on old state laws that don’t allow ride-sharing services for profit. Yet these services facilitate convenient, comfortable, inexpensive ride-sharing at the touch of a button on our smartphones. While, under pressure from thousands of outraged citizens, the Virginia DMV apparently changed its position, the underlying law restricting competition remains on the books. Same problem with other states and new innovative ventures.

Car dealers in several states are trying to stop Tesla Motors, a company that designs, manufactures and sells electric cars, from selling directly to consumers. The dealers are relying on outdated rules to kill the competition, keeping consumers from buying well-built, eco-friendly cars that rarely need service.

Hotels are trying to shut down Airbnb, a website that links vacationers with homeowners seeking income from their properties. Old rules about short-term rentals of houses, apartments or rooms are standing in the way of this innovative service, most notably in New York City.

This month the Supreme Court ruled to preserve the status quo and protect legacy broadcasters in itsAmerican Broadcasting Companies Inc. v. Aereo Inc. decision. Aereo’s tiny broadcast antennas let consumers access TV anywhere and anytime. But in a blow to innovation and consumer choice, the divided court said Aereo violates the Copyright Act and encouraged the company – and future innovators – to turn to Congress to clarify this legislation. The Court’s ruling ignores persuasive, downward trends in over-the-air TV viewership rates – the latest research from the Consumer Electronics Association (CEA) finds that only six percent of Americans rely exclusively on free over-the-air signals to watch TV. We don’t need to kill Aereo; we need to kill the rules that can’t keep up with innovation.

In each of these cases, entrepreneurs are offering consumers services we demand. And in each case, old businesses refuse to adapt and compete fairly. Instead, they are using their political muscle, campaign contributions and distortions of old laws to convince the government to choke off innovative businesses consumers love.

Innovation demands adaptability, and companies that can’t be flexible don’t survive. Still, many business relics believe they just need to flex their political muscle to stay alive. And because most new businesses have to focus their efforts on growing their companies, they don’t have the time to establish powerful government connections. So hoteliers, broadcasters, cab companies and auto dealers have an advantage when it comes to cultivating government favoritism, which leads to brutal court battles and threats to innovation.

Politicians must stand up to the moneyed interests and give their constituents a real choice of services. Old businesses that can’t compete in today’s constantly changing landscape must not be allowed to hold consumers hostage with subpar services and high prices. Government must step back and let entrepreneurs innovate, creating goods and services that meet consumers’ demands.

Our nation was founded by citizens who revolted against a distant, out-of-touch government imposing rules on private transactions. We must continue that tradition today. Americans want better TV service, the right to rent out their homes, more convenient transportation choices, and the option to buy their cars without going through a dealership. Policymakers should listen to their constituents demanding better choices, not the old businesses incapable of adapting to the reality that the better competitor should win.

Gary Shapiro is president and CEO of the Consumer Electronics Association (CEA)®, the U.S. trade association representing more than 2,000 consumer electronics companies, and author of the New York Times best-selling booksNinja Innovation: The Ten Killer Strategies of the World’s Most Successful Businesses and The Comeback: How Innovation Will Restore the American Dream. His views are his own. Connect with him on Twitter: @GaryShapiro.