Tuesday, September 15, 2015

MassTLC Testimony on Innovative Business Models such as RideSharing before the Joint Committee on Financial Services

By: Tom Hopcroft, CEO of MassTLC

September 15, 2015

Dear Chairman Eldridge, Chairman Michlewitz and members of the Committee:

On behalf of the Massachusetts Technology Leadership Council (MassTLC), the state’s largest non-profit technology industry association, I am writing to ask for your support of a sensible regulatory framework that will help support transportation network companies (TNCs) like Uber and Lyft. With several bills pending before your committee, we hope you will support regulations that embrace innovation, like those offered in H.931 An Act Relative to Transportation Network Company Services. We are concerned that regulatory frameworks like those offered in H.3702 An Act Relative to Passenger Safety, threaten to stifle innovation, opportunity and competition in the Commonwealth of Massachusetts.

With 500+ member companies, MassTLC is the region’s leading technology association and premier network for tech executives, entrepreneurs, investors and policy leaders. Our mission is to accelerate innovation and growth in the Commonwealth. We’ve set a goal to create 100,000 new tech sector jobs in Massachusetts by the year 2020, and we’ve made substantial progress toward that benchmark.

The tech sector, which employs more than 214,000 people and underpins nearly a quarter of the state’s payroll, has a lot to offer Massachusetts.  As our recent State of Technology report illustrates, Massachusetts has the highest concentration of tech sector jobs nationwide. Tech is an important and growing sector that is increasingly driving growth and opportunity across every industry in the Commonwealth.

Innovation Economy
Fueled by one of the world’s greatest concentrations of research and academic institutions, Massachusetts has been at the forefront of innovation for over 300 years – from the founding of the United States to successive waves of innovation and leadership -- in agriculture, maritime trade, industrial mechanism, and information technology. This latest era has witnessed technology innovation transforming our world with the birth of the telephone, the Internet, the mutual fund, computational biology, genomics, telemedicine, online education, and more.
Our political leaders work hard to leverage our regional strength – brainpower, innovation and our knowledge economy. We are a leading technology and innovation state, and with this comes both economic power and an opportunity to use technology innovation to create new, flexible job opportunities, particularly for women and people in lower income neighborhoods. Ridesharing represents just one more in a long line of innovative business models that is being embraced by our forward-looking populace. And, beyond the improvements in convenience, safety and sustainability, these innovative services contribute to the brand of our innovation economy which is a powerful magnet for attracting and retaining talent, investments and companies to the region.

What’s Good for Consumers is Good for Drivers
A wide variety of transportation options provide both visitors and residents of our Commonwealth with choices and flexibility, supporting the Massachusetts innovation brand and providing service and economic opportunity in underserved neighborhoods. Studies show that the availability of transportation is the most significant factor in lifting communities out of poverty. The addition of ridesharing has decreased wait times, increased safety and accountability, and provided flexible work options for people across the region.
Ridesharing is also good for the vast majority of taxi drivers. With the tremendous demand for drivers and transferability of skills, the rise of ridesharing companies like Uber and Lyft has created greater economic opportunities for drivers. And the transportation network company (TNC) technology platforms mean that drivers set their own schedules as they wish rather than working fixed shifts. This flexibility plus the added security, lack of cash on hand, and accountability are reflected in the relatively high number of women who choose to be drivers in this new paradigm. These factors also encourage drivers to come online in previously underserved neighborhoods.
The main opposition to ridesharing comes from owners of highly coveted taxi medallions who must now cope with a shifting consumer market. The automobile replaced the horse drawn carriage. Personal computers replaced mainframes, only to be replaced by tablets. The Internet and mobile technologies have forever changed communications. Instead of stifling innovation in favor of old models, policy makers have instead shaped rules that focused on the value to consumers.
The ridesharing model tips the balance in favor of customer-centric drivers and service, and disrupts the entrenched regulatory scheme built around a scarcity of medallions rather than service or safety of consumers. As a leading technology innovation state, we should support innovative business models as important to our brand and to the thousands of drivers who have taken advantage of the high quality, flexible jobs that have been created.

A Word of Caution
In seeking to protect traditional business models, some proposals could, not only end ridesharing in Massachusetts as we know it – resulting in the loss of tens of thousands of jobs, but threaten the very existence of our innovation economy. Lawmakers have an opportunity to pass regulations that support the technologies and innovation that have changed the way Massachusetts moves. 
·       Consider this: As a leader in mobile software and hardware, Massachusetts’ thriving mobile community has produced game-changing innovations from telecom to photo sharing, traditional retail to health and fitness, online education, travel, home automation, and more. By all accounts, mobile is where technology is going and our leadership in this area has produced thousands of jobs. Yet one of the bills under consideration would require tens of thousands of TNC drivers to bring their smartphones in for review and approval by state regulators as if they were taxi meters. Requiring state approval for users of mobile apps is a dangerous precedent that threatens to drive the mobile development community out of Massachusetts, putting all our industries that utilize mobile applications – from heath care to financial services, and retail to education – at a significant disadvantage. Sensible regulations would ensure these new technologies that have introduced unprecedented accountability can continue to thrive and support the demands of Massachusetts residents and visitors.

·       Consider this: One of the great things about technology is its ability to level the playing field and help make smarter use of capital investments. Another provision under consideration would prohibit the use of technology to manage vehicles that are more than five years old. Putting safety aside as already addressed by our state inspection system, restrictions on the age of assets managed by TNC technology makes no sense. Should building automation technology only be permitted on new buildings? Should we not allow the public to fly on older airplanes, drive over bridges, or ride bicycles that are more than a few years old? The effect with ridesharing would simply be to exclude the drivers who are least able to afford a new car every five years from essential economic opportunities and decrease the availability of transportation in the underserved neighborhoods that need it most. Legislators have an opportunity to support regulations that would create access to more affordable transportation options.

·   Consider this: Dynamic pricing is a growing trend that has been around for some time. We see algorithmic pricing and business intelligence used in travel, retail, sporting, financial markets, etc. TNCs have found a way to use this pricing to incentivize drivers and meet consumer demand at peak times and in underserved communities, resulting in better service for consumers. Much like a plumber who charges more for a late night visit, the dynamic pricing is a trend that is an accepted practice in many business models and has driven a responsive customer centric service level that would be hard to let go. Prohibiting dynamic pricing could have far reaching implications for our economy. Lawmakers should consider a framework that would support the innovative technologies that allow companies to help meet the growing demands.  

Moving Forward

Fair policies around ridesharing and other disruptive technologies can become one of the first building blocks of a true Innovation Agenda for our state. I ask the Committee to be cautious and thoughtful as it considers reasonable approaches to regulating new and innovative business models like those offered by TNCs. Current legislation offered in H.931 An Act Relative to Transportation Network Company Services would support innovation and technologies that change the way our cities, towns and communities move. The tech sector is eager to continue to help state and local lawmakers leverage technology to deliver vital services, and to create the talent and regulatory framework that will let innovation thrive in Massachusetts.

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