News Column

'Sharing Economy' Takes Steps Toward Mainstream

August 9, 2013
Sharing Economy

What's often known as the "sharing economy" _ represented by startups like Airbnb, Sidecar and TaskRabbit that match buyers with goods and services ranging from rooms to rides to running errands _ has long operated on the margins of legitimacy.

But there are growing signs that the sharing economy is going mainstream _ creating thousands of jobs and a business model that promotes environmental sustainability through more efficient use of resources. In the process, this emerging economy is disrupting traditional businesses such as hotels and taxi companies, and forcing governments to rethink decades-old rules on taxation, labor and safety.

Last week, state regulators with the California Public Utilities Commission proposed groundbreaking new safety regulations that would grant state licenses for smartphone-enabled ridesharing companies like Lyft, Sidecar and Uber. Passionate users of the sharing economy companies have formed their own advocacy group, and several mayors are working to make their cities more "shareable."

"It's a groundbreaking new economic paradigm," said Arun Sundararajan, a professor at New York University's Stern School of Business who studies digital economies. "This isn't just a recession-era phenomenon. It's a technology-driven change."

PEERS, a nonprofit advocacy group for the sharing economy, launched last week. Founded by service users, academics, entrepreneurs and several leading sharing economy startups, PEERS hopes to forge a unified voice for what many have come to regard as a movement.

Sundararajan noted that several of the nation's most prominent mayors, including San Francisco Mayor Ed Lee, Chicago's Rahm Emanuel and New York's Michael Bloomberg, backed a resolution at the U.S. Conference of Mayors meeting in June "to support making cities more shareable" through car and bike sharing, ride-sharing, home-swapping and tool-lending.

"Sharing economy companies have proved to be engines of innovation and job creation, driving economic development in the hearts of American cities, where joblessness is still most pervasive," the resolution said.

A growing number of people make a living from renting out spare rooms on Airbnb, performing errands and odd jobs as a TaskRabbit or ferrying people across the city as a driver for Lyft or Sidecar. Mobile phones and social media have fueled the phenomenon, helping build a culture of trust around the transactions.

While many of the startups sprang up in the San Francisco Bay Area, the sharing movement has quickly gone global. An Australian company called Zookal allows college students to rent out textbooks, while Vayable hooks travelers up with local hosts who give customized, personalized tours of cities from Barcelona to Shanghai.

The companies, which typically make money by charging transaction fees, have faced a thicket of regulatory, tax and labor issues in the markets where they operate. Advocates say the livelihood of micro-entrepreneurs is at stake, while established industries _ from hotels to taxi companies _ have argued that the newcomers are sidestepping taxation, safety regulations and labor rules.

With the market still in its infancy, government agencies are just beginning to grapple with what it all means. The ridesharing companies are the first to come under the regulatory umbrella, but will likely be far from the last. Yet many experts see the mainstreaming of the sharing economy as inevitable because of the economic efficiencies it will create.

"There will be more companies _ this is just the beginning," said Dan Sperling, founding director of the Institute of Transportation Studies at the University of California-Davis. "The information tech revolution swept through many industries but barely touched transportation. This is just the leading edge of things we're going to be seeing in the future."

Last fall, state regulators with the California Public Utilities Commission slapped startups Lyft, Sidecar and Uber with $20,000 fines each after accusing them of operating as passenger carriers without commercial insurance to cover injuries, property damage and workers' compensation claims. But commission President Michael Peevey last week issued a proposal that would create a new regulatory category called "Transportation Network Company."

The proposed regulations, which are likely to be approved in September, would require drivers to undergo a criminal-background check and require companies to provide driver training, adopt a zero-tolerance policy on drugs and alcohol and to carry insurance. While various cities have made accommodations to the sharing economy, the California regulations would represent the first statewide rules for ridesharing companies.

Companies like Sidecar, which has thousands of drivers in the San Francisco Bay Area, applauded the move, saying the regulatory clarity is a "critical milestone" that will make ridesharing better and safer.

"There's a growing recognition that the sharing economy is the wave of the future," said Sunil Paul, Sidecar's founder and CEO. "We now have a set of rules that are about us, and the kind of innovation we are creating."


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Source: Copyright San Jose Mercury News (CA) 2013. Distributed by MCT Information Services


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