The urge to surge

From Uber to AirBnB and Net­flix, it’s about in­no­va­tion

The Financial Express - - COMPANIES -

Though the de­bate over taxi ag­gre­ga­tors like Uber and Ola, and the re­sponse to it in states like Delhi and Kar­nataka, has pri­mar­ily been over whether surge pric­ing should be al­lowed, that is com­pletely miss­ing the point. And we are not even get­ting into the is­sue of whether, once you av­er­age out surge and non-surge pric­ing, the ag­gre­ga­tors ac­tu­ally de­liver bet­ter value for money than the ex­ist­ing sys­tem—if they didn’t, it is dif­fi­cult to see why they would be do­ing so well. Uber and Ola’s USP is tak­ing an un­der-utilised as­set—in this case, trans­port ser­vices—and help­ing use it more ef­fi­ciently by of­fer­ing su­pe­rior match­ing ser­vices. So, an of­fice-goer with spare time on his/her hands, a home­maker or a stu­dent who is not us­ing his/her car/two-wheeler all the time sud­denly get added to a na­tion’s pub­lic trans­port ser­vice pool—while one study on how Uber’s surge pric­ing doesn’t add to sup­ply is widely quoted as proof of the per­fidy of ag­gre­ga­tors, ele­men­tary eco­nomics tells us that added sup­ply re­sults in fall­ing prices.

Such in­no­va­tion on ag­gre­ga­tion, of course, is not re­stricted to taxi ser­vices, and AirBnB has done the same for ho­tel space by al­low­ing peo­ple to give out unutilised rooms in their houses for hire—in this case, AirBnB’s job of match­ing re­quires it to guar­an­tee a cer­tain qual­ity of ser­vice to those rent­ing the rooms. In each case, there are vested in­ter­ests be­ing hurt, and it is not just the ex­ist­ing set of taxi ser­vices or ho­tels we are talk­ing about. In both cases, by bring­ing in new play­ers into the busi­ness, the gover nment’s abil­ity to li­cence/reg­u­late is also be­ing made re­dun­dant—which is why, for in­stance, the Delhi gover nment is now telling the Delhi High Court that Uber/Ola are run­ning their trade il­le­gally.

All in­no­va­tion, by its very na­ture, up­sets the sta­tus quo. The ques­tion is whether the gov­ern­ment/reg­u­la­tory sys­tem will adapt to it in such a way that so­ci­etal ben­e­fits are max­imised—if it doesn’t, the in­no­va­tion is ei­ther driven un­der­ground or so­ci­ety is de­nied that ben­e­fit. In­ter­net bank­ing, mo­bile bank­ing, pay­ment banks, wal­lets and now UPI—imag­ine how peo­ple’s lives would be, and how much more costly the trans­ac­tions would be if RBI were to dis­al­low these in­no­va­tions and in­sist that branch bank­ing, with the num­ber reg­u­lated by the cen­tral bank, be the only form of bank­ing. So­cial me­dia has rev­o­lu­tionised the way news is dis­sem­i­nated to­day and, to a large ex­tent, taken away the power from big me­dia—is it to be banned? In tele­com, over-the-top (OTT) play­ers like What­sApp and Skype have changed the voice busi­ness for­ever. The an­swer is not to choke them off—as many in­cor­rectly be­lieve big In­dian tel­cos are try­ing to do—since cus­tomers are get­ting a ser­vice at a frac­tion of the ear­lier cost. What a smart reg­u­la­tor would do in the face of this rev­o­lu­tion is to en­sure a level play­ing field that al­lows the sec­tor to pros­per—since OTT play­ers don’t pay huge amounts to buy spec­trum or the high li­cense/spec­trum fees that tel­cos do, the so­lu­tion lies in low­er­ing the reg­u­la­tory bur­den for tel­cos as well. Re­duc­ing the de­bate over in­no­va­tion, whether in the case of Uber or AirBnB or Net­flix or What­sApp and so many more, to one of costs or of le­gal­ity is miss­ing the wood for the trees.

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