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Home / Business

A share of the action - but some don't like the divvy-up

By Charles Arthur
Observer·
26 Dec, 2014 04:00 PM7 mins to read

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Uber, the ride-hailing service, was started by Travis Kalanick after he couldn't use his smartphone to call a cab in Paris. Photo / AP

Uber, the ride-hailing service, was started by Travis Kalanick after he couldn't use his smartphone to call a cab in Paris. Photo / AP

Cyber-revolution is creating new ways of doing business around the world, as well as triggering bans and protests.

You can not only find someone online willing to rent you a room in their house, but someone who will share their car, their desk, their power tools or their child's toys.

You can find someone to walk your dog, deliver your dinner, assemble your furniture, lend you clothes or hold your place in a queue.

This is the "sharing economy", hailed by governments for creating "micro-entrepreneurs" and by economists for putting "excess capacity" to use.

Traditional businesses and workers - from hotel owners to taxi drivers - have been less welcoming.

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The sector is growing quickly.

Airbnb claims to have more than 1 million rooms available, compared with the 13 million rooms provided by formal hotel chains. Uber claims thousands of drivers.

Not all companies are doing so well: TaskRabbit, which puts you in touch with vetted "taskers" to take whatever chore you want off your hands, has struggled to grow beyond its current 19 cities.

As poster children for the sharing economy (even if Uber shrugs off the title), Uber and Airbnb have been accused of riding roughshod over the regulations other companies have to play by.

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The list of places that have banned Uber includes Berlin (and later the rest of Germany), the state of Virginia, New Delhi, Belgium, New South Wales in Australia, Spain, Portland in Oregon (it went ahead anyway), Thailand and Seoul in South Korea. Some of those bans were later lifted.

The ride-hailing service, started by Travis Kalanick after he couldn't use his smartphone to call a cab in Paris, has been the lightning rod for much of the anger at the disruption being caused by these new companies.

In some cities, including London and Paris, taxi drivers have protested at the presence of the firm, claiming its avoidance of many regulations enables it to undercut them on price.

Airbnb, started by two designers who in 2008 hosted three people looking for a place to stay, has had a series of run-ins with US regulators.

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New York state has taken the company to task over whether its activity constitutes sub-letting, thus breaking the leases of many residents who offered rooms or homes.

In Amsterdam this month the company agreed to collect what could be millions of euros in tourist taxes after complaints from hoteliers.

But for Airbnb's public policy director in Europe, Patrick Robinson, there's no question its users should enjoy lighter regulation than some other businesses.

"It's manifestly obvious to me that somebody renting out their flat shouldn't have to obey the same rules as a Park Lane hotel," he says.

His views were echoed last month by a British Government-commissioned report that recommended "regulations must be examined to ensure they are still fit for purpose and meet peoples' expectations".

The recommendation was that regulations should change, but only for those small groups.

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In a foreword to the report, Business Minister Matthew Hancock said new services such as Airbnb and PeoplePerHour "are unlocking a new generation of micro-entrepreneurs".

The report was written by Debbie Wosskow, who runs Love Home Swap, described as a "peer-to-peer travel club". That irked the British Hospitality Association, whose members view many "sharing economy" participants as enjoying a free ride, with no oversight apart from the cumulative reviews on the site itself. Hotels and B&Bs, the BHA's members, face constant scrutiny.

The key that has enabled all this is the internet and smartphones. As commerce moves online and the internet pervades so many areas of life, it has become easier to create businesses linking people who want to be on either side of a deal. In effect, it seems every transaction can be managed by a sort of dating site.

A classical economist would say these systems are releasing surplus capacity into the economy - there are car seats going begging on various journeys that could be more efficiently shared, and the exchange of value (read: payment) between participants would be good for all.

It should increase efficiency and lower the price of those goods - so you might expect that the arrival of ride-sharing services would drive down prices for regulated services.

There are signs that this is happening in some areas. In New York the cost of a "medallion" for an official yellow cab has fallen from its million-dollar peak recently. But Robinson and the BHA say there's no sign that Airbnb is pushing down the price of hotel accommodation.

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Tony Greenham, head of finance and business at the New Economics Foundation, says that in many cases the label of the "sharing economy" is a fig leaf for companies that are just as rapacious as any around now.

"The starting point has to be realising that the label has been used to describe wildly different things.

"At one end there's Uber, which is trying to dress a traditionally capitalist business model in the cuddly clothes of 'sharing'. But that doesn't mean the whole area is just marketing."

There are also downsides, or what economists call "externalities".

Greenham says: "Driving down the cost of taxis encourages people off buses and into taxis.

"That means you're using more resources, at an overall higher cost to everyone because you have all these people owning and running cars."

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He also points to the fact that every driver (and every passenger) is rated by each other; a driver whose rating falls too far below 5/5 is liable to be dropped.

With accommodation services, there are other concerns.

What would happen if an Airbnb guest was harmed by fire, or a carbon monoxide leak? Although the money for any stay is paid via Airbnb, Robinson says he doesn't know who would be responsible if someone were injured that way.

It's a scenario that has exercised insurance companies, which are wrestling with the question of who is liable in a collision involving a car being driven on an Uber journey or a complaint involving Airbnb clients.

Everyone involved agrees that these businesses look unstoppable.

The question is how far regulations will shape them to behave more like the traditional businesses that they're trying to supplant.

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There's an app for it ...

A place to stay, something to wear, and someone to look after the dog? Here are the apps:

Airbnb
A mobile or desktop service, Airbnb connects people looking for short stays in houses or rooms with those offering them. Founded in 2008, it now has about a million listings in 33,000 cities.

Uber
A mobile app for "ride-sharing", this in effect functions as a taxi service, usually undercutting registered cabs (though "surge pricing" at peak times can make it far more expensive).

TaskRabbit
Connecting people who want something done with people willing to do it, TaskRabbit is described as "an eBay for labour".

JustPark
This service just lets people park - outside your house. People have been doing this in Britain for a long time - near airports and in places like Wimbledon at tennis time.

DogVacay
This service claims it will find a "loving dog sitter near you", with more than 20,000 sitters in the US.

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Resecond
This Copenhagen service lets members "rent" dresses from a curated selection. In the same city, Chare, started by the Danish Refugee Council, uses a similar system and offers clothes.

Peerby
This Amsterdam startup lets neighbourhood users borrow almost anything, from power tools to pressure washers. It operates in the UK, Belgium, Germany and the Netherlands, with more than 100,000 active members.

- Observer

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