There are two things that the changes currently shaking up the media sector can teach us. The first is that the digital transition process is painful. Shrinking newsrooms, advertising market fragmentation and declining audiences are now an everyday feature across the mediums of television, radio and print the world over.

Yet for all the pain caused by the transition, even journalists involved in the sector's upheaval would be hard pressed to say that the introduction of the internet was a net negative for society.

News now reaches us in seconds, wherever we are. This is mostly a good thing.

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The irrepressibility and ubiquity of the digital medium means that even the most oppressive regimes struggle to keep a lid on developments they dislike from getting out.

Remember the Arab Spring? Indeed, the number of blogs (expert and otherwise) is testament to the fact that there are now fewer gatekeepers, and it is more difficult to monopolise the message than in the pre-digital days, when the media was dominated by press barons like Rupert Murdoch.

We need to embrace this change, not fight it.

That brings us to the second lesson - we need to embrace this change, not fight it.

This is a particularly important point that needs to be driven home with policymakers, who have the power to constrain the adoption of new technologies, and the productivity-enhancing benefits that come with it.

The most obvious example is Uber, the online ride-sharing platform that allows anyone to become a de facto taxi driver with demand-driven pricing that delivers lower costs to price-sensitive commuters and convenience to those willing to pay for it.

Yet the firm has pretty much fought policymakers in every city that it has launched in, largely because it threatens officials' ability to sell taxi licences, and taxi operators' existing investments in those licences. Even in New Zealand, where the taxi industry was deregulated years ago, the major taxi firms are using the law to protect their fiefdoms and investments.

As a result we now have police in Auckland patrolling crime spots like Ponsonby, looking for drivers who are breaking the law by using a smartphone to charge people for rides instead of using the more traditional taxi meter. The problem is not with the police, but outmoded laws.

That may seem a marginal issue for many of us, but the digital world is threatening to disrupt many other sectors of the economy. Peer-to-peer lender Harmoney, for example, is threatening to displace short-term high-interest lenders. Now, hardly anyone is going to shed a tear for the loan sharks, but what happens when services like these start competing with traditional lenders?


It is already happening. The top five peer-to-peer lenders in the US oversaw the lending of US$3.5 billion ($4.6 billion) of loans in 2013, up from US$1.2 billion in 2012. Yet unlike loan sharks, banks have deep pockets and strong ties with government, which they could use to stifle competition from more innovative competitors, all to the detriment of consumers.

The digital disruption is not limited to the internet either.

Nothing gets public transport advocates squealing like the mention of driverless cars, an innovation that threatens to derail their hopes of putting the private automobile on the endangered species list.

Thankfully Transport Minister Simon Bridges has not imbibed this Kool-Aid.

But it is not just the big ticket items that we have to watch out for.

The Digital Communications Bill, which attempts to stamp out cyber bullying across a wide range of mediums from text messaging to blogs, worryingly gives the Government the ability to curb free speech on the internet. Likewise, the proposed Privacy Bill risks stifling emerging technology platforms like big data.

As a small isolated country floating in the South Pacific, the internet and the digital revolution that comes with it play a highly important role in the economy, one that we can only expect to grow over time.

We need to embrace the change, no matter how painful at first, and ensure that the policies that govern the digital realm don't tie up innovation in red tape. All laws create problems of unintended consequences where they impose a boundary.

The most effective way to avoid this problem, but not always easiest, is to avoid imposing unnecessary rules in the first place.

Jason Krupp is a research fellow at the New Zealand Initiative, a public policy think-tank based in Wellington.