This is a guest post by Steve DelBianco, president of NetChoice.
America’s tech industry has embraced the idea of permissionless innovation, where new online business models set up operations without requesting approval from public officials. That’s how eBay revolutionized the way people sell their stuff, and it’s how sharing economy businesses became a great way for Americans to rent their own homes and cars to travelers.
To be sure, permissionless innovation has brought new waves of competition and consumer choice. But sometimes those waves wash right over public officials, raising their skepticism and scrutiny. We’ve already seen the pitfalls of permissionless innovation when some businesses placed their bikes and scooters on city streets.
Over the last several years, many cities have methodically deployed docked bike systems to improve urban transit. But the fixed docking stations are expensive, have limited capacity, and are located only on streets with the highest traffic, leaving many neighborhoods and city residents unserved.
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That’s where “dockless” systems can help cities provide better transit options to their residents. Dockless bikes and scooters from operators like Ofo, Spin, Bird and Limebike can be located and unlocked by anyone with their apps, and can be parked on the sidewalk when they reach their destination. Dockless rides are cheaper, more convenient, and reach more city residents than yesterday’s docked systems.
However, dockless bikes and scooters are appearing on sidewalks in some cities that haven’t granted permits for the dockless business to operate. While cities seem willing to explore new dockless transit options, some providers are ignoring safety rules and sidewalk restrictions when they deploy their services without authorization.
Some companies dropping unauthorized dockless bikes and scooters on city streets are actually undermining consumer trust in a service that has the potential to benefit residents and all commuters. As a result, local officials are pausing or even precluding sensible regulations that would enable responsible businesses to deploy dockless technology. But cities need to distinguish between rule-breakers and rule-followers, or a technology that has the potential to benefit so many will be undermined by the actions of a few.
Events in San Francisco show how aggressive tactics by some companies have undermined the efforts of rule-abiding companies to provide dockless rides to city residents. When a fleet of unregulated e-scooters began appearing in the city, it generated a rash of complaints about pedestrian safety and sidewalk obstruction, damaging the relationship between dockless providers and city officials.
City Attorney Dennis Herrera quickly sent a cease and desist letter to Bird and LimeBike. Herrera wrote an op-ed in the San Francisco Chronicle further asking for compliance. Some San Francisco citizens were so displeased with rogue operators that they turned to dismantling, and vandalizing and adorning scooters with biological waste.
Vandalism like this is a poor way to protest against irresponsible dockless ride companies, since it harms city residents who want to use the devices responsibly. But it’s evident that abrasive tactics of providers have provoked a backlash — a backlash that impacts rule-followers and rule-breakers alike.
So far, San Francisco’s attempts to get these companies to follow local rules have failed. 66 scooters were impounded in early April, followed by another 24 later in the month. In total over 335 scooters have potentially been impounded.
While San Francisco is committed to develop regulations to legalize the scooters, it has warned of more serious punitive legal options should companies continue to defy city rules and requests. Unfortunately, San Francisco’s rules released last month were stricter than they would have been if dockless bike and scooter companies had not expanded aggressively without permission in the first place.
Other cities have had a rocky relationship with some dockless providers, too. In December, Santa Monica filed a criminal case against Bird, an electric scooter operator, for operating without proper permits. Bird later agreed to pay more than $300,000 as part of a settlement agreement with the city. More recently, the City Council issued a temporary order for scooters to be impounded and incur a fine until regulations are released.
In Austin, Bird began an unauthorized deployment of its scooters against the City’s wishes. Competing provider LimeBike sent a letter to the City of Austin threatening to “consider its next steps” if Austin did not punish Bird for breaking rules. After concluding that the city’s response was insufficient, LimeBike sent another letter, announcing that it would join Bird to deploy 200 scooters—without permission.
Austin responded by impounding 55 scooters, which were soon returned to the streets. As a result, the Austin City Council has fast-tracked a bill to strengthen its sidewalk and right-of-way protections, showing how abrasive expansion tactics can undermine the entire industry, even though some players followed the rules.
LimeBike has also said it will be bringing its scooters to Wynwood, a trendy neighborhood in Miami, despite having no permission from local authorities, harming relations with city officials. LimeBike’s scooters have also appeared in San Diego, drawing complaints from local government.
Early this month, Bird launched in Atlanta without permission, and LimeBike is likely to do the same. Bird also launched in Nashville – to the surprise of city officials who sent a cease and desist letter only days after. In Charlotte, LimeBike again launched scooters without the city’s permission.
Major cities yet to finalize business-friendly regulations are taking preemptive steps against dockless companies. When Dallas heard that LimeBike planned to launch in the city, it reminded them that e-scooters are illegal on city streets and sidewalks until new regulations are approved. Similarly, Seattle informed all companies operating scooters that they cannot launch until a permit system is in place.
The question remains whether these warnings will dissuade companies from deploying. LimeBike seems willing to ignore warnings and absorb the cost of penalties – if it means they can be the first mover and seize a sizable market share before their competitors arrive.
Considering all these examples, it is clear that aggressive expansion tactics by dockless providers in defiance of local rules run a serious risk of aggravating city officials and harming consumer trust in the entire industry.
Cities should keep in mind that dockless technology does not have to have to be deployed in the aggressive way some companies have chosen. Cities can, and should, write rules that encourage compliance and punish rule-breakers without limiting consumer choice. San Francisco said that it would be taking previous compliance into account when allocating permits – taking this concept further, cities should reward consumers and rule-followers by ensuring restrictions on compliant providers are not overly restrictive, even if they decide to maintain more restrictive regulations on non-compliant companies too.
Competition between dockless ride providers can benefit consumers, but only if all companies play by the same rules. By taking advantage of unprepared cities, some dockless providers are repeating Uber’s mistakes.
Uber built its market share through aggressive expansion tactics. But local governments have also implemented punitive regulations against all ridesharing providers, which might not have been pursued if Uber had taken a more diplomatic approach.
Rather than rushing new services to the market to gain early market share, aggressive expansion tactics by some dockless companies will slow the process of giving consumers access to a convenient new transit option. Instead, the public will see regularly impounded bikes and scooters, and endure public spats between officials and dockless ride providers. That’s going to generate distrust for a technology still in its infancy – putting wider adoption at risk.
All dockless ride providers heed these concerns and modify tactics. Local authorities are not the enemy, and cooperation is vital if businesses and consumers are to realize the benefits of this new technology. We also hope that cities adopt regulations that encourage business investment and innovation, and reward those that comply with city regulations.
We can all benefit from dockless ride tech, but only if we are willing to work together — and follow the rules.
About the Author: Steve DelBianco is president of NetChoice, a trade association of e-commerce and online companies.