Peer-to-peer services face regulation

Austinu2019s peer-to-peer economy has grown during the past four years, with at least 10 such companies launching in the city since 2012.

Austinu2019s peer-to-peer economy has grown during the past four years, with at least 10 such companies launching in the city since 2012.

This May, Austin voters will determine how ride-hailing companies are regulated within the city. The May ballot proposition is the latest chapter in an ongoing discussion over peer-to-peer businesses, such as Uber and Airbnb, that allow individuals to directly exchange goods and services.

A self-proclaimed tech- and business-friendly city, Austin is the birthplace of several peer-to-peer companies—including HomeAway, a short-term rental listing service, and Favor, a food and product delivery service—and has helped pioneer other peer-to-peer services, such as TaskRabbit, which connects users to area individuals willing to complete tasks or errands.

Although recent debate at City Hall has centered around laws governing ride-hailing companies and short-term rental properties, new city regulations could affect similar businesses and Austin’s greater startup community.

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City Council passed an ordinance Jan. 28 that not only incentivized voluntary fingerprinting for ride-hailing company drivers but also authorized the creation of a digital security badge program for the city’s entire peer-to-peer economy.  Badge programs are used by some peer-to-peer businesses to show users have passed certain identity or background checks.

“This concept could be used in lots of different peer-to-peer platforms,” Austin Mayor Steve Adler said during the Jan. 28 meeting. “In the new economy we have more and more people who don’t know each other involved in transactions for business deals or social interactions than we ever had before, and I think this is a vehicle for us to incentivize the kind of behavior we want to see.”

A familiar pattern

Peer-to-peer businesses have been operating in the Austin for more than a decade, but in the past four years the city has seen a spike in such operations. At least 10 peer-to-peer services have launched Austin networks since 2012.

In recent months City Council has heard more than a dozen combined hours of public testimony about regulating short-term rentals, or STRs, but discussions about STR legislation are nothing new, said Matt Curtis, government relations director for HomeAway, one of Austin’s longest-running peer-to-peer businesses.

“People have been renting homes since Austin was incorporated,” he said. “HomeAway is in its [11th] year. This has been standard practice for a long time.”

Peer-to-peer services face regulation

Curtis said HomeAway’s interactions with city staff during the most recent STR debate have lacked “a sense of process and transparency,” but he praised City Council’s 2012 STR regulations, which set licensing requirements and limited the density of Type 2 STRs—homes and duplexes that are not owner-occupied. Curtis said those regulations helped shape STR best practices used by the National League of Cities and the United States Conference of Mayors.

Bart Bohn, a partner at Austin Technology Incubator where he leads the IT and Wireless Incubator, said the growth of Austin’s peer-to-peer economy is following the “predictable pattern”  of new startups, which can function below the radar of regulators for several years before area residents and stakeholders take notice and begin to engage their local government.

“[The peer-to-peer debate] has been a long time coming,” Bohn said. “A lot of people think of this as an overnight [occurrence], but as with every startup, overnight started five years ago.”

New rules for a new industry

Peer-to-peer businesses connect users through an online or mobile platform and allow them to exchange goods or services without moderation by a third party. A significant amount of national dialogue has gone into how best to ensure a safe and secure transaction while using these services.

Bohn said he does not view Austin’s recent debate about fingerprinting drivers from ride-hailing companies as a sign that security needs to catch up with technology—but as a sign that regulators need to catch up with new methods of providing security. 

Peer-to-peer services face regulation

“There are a lot more sophisticated ways [than fingerprinting] to monitor the safety of both people in a transaction,” he said.

The effectiveness of fingerprinting Uber and Lyft drivers has also been debated by local residents during various public meetings at City Hall.

Peter William Flessas, an Austin resident who said he has used TaskRabbit and STR listing service Airbnb as primary sources of income, said he would be more likely to rely on user reviews than a fingerprint background check when using a peer-to-peer service.

“I could care less about the fingerprint,” Flessas said. “Obviously it’s good to have a background check, but I think if you have 10 reviews, that gives you a good sense of what type of experience you’re going to have. Reviews would definitely be a way more useful way [to convey] comfort and trust than a fingerprint could ever be.”

Lyft spokesperson Chelsea Wilson said peer-to-peer transportation companies are inherently different than their traditional taxicab counterparts and must be regulated differently. Most Lyft drivers do not work for the company full-time; about 80 percent drive 15 or fewer hours each week, Wilson said.

“The key to our conversation with regulators is to make sure any regulations passed recognize Lyft is a peer-to-peer platform,” Wilson said. “[Our drivers] are not professional drivers; they’re not trying to be professional drivers.”

Wilson said Lyft has worked with local governments in 29 states and dozens of cities on legislation that allows ride-hailing companies to function safely and efficiently.

“I think there’s a misconception that we’re opposed to regulation,” she said. “We’re always open to being collaborative, but we do want local regulators to understand Lyft and ridesharing are different than the traditional [taxi model].”

Peer-to-peer services face regulation

Wider implications

Some of the immediate effects of proposed peer-to-peer legislation are clear. Wilson said Lyft does not operate in cities that require mandatory fingerprinting, which could be an option if Austin voters reject the May ballot proposition.

In the short-term rental arena, Curtis said additional regulations may not have a significant impact because of the heavy demand for vacation rentals in Austin.

“There are cities like Portland or New York City that have very low [code]compliance rates, but they also have very onerous and restrictive regulations,” he said. “I think the outcome [of additional regulation] would be exactly the same. People would still [rent their properties], but they would do it under the radar.”

One certainty moving forward is that peer-to-peer companies will be more likely to focus on safety and collaboration with local officials when crafting their product, Bohn said.

“Many years ago the attitude [in the startup community] was, ‘Just do it, and deal with the consequences down the road,’” he said. “Today because local and state and federal governments are aware of the peer-to-peer economy, new entrepreneurs in the industry are calculating in the role of regulation.” 

Bohn said he does not think recent legislation will dissuade new peer-to-peer businesses from launching in the Austin area, but said the precedent set now will impact how startups determine the technology they develop, the teams they use and how they fund their companies in the future.