Like me, you might have recently read that the Mayor of London, Sadiq Khan, and the Transport Authority of London have decided not to renew Uber’s license to operate, effectively banning the company from London. Your first reaction was also probably to scratch your head and ask yourself what anyone could possibly have against cheaper taxi rides. But the reasons behind this decision are surprisingly reasonable and the banning of services like Uber may even be relevant for our own telecommunications industry.

Uber is a classical over-the-top (OTT) service and yet another manifestation of globalization: what Uber does for taxis, Airbnb does for hotels, Facebook and Twitter do for mass media, Amazon for retail stores, and Skype, Whatsapp & co for communications.

It seems to me that the embracing or banning of such OTT services is not primarily an economical issue: it is really about social sovereignty.

Consider for instance the principle reasons for the London ban of Uber:

  • Security: Local authorities inspect taxis, do background checks on licensed taxi drivers, etc.
  • Quality: Local authorities make sure taxi drivers know their way around London.
  • Underlying infrastructure: Local authorities provide and maintain the infrastructure, e.g. roads, bridges, parking spaces, etc. and also control the number of taxis licensed and thus the usage of this infrastructure, which is generally also funded in part by the taxi licenses.
  • Fair prices and wages: Local authorities (including unions) regulate prices and wages.

OTT services attempt to circumvent such local legislation and regulation of their respective industry, including in many cases paying local taxes. They claim to do it in the name of lower prices which are to everyone´s benefit. But in every industry, local regulations, promoting for example equal opportunity, health, safety, security, etc., cost money and thus make products and services more expensive. Societies decide these are things worth paying for and require them via legislation and regulation so that it is not left up to “individual choice” or to some “invisible hand” of the market to make decisions on essential issues of public well-being, health and safety.

This is what I earlier referred to as social sovereignty. If local municipalities, states and even nations want to maintain control of services and products deemed to be essential to their society, they cannot allow global OTT’s to circumvent their sovereignty and compete unfairly against local players who abide by local laws and regulations and yes, pay local taxes.

In my continuation of this blog, I am going to point out some of the parallels I see between Uber and the OTT services in our telecommunications industry as well as the challenges they pose.

Marshall E. Kavesh

Author Marshall E. Kavesh

Chief Executive Officer at ECT

More posts by Marshall E. Kavesh

Join the discussion 4 Comments

  • Digital services are challenging traditional economy and all services related to internet will be “jumping” all kind of “borders”. “There is always a day for each night …” Who can stop the future? Better to adjust the rules for everybody.

    • No one can stop the future, but maybe we can take an active role in forming it. Societies and nations can also regulate, tax and limit services via the Internet if they threaten their interests. The best and most notorious example is of course China. If local infrastructure, local businesses and local interests in general are at stake, it’s legitimate to think of how national legislation can protect local interests. Take a look at the continuation of my blog published today.

  • Carlos Pastor says:

    I think it is too naif to use “sovereignty” as an argument. The OTT’s exist because they found a way to fulfill a gap in the market previously not covered by “traditional” service providers. The fact is that with the internet penetration, the mobility, the social networks and the lower cost to do business analytics, the consumer empowerment has grown dramatically and is no longer under the control of any particular organization or government. Failing to digest that new reality is a dead sentence.

    • Businesses that circumvent regulation (and taxes) always claim that their lower-price products empower consumers. But is this true? The companies that, for instance, offer illegally copied drugs via international mail offer customers their products without a prescription at far reduced prices, but the consumer doesn’t know if the product has side-effects or if it even contains the drug. Is this consumer really “empowered”? Regulation of products and services are meant to be for the common good and protect the consumer and society as a whole. I, for one, fell much safer in a London black cab than in stranger’s private car. Have a look at my continuation of this blog on Uber.

Leave a Reply