Startup News Digest: 1/15/2016

Our weekly take on some of the biggest stories in startup and tech policy. 

Obama’s Final SOTU. President Obama addressed Congress Tuesday evening in his seventh and final State of the Union, which included a few nods to the tech industry and startups, too. He remarked on some upcoming proposals from the White House, including a push to bring computer science education to more schools. The president also spoke of the country's rich history of innovation, as well as the challenges workers face in the new technology-driven economy. "In this new economy, workers and start-ups and small businesses need more of a voice, not less. The rules should work for them."

Encryption Debate Continues. A new bill was introduced in the New York State Assembly this week that would essentially disable strong encryption on all smartphones sold in the state. If passed, it would be the first state law requiring a “backdoor” for encrypted technologies—something that is not only constitutionally questionable, but also not technically feasible without undermining the security of the system as a whole. The tech industry has been pushing back against these “backdoors” at all levels of government. Just last week at a counterterrorism discussion between high-level federal officials and tech leaders, Apple CEO Tim Cook called on the administration to issue a statement defending the use of unbreakable encryption. The White House has yet to take an official position on encryption.

New Regs and Report for Ride-Sharing in NYC. The New York City Council will soon introduce new legislation regulating for-hire vehicles, the Wall Street Journal reported last week. The proposed legislation would require for-hire vehicle services such as Uber and Lyft to make their cars more accessible to the disabled, among other regulations that may address surge pricing. These new laws could be introduced as soon as next week, following today’s release of the highly anticipated traffic congestion report from the Mayor's office. The study, which examines the impact of new ride-sharing services on the city’s traffic, was commissioned by New York City Mayor Bill de Blasio last summer after proposals to cap the number of for-hire vehicles were defeated. We’ve just started digging into it, but among other things, it claims “For-hire vehicles are a vital part” of the city’s transportation mix and does not blame any one company for local congestion. We’ll be watching whether the report’s findings will influence the city council’s new legislation.

Big News for Autonomous Vehicles. 2016 is shaping up to be the year of the autonomous vehicle. At last week’s Consumer Electronics Show, a number of automakers announced their forays into this rising market. Then, on Thursday the Obama Administration unveiled plans to include $4 billion for autonomous vehicle R&D in the proposed 2017 budget. The Administration also promised to issue regulatory guidance for companies around compliance with safety standards within six months. The federal government has remained relatively hands off in this new market, but the Administration’s announcement this week represents a new level of involvement and a huge win for proponents of this growing technology.

The Size of the Sharing Economy. The results are in. A recent and first-of-its-kind poll conducted this fall found 44 percent of American adults have participated in the sharing and on-demand economy—that's over 90 million people who've booked a room on Airbnb, hopped in an Uber, or ordered groceries from Instacart. The poll also found that 22 percent of American adults have offered goods or services through these new platforms in exchange for income. And despite a spate of recent lawsuits over worker classification, the vast majority of these workers describe their experiences as positive.

The State of Computer Science. Code.org, a national organization dedicated to expanding computer science education, published its 2015 report, revealing K-12 student enrollment in computer sciences courses is growing nationwide. Today, 25 percent of U.S. schools teach computer science and programming and several major school districts including New York and Chicago have made recent pledges to the subject in every school. Computer science is also the fastest-growing AP course of the past decade.

Americans Online. Last week, the Federal Communications Commission released updated numbers on broadband access in the U.S. While the percentage of Americans with access to advanced broadband has improved over the past year, there are still 34 million Americans (or about 10 percent of the country) who lack access to broadband at sufficient speeds. While this report suggests improvements in the broadband ecosystem, more needs to be done to connect the 34 million currently cut off from broadband opportunity.

Comments on NYC Congestion and FHV Studies

It’s been two months since New York City agreed to postpone a vote on legislation that would have capped the number of for hire vehicles in the city, a policy that would have been particularly damaging for small and emerging startups in the rideshare industry. The City instead has initiated a pair of studies: one a broad look at the taxi and for hire vehicle (FHV) industry and the regulations that govern it, and the other an analysis of congestion and its causes. Both studies are set to be completed by the end of this year.

To the City’s credit, it has made an effort to engage with startups and the larger tech community as it plans and conducts these studies. Engine has already participated in one meeting in which startups and advocates were given the opportunity to ask questions and weigh in on the studies.

However, it’s still unclear what impact this dialogue will ultimately have on the findings of the studies, and - more importantly - on whatever policy decisions are made based on those findings. With that in mind, Engine has shared the following recommendations with the Mayor’s office.

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The study focused on regulation of the FHV and rideshare industries should consider the following:

• The possibility of creating a brand new regulatory scheme for yellow and green taxis, livery and black cars, that is different from either of the current structures.
• The possibility of bringing yellow and green taxi regulations closer in line with the current black and livery regulatory scheme.
• The possibility of creating a new set of regulations that encourages and supports ridesharing or other public benefits being enabled by new technologies.
• The importance of creating a regulatory scheme that allows for emerging startups to innovate within the FHV industry, and which is not overly burdensome or cost prohibitive for new market entrants.

The study focused on the causes of traffic and congestion in Manhattan’s central business district should be sure to look at a wide array of potential contributing factors beyond the FHV and rideshare industries, including:

• The number of deliveries being made within the central business district and the behavior of those vehicles.
• The number of privately owned vehicles entering the central business district and changes in their behavior.
• Changes in bicycle and pedestrian traffic.
• Changes to the streetscape such as bike lanes, pedestrian plazas, or traffic calming devices.
• Street and other infrastructure conditions.
• Changes in scope, location and duration of street, bridge and tunnel closures resulting from construction, events, disabled vehicles, and other factors.
• Inefficiencies in current signaling systems and grid layout, including placement of one way streets.

Perhaps even more important than the parameters and findings of the studies are the policy recommendations that stem from these studies. In that context, we would like to see the City consider the following:

• When evaluating different factors, consider not just how much they contribute to congestion, but also what public benefits they provide. Some factors (ex. an increase in the availability of FHVs to underserved communities, improved access to bike lanes or pedestrian plazas) may have a negative impact on traffic but also have a clear public benefit. Other factors (ex. inefficiencies in signaling systems) have no public benefit. It will likely be preferable to reduce the factors that have no public benefit before reducing factors that have a clear public benefit.
• When considering driver pay, benefits, flexibility and quality of life, don’t just evaluate new technology driven FHV operators. Make sure to look at these factors for traditional drivers as well.
• Explore opportunities for the City to better use data to support a more flexible, 21st century regulatory scheme that can adapt to changing conditions in real time. Engage with transportation startups as well as leaders in the civic tech community to look for ways to make better use of the data that both companies and city agencies collect.
• Continue to invest in and prioritize making New York a more connected city. Broadband infrastructure doesn’t just help families and businesses connect to the Internet, it opens up endless possibilities to transform the streetscape into a smart-grid that can collect and adapt to real time conditions.
• Provide ample opportunity for innovators in the FHV and rideshare space to design and propose solutions to any negative impacts. Reasonable market and innovation based solutions should be viewed as preferable to government regulation wherever possible.
• If new regulations are considered, make sure they leave the door open for the next wave of innovators. Be careful not to inadvertently stifle new startups that could very well solve the problems currently under debate.
• Consider all solutions on the merits, even those that prove financially or politically challenging. Regulating FHVs may seem less expensive than making serious infrastructure investments, or more politically expedient than tolling East River crossings, but it may not prove nearly as effective at addressing the true causes of congestion.

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We’ll continue to engage with the Mayor’s office and other stakeholders in the weeks ahead. And as always, we’ll be working to ensure that startups have a real seat at the table.

Startup News Digest 9/18/15

Our weekly take on some of the biggest stories in startup and tech policy.

Tech and 2016. In case you missed it, check out Julie talking about tech and the 2016 election on KCRW’s Press Play with Madeleine Brand.

FCC Opens Up Business Broadband Data to New Eyes. On Thursday, the Federal Communications Commission (FCC) announced that it will release data on the little-understood special access market. While most consumers have never heard of special access lines, you probably unknowingly use them every day. They are the high capacity business broadband lines that allow ATMs to connect directly to your bank or cell phone towers to connect back to the network. Competition in this industry is sorely lacking, with just two providers covering most of the U.S. and jacking up prices for the startups, universities, hospitals, and other businesses that use them. While the data will only be accessible to analysts approved by the FCC, its release represents a step in the right direction towards more transparency, increased competition, and lower broadband prices.

Senate Committee Considers ECPA Updates. The Senate Judiciary Committee held a hearing on reforming the Electronic Communications Privacy Act (ECPA) on Wednesday morning. As we’ve covered in past digests, it's still legal for law enforcement to access your emails and other digital data without a warrant. Last week, the California legislature passed a bill to modernize these outdated digital privacy laws at the state level. Still, a federal overhaul of ECPA would be an even better fix, bringing these laws out of the digital dark ages.  Sens. Lee (R-UT) and Leahy (D-VT) have proposed a bill in the Senate, and there is similar legislation in the House. We’ll be tracking reform efforts.  

Dancing Baby Wins Victory For Copyright Fairness. The courts ruled this week in Lenz v. Universal, the famous “dancing baby” case. As Evan writes, “The Lenz ruling is important for a few reasons. First, it should make it much harder for content owners to abuse the takedown process. […] Second, the decision should serve as a loud reminder that the tech world needs to get to work rebalancing our copyright laws to ensure that they’re actually promoting creativity and expression.”  Read the whole post here.

$81M for CS in NYC. On Wednesday, New York City Mayor Bill de Blasio announced an $81 million public private partnership to make computer science education available to every student in city public schools by 2025. Substantial contributions have come from the Wilson family foundation, the AOL Charitable Foundation, and the Robin Hood Foundation. New York joins Chicago and San Francisco in terms of large cities that have made similar commitments, and we hope to see other cities, states, and the federal government continue to build on such efforts to prepare students for jobs in the growing innovation economy.

The Fight Is On Over Chicago’s Streaming Tax.  A group of Chicago residents have sued the city over its controversial application of the 9% Amusement Tax to online streaming services like Netflix, Hulu, and Spotify.  The Amusement Tax, which applies to events like concerts and sporting games, has been in existence for a while, but was only recently expanded to cover streaming services. And Chicagoans’ bills are already increasing.  As Ars Technica reports, one reader’s Spotify bill went from $7.99 to $8.71 this month. We’ll be watching, as the outcome of this case could have a national impact on the power of cities and states to tax the internet economy.

“Cool clock, Ahmed”. When a Texas middle-schooler’s homemade invention was mistaken for a bomb this week, prompting an outlandish response by his school and local law enforcement, it caught the tech world’s - and the President’s - attention. As a New Yorker writer points out, “His arrest comes at a moment when some of the world’s most influential people...have argued that there aren’t enough U.S. students gaining the math and science skills that will get them jobs in the tech sector."

A Different Kind of Tech Event. We were impressed and encouraged by the conversation at last week’s Tech Inclusion conference in San Francisco, which brought together leaders in Silicon Valley and the national tech community to discuss the challenge of making the tech industry more diverse. Read our take on why this wasn’t your typical tech event and what we took away.

Engine Statement on Postponement of New York FHV Cap

Engine is pleased that New York City has agreed to postpone a proposed cap on the number of for-hire vehicles in the five boroughs. As we said after the proposal was introduced, it had the potential to be especially problematic for some of the newest and smallest transportation startups in New York, and particularly for the next wave of innovators that haven't even launched yet.

We commend the Council and the Mayor's office for once again being responsive to concerns raised by the startup community. And we look forward to supporting a dialogue with startups and other stakeholders to find creative 21st century solutions to the problems of traffic and congestion.

BitLicense: It's not just for New Yorkers

Periodically, Engine will invite policy experts to weigh in on specific topics with guest blog posts. Today’s expert is Peter Van Valkenburgh, Director of Research at Coin Center. As Bitcoin's leading advocacy group, it is Coin Center's mission to ensure that any regulatory reaction to digital currencies is based on a sound understanding of the technology. As the bitcoin ecosystem grows, we are keeping a pulse on the policy environment it faces as it disrupts age-old financial regulatory systems. One new regulatory system with major implications is New York’s recently approved BitLicense, which will go into effect August 8. If you have even the most broad interactions with bitcoin, we suggest you read the summary below - with one month to go until unlicensed businesses will be prosecuted, we want to make sure startups understand the potential impacts of the new law.  

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We’ve one month to go until the grace period ends and the BitLicense—New York’s new digital currency regulations—comes into full effect. What’s a BitLicense? The short of it is don’t get caught engaging in virtual currency business activity with a New York resident or visitor without one after August 8th!

If that sentence reads like a bad civics PSA or a Jaden Smith tweet, don’t worry - you’re not alone. The BitLicense is a confusing new regulation, but this is the top line: it can apply to your business even if you are not located in New York and even in some situations where you may not think you are offering digital currency transmission. So, in the spirit of not ending up on the wrong side of a prosecution, here are 8 things everyone involved with a digital currency business should know:

• Whether or not you run your business from New York has nothing to do with whether you need a BitLicense. The BitLicense isn’t interested in where you are; it cares about where your customers are. So if you have a New York resident using your website or app, or you have a California resident traveling in New York City using your product, you may need a license. That’s true even if you have no way of knowing that the user is in NY. There’s a federal law, the Bank Secrecy Act, that makes it a felony to operate a money services business in a state where you don’t have a license, and there is no “knowledge” requirement to that law. Take a customer who’s in New York but spoofing their IP to appear like they are from elsewhere? You could be violating a federal law—and facing prison time—without even knowing it.   

• You probably need a BitLicense if you do any of the following as a business: transmit digital currency; store, hold, or maintain custody or control of digital currency for another; buy or sell digital currency as a consumer business; or control, administer, or issue a digital currency. Therefore, asking whether you need a license is a process that involves asking whether any of these words—like transmit, store, or control—is an apt metaphor for something specific you do in your business. Holding the private keys to a customer’s bitcoin is the easier fact-pattern: “storing” and “holding” both sound like obvious metaphors for that technical activity. Maintaining and updating an app that helps a user store her own keys? That’s harder and you’d probably want to at least talk to a lawyer or seek clarification from DFS.     

• No one really knows what “administrating, issuing, or controlling” means in the context of bitcoin or other cryptocurrencies; if you think you might be doing these things maybe you should ask. The definition of a virtual currency business in this section of the regulation is tricky. It makes some sense in the world of centralized digital currencies, where the centralized company or entity creating the currency can decide when to issue new units of currency and how to control or administer their allocation. The section doesn’t make any sense in the world of decentralized currency like Bitcoin. Bitcoin has no definite “issuer,” “administrator,” or “controller.” People mine new bitcoins (“issuing?”), yes. Others write software that miners run (“administering?”). Others run nodes that help the P2P network communicate (“controlling?!”). Are any of these activities covered? Probably not: Benjamin Lawsky, the outgoing Superintendent of the DFS, repeatedly said that miners and software designers will not need a license. Trouble is, the law is the text of the regulation, not the speeches given by its author. That text is vague, so, again, the best advice is to ask a lawyer and get clarification from DFS regarding your particular facts and circumstances. Maybe we need an abbreviation for that answer. Let’s call it A(sk) L(awyer); S(eek) C(larification). AL;SC.   

• Awesome new tools, like multi-sig, may not be excluded from licensing. Cryptocurrencies can do pretty neat tricks, like dividing control over some amount of currency between two or more people. People in a bitcoin multi-sig transaction, for example, can effectively vote to decide where the money moves. It all happens with cryptographic keys that are linked to cryptocurrency addresses. So, if you run a business that only holds one key to some amount of bitcoin, and your customers hold the other keys, do you need a license? What if you could never even spend those bitcoins on your own, or lose them, or get hacked and have them stolen? Your business certainly isn’t like the traditional banks or money transmitters we talked about above—the technology limits your losses and makes you less risky!—but do you still “maintain custody or control,” as per the regulation? We’d like to think that the answer is no, because these tools are amazing innovations that provide security and limit consumer risk rather than create it. The safe answer: AL;SC.

• Nominal, non-financial uses are excluded but what that means isn’t crystal clear. The bitlicense has an exemption for companies that are transmitting “nominal” amounts for “non-financial uses.” This is seemingly aimed at exempting so called Bitcoin 2.0 or Blockchain companies that want to use cryptocurrency ledgers to record non-financial metadata—i.e. a document notary service or an identity validation tool. This may be where colored coins, app coins, or sidechain businesses could fit. But “nominal” isn’t defined, and neither is “non-financial,” so the prudent next steps for your blockchain business? AL;SC.    

• Software development is excluded as long as that’s all you’re doing. If you are writing an app that lets people check the price of Bitcoin, you’re home-free because of this exemption. But what if you write software for mining clients, and you also mine for fun? Or what if you write a mobile wallet app that stores users’ keys on their device? Or what if you are a core contributor to the protocol?! Are you really just writing software, and will DFS agree with that self-portrait? Sadly, and First Amendment problems aside, you should probably AL;SC.

• You can ask for a conditional license but there’s no clear guidelines for when it will or will not be granted, or how much easier it will be to get. If this is all starting to sound hard and expensive, take note: the BitLicense can be tailored to be lighter-touch and cheaper at the discretion of the Superintendent. This is called a “conditional license.” Unfortunately, however, there’s no obvious way to qualify for a conditional license. Some commenters in the drafting process asked for a formal threshold, something like “all companies under two-years old, and dealing with less than $5 Million in obligations annually can get conditional license.” Those thresholds didn’t make it into the final draft however, so if you want a conditional license . . . sorry . . . AL;SC.  

• If you need a license and get one, you’ll have to do some hard work keeping records, filing reports, and asking permission to make new products. Unlike normal money transmission licenses, a BitLicense comes with some special obligations. You’ll need to keep specifically formatted records of all your customer’s activities. You’ll need to file reports about transactions to New York in situations where you didn’t already have to file them with federal regulators like the Department of Treasury. You’ll need to ask permission if you make “material” changes to your apps or products, and if you decide to release any new products. The specifics requirements are far too complicated to learn in a blog post, you’ll need to AL;SC, a lot.

So what do you now know for sure with regard to the BitLicense? AL;SC! Ask a lawyer and seek clarification from the DFS. We can say this for sure: the BitLicense just drummed up a whole bunch of new business for the legal profession. We also know that it will be harder to operate a legal digital currency business than it will be to operate a traditional money transmission business—don’t forget those additional recordkeeping requirements and change-of-business requirements. These are some unfortunate new realities, and they make it hard to believe that this new law is really the pro-innovation regulation some politicians hoped or said it would be. Whatever it is, it’s here and the grace period ends in one month, so don’t be caught off guard. And if you’re bothered by all this, consider supporting organizations that are working with the state to improve regulations.

The Future of Transportation Innovation in NYC

New York City is considering legislation that would halt the growth of the for-hire-vehicle industry, including--and especially--startups that use technology to connect riders with rides. Local leaders have generally worked hard to support innovation, but policies like this have the potential to undermine those efforts. The following is an explanation of how the bill would work, and why Engine opposes it.

Of all the disruptive technologies to emerge in the last few years, it seems ridesharing and for-hire-vehicle (FHV) applications have been subject to some of the most heated policy debates in cities around the globe. We’ve seen this on display in New York City, where the Taxi and Limousine Commission (TLC) recently proposed rules that had troubling implications for application developers in almost any area of tech.

Fortunately, after hearing concerns from startups and organizations like Engine, the TLC updated those rules in ways that protect both startups and riders. But fresh on the heels of that positive resolution, the New York City Council introduced legislation that could threaten the future of transportation innovation in the city.

New York City has a booming startup economy, and government officials have worked very hard to support innovation. It would be hard to argue that a single policy would spark a mass exodus of entrepreneurs from the five boroughs. But policies like these do send a message that reverberates through the larger startup community, a message about what kind of environment New York wants to create, and how much local leaders are willing to listen to our community’s voice. And it certainly sends a message to anyone who wants to innovate within regulated industries - not just transportation, but health care, finance, and education - about whether they can really start and grow and thrive in a city like New York.

New Legislation

Two connected bills have been introduced by the City Council. The first bill, Intro 847, would require the Mayor's office to produce a study on what impact, if any, a recent increase in the number of FHV licenses had on traffic and pollution in the city. While we question the presumption that any noted decrease in average vehicle speeds must be the result of an increase in FHVs, we certainly support the city doing a comprehensive study to inform future transportation policy decisions. And in fact, the TLC and Department of Transportation have already begun work on such a study prior to any legislative mandate.

But it's the second bill, Intro 842, that is the greater cause for concern in the startup community. This bill would essentially freeze the number of FHVs currently on the road by capping the number of vehicles that can be affiliated with TLC-licensed bases, which, among other things, would disproportionately harm the smallest startups. Here’s where it’s helpful to know a bit about the way FHVs are currently regulated in New York City.

How FHVs are Regulated

There are two main types of FHV licences issued by the TLC. The first is called a medallion, and it allows a vehicle to accept street hails. Yellow medallion cabs can pick up riders anywhere, but the vast majority tend to serve Manhattan south of 96th street where density and demand are highest. The relatively new green medallion cabs can pick up riders anywhere except for that central business district and the airports. The number of medallions available is capped by local law, and periodically (if it believes there is sufficient rider demand) the City will put additional medallions up for auction.

The second type of licence is issued to livery cabs, limousines, and black cars. These vehicles cannot accept street hails. Instead, they can offer pre-arranged trips (like a ride to the airport) or contract with businesses and individuals to provide private transportation (like a law firm that offers employees rides home). Any FHV operating in the city must be affiliated with a livery, limo, or black car base, and it is through that base that they are licensed by the TLC.

Unlike medallions, these licenses are not currently capped. They also do not dictate how many different drivers can drive an individual vehicle, nor do they require that a vehicle drive only for the business associated with its base. Startups like Uber, Lyft or Via own bases through their subsidiaries, as do traditional livery companies like Dial 7 and Carmel, along with hundreds of small community providers. But a driver that owns a vehicle licensed through an Uber base can drive for Lyft, a Lyft car can drive for Dial 7, a Dial 7 car can drive for Uber -- and many drivers take rides through multiple companies throughout the day.

How the Vehicle Cap Would Work

Intro 842 would cap the number of new vehicle licences issued to any livery, limo, or black car base, whether a traditional provider or a high-tech startup. The cap is determined by the number of vehicles affiliated with a base as of June 15, 2015. If a base has 500 or more affiliated vehicles, it can only increase its total number of licenses by one percent. If it has between 20 and 499 vehicles, it can grow by five percent. And if it has less than 20 vehicles, it can grow by 15 percent. The cap would remain in effect until August 31, 2016, or until the traffic study is complete, whichever came first.

This may seem like a structure that favors smaller operators - until you actually run the numbers. Under the cap as proposed, a base of 500 vehicles would be able to add just five more vehicles in the next year. A base of 50 vehicles would be able to add just three vehicles, and a base of ten could add just two. So across the board we’d see negligible growth among any single base operator and throughout the industry.

What This Means for Startups

New York City has every right to evaluate traffic and take steps to alleviate congestion. But while the proposal to cap the number of new FHVs is likely well-intentioned, we believe it is misguided and will create a number of adverse impacts.

Media coverage of Intro 842 has generally framed this as a battle between Uber and the City -- and understandably so, given Uber currently accounts for the majority of app-based FHV rides in the five boroughs. But while this would obviously have a negative impact on Uber’s ability to expand its bases, we’re concerned that it will have a disproportionately damaging effect on smaller companies, and make it all but impossible for new startups to enter the market in NYC. In fact, by forcing everyone to compete for a limited supply of fluid labor even as demand for rides continues to grow, it has the potential to create an even greater monopoly within New York’s FHV industry.

It will have a particularly negative effect on small, home-grown startups like Via, a NYC-based service that provides shared rides within the city’s central business district. And it also means anyone with a great idea that could become the next Via, or the next Lyft or Uber, can’t start that business in NYC - certainly not in the next year, and possibly not ever.

Intro 842 won’t just impact businesses; it will also impact riders and other residents. It will slow or stall the expansion of ridesharing services that are likely to reduce congestion and make rides more affordable. It will also slow the expansion of FHVs into communities that remain underserved by traditional services, especially in the outer boroughs.

The City has argued that it can’t produce an accurate traffic study unless it holds the number of FHVs constant, a claim that simply doesn’t hold up. Analysts of all kinds are constantly studying snapshots of systems in flux, and no one claims that their findings are invalid simply because those systems have continued to evolve. And the City’s traffic study wouldn’t hold other variables constant, such as increases in both tourism and city residents, changes in streetwork or construction, or growth in the number of bicycles on the road.

The City has previously demonstrated a willingness to work collaboratively with the startup community towards smart regulations, as evidenced in the TLC rulemaking process just a few weeks ago. And the goal of alleviating congestion and the resulting traffic and pollution is a noble one. But the City seems to be conflating correlation with causation.

A vehicle cap is a blunt policy instrument that will likely stall or kill the growth of ridesharing services, which could actually take vehicles off the road and reduce congestion in the long term. Policy makers should postpone any movement of Intro 842 and instead work with the startup community and all stakeholders towards a better solution.

Updated TLC Rules a Win for Startups

Last month the New York City Taxi and Limousine Commission issued proposed rules for for-hire-vehicle and ridesharing services, many of which raised concerns for the startup community. Particularly troubling was a broadly written rule that could have required all software updates to be pre-approved by the TLC. Also of concern was a rule prohibiting the use of more than one electronic device outside whatever was provided by a dispatcher. This rule could have been especially damaging for new market entrants trying to compete with larger incumbents.

After vigorous public debate and a fairly contentious hearing, the TLC voted today on an updated set of rules which, while still not perfect, address many of the tech community’s concerns. Some of the more significant changes include:

• Software and user interface review have been taken out of the rules. Instead, rideshare companies must notify the TLC of any changes to the ways in which they comply with passenger or driver facing requirements.
• The number of handheld devices has been expanded. While we still question the purported safety value of placing a limit on electronic devices, the fact that most drivers will now be able to access rideshare apps on two separate devices is a noted improvement to the previous draft.

• Violations will not impact all bases operated by a single company. Violations by a single driver affiliated with one company base will no longer have the potential to shut down a rideshare company’s entire operation.

• Companies that operate bases will not have to pay a separate $1,000 technology fee. Companies without bases of their own that want to partner with existing bases will still have the opportunity to do so by through the new technology license.

To their credit, the TLC demonstrated a real willingness to come to the table with rideshare companies, and worked towards smart regulations that protect both riders and innovation. As the sharing economy continues to expand into even more facets of American life, we hope to see similar commitment to open collaboration from other regulatory agencies in New York City and beyond.