Policy Studies Regulatory Reform

Catching the Third Wave: A tale of two tech-policy battles

In his recent book “The Third Wave,” AOL founder Steve Case outlines what the latest generation of technology companies will need to do to succeed, stressing the importance of proactively and constructively engaging with government policy and regulation. Unlike so-called “second wave” companies, those in the “third wave” – that is, companies that use the internet to deliver real-world goods and services – will not enjoy the luxury of being able largely to ignore the policy landscape. As Case puts it:

Third Wave entrepreneurs will need to engage with governments. The challenge, of course is that few founders are policy wonks, and even fewer have the time (or desire) to become policy experts. They’ll have to hire them—or at least rely on them—from the beginning.

Case notes the “first wave” of internet companies had to fight legislative, regulatory and legal battles to build the infrastructure and policy frameworks that made internet access increasingly affordable for everyone. By contrast, the second wave could take advantage of those successes to build new applications and platforms, such as Google’s search engine, various blogging services and social networks like Facebook. In that environment, engagement with government seemed less necessary—build the killer internet platform and the world would simply beat a path to your door.

The third wave will require re-engagement with the material or “offline” world, because it includes delivery of physical products and services. Case’s third wave includes the so-called “internet of things,” but he asserts that it’s really the “internet of everything.” This “three wave” taxonomy is a good starting point for today’s tech entrepreneurs who want to offer new internet-based and internet-mediated services.

Two recent public-policy failures – one involving a second-wave company (Facebook) and one centered on a third-wave company (Uber) – offer lessons in how tech companies will have to build and maintain new, positive public-policy frameworks. This paper aims to show what Facebook’s recent regulatory defeat in India and the electoral loss by ridesharing companies Uber and Lyft a few months later in Austin, Texas, have in common.

There are striking similarities in the two public-policy setbacks, from which entrepreneurs should learn how (and how not) to advance pro-market, pro-access, democratic policies in an era in which governments increasingly see themselves as playing an essential mediating role. In many policy environments, it may be less than helpful to take a simplistic anti-regulatory approach. Even strategic approaches that have worked in other contexts will need to be fine-tuned to the specifics of each unique political environment. Doing so is not merely good politics—it’s good policy.

One key lesson both of these regulatory disputes teach us is that neither having the best intentions nor having the right facts can guarantee public-policy success. Even an initiative that begins with a groundswell of public support and goodwill for regulatory flexibility can, if poorly executed, lead to the opposite result, with unforeseen negative consequences both for policymakers and for citizens.

This paper analyzes some of the striking parallels between the zero-rating debate in India, which resulted in regulation that categorically outlawed services such as Free Basics and Wikipedia Zero, and the ridesharing debate in Austin, which resulted in the popular services Uber and Lyft opting to withdraw their now out-of-compliance services from the city.

Image by Zoya Art

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