Regulatory Hacks

The usual term for this is "regulatory arbitrage."<p>I do want to take exception to one point though:<p>&#62; Of course regulations that truly protect the public interest are necessary. But many regulations are created by incumbents to protect their market position. To try new things, entrepreneurs need to find a back door. And when they succeed, it will all look obvious in retrospect. Today’s regulatory hack is tomorrow’s mainstream industry.<p>It's really a lot more complex than this. A lot of the regulations that seem obviously protectionist now really weren't at the time they were implemented.<p>The FCC is rife with examples of seemingly protectionist regulations because one of the core parts of its mission is to ensure universal coverage. It exists to ensure that every little town in the US gets access to the new communications technologies within a reasonable time.<p>Things like local monopolies/duopolies are the tool that the FCC uses to get companies to serve areas that the free market would leave unserved. The FCC says: "okay, you get a duopoly in Chicago, but you have to build out service to Belleville, IL."<p>The taxi regulations operate much in the same way. If taxi companies were left to their own devices, they just wouldn't operate in the sketchier parts of town. They'd refuse to drive you to the Bronx. Protectionist regulations are the concession that municipalities give to taxi companies in return for forcing them to provide certain services and maintain certain rates.<p>You'll also see a lot of this in the utility industry. Local monopolies with guaranteed rates of return are an incentive municipalities use to get companies to provide power/water/gas to everyone, instead of just the places where it's profitable.<p>Municipal regulation is a very complex topic, both legally and in terms of economic theory. You can't consider the regulations standing alone, when you're talking about industries that in some way form the infrastructure of the city or relate to urban planning. You have to consider them in the context of being alternatives to the cities building out certain infrastructure themselves as part of their mandate to provide service to each one of their citizens.

Airbnb and Uber are running up against regs problems. Is Aereo? Aereo is being sued by rightsholders, who argue that as the parties that fund the creation of content, it should be up to them how to commercialize it. Copyright isn't regulation. Copyright infringement is a tort.<p>The regulatory hurdle Nextel faced is also different from the ones Airbnb and Uber face. If you took Airbnb out of the picture, it's unlikely that HN would be so friendly towards the idea that giant hotel corporations should be able to operate with zero regulations.<p>But if Marriott must be regulated, it's reasonable (though not dispositive) for them to note that it's unfair for them to be structurally disadvantaged by competing with businesses that effectively arbitrage regulations (and, more importantly, regulatory enforcement).

Of the companies mentioned Aereo is clearly the biggest hack.<p>The regulation that having a single antenna for multiple subscribers is not ok seems to inevitably lead to Aereo's one antenna for each subscriber - and ultimately antenna farms.<p>Having (someday) millions of redundant antennas in rows to avoid copying signals to meet an outdated regulatory requirement is so hilarious, I'm tempted to call it entrepreneurship as social commentary.

It always struck me that a legal hack was Microsoft's real, core innovation -- the whole OEM installation agreement, more than anything to do with the superior quality of its operating system. It took decades for the regulators to catch on.