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Tech startups facing unexpected challenge: the government

Zipcar on iPhone.JPG

Zipcar

Could your favorite apps soon be banned in your city?

From the online taxi service Uber -- which regulators are trying to keep out of Washington, D.C. -- to Zipcar.com, tech startups are facing an unexpected challenge: government regulation.

Here are three hip new technology sites that politicians are causing trouble for.

Uber
Can’t find a taxi? Uber allows you to hail a black car from a smartphone. The app uses GPS to display the location of drivers’ cars and how many minutes it will take them to pick you up. The driver calls when he arrives, and your phone pays automatically.

Uber has expanded from its base in San Francisco to other cities: New York, Chicago, Boston, Seattle, and DC. But sometimes, city governments are less than welcoming.

"They’re operating illegally, and we plan to take steps against them," D.C. Taxi Commissioner Ron Linton warned at a meeting earlier this month.

“What they’re trying to do is be both a taxi and a limousine,” Linton has said. “Under the way the law is written, it just can’t be done.”

SUMMARY

Many tech startups are facing an unexpected challenge: government regulation.

Uber: The D.C. Taxi Commissioner aims to stop the growth of an app that helps you catch a cab.

Roomarama.com: Want to book a room for the night? New York state is trying to prevent you from using this online service.

Zipcar: The popular car-sharing service says D.C. tax policies are hitting users hardest.

This month, Linton conducted a sting operation. Using Uber's app to hail a car, Linton took it for a ride, and arranged for inspectors to greet it at the destination. The inspectors fined the driver $1,650 for various violations and impounded the car.

Uber CEO and founder Travis Kalanick calls it outrageous; D.C. has not told him what law Uber violates, he claims.

"You can go on an endless hunt for the regulation or statue forbidding what we do," he told FoxNews.com. "We haven't found it yet."

Kalanick added that he preferred the technology side of his business.

"I’m a tech dude. I kind of like my life outside of politics," he said. "It's been a wild ride in D.C. I'm learning how the political game works, but there's a learning curve."

Unlike Kalanick, the established industry players have their own lobbyists and decades of experience with politics.

"You have an established taxi industry, and there's this new technology that's competing with them. So they’re going to get folks to regulate," Kalanick said.

While lawyers work things out, Kalanick has kept Uber's drivers on the streets by offering to pay any fines the city charges them because they work with Uber.

Roomorama.com
Think bed-and-breakfast. Arranged online.

You can go on an endless hunt for the regulation or statue forbidding what we do. We haven't found it yet.

- Uber CEO and founder Travis Kalanick

Every year, thousands of tourists, rather than book a hotel at their destination, find accommodations from locals who have an extra room in their apartment -- or who have an empty place because they themselves are going on vacation -- at sites like Roomorama.com.

Roomorama ensures security by verifying the identities of the people using the site and allowing renters to rate places they've stayed at.

But there's one catch: Last May, New York State made it illegal for anyone to rent out an apartment for a time period of less than a month. Doing so could land you a fine of $800.

Supporters of the ban call such rental arrangements "illegal hotels" and say the Internet has compounded the problem.

"The Internet has made it easier than ever to advertise illegal hotels," New York state senator Liz Krueger said in testimony to the NYC Committee on Housing and Buildings.

Krueger has also introduced a bill that would raise the fine to a maximum of $25,000.

"This proliferation of illegal hotel operations has ... disrupted the lives of countless permanent residents ... and ruined many tourists' visits in New York," Krueger explained.

Roomorama.com CEO and founder Jia En Teo says that the ban goes too far.

“By slapping a law like this on, it is not allowing markets to run themselves efficiently. Having more options available for consumers is always a good thing,” she said.

Hotel industry groups -- which publicly support the ban -- are the real reason for the law, Teo said.

"It is the hotel lobby that has been pushing for these laws, so as to stifle the competition."

Zipcar
Thousands of college students and city-dwellers have ditched owning a car in the last few years for Zipcar -- a “carsharing” service that has cars on streets in 13 U.S. cities and 148 college campuses.

Everything is done through a smartphone app that shows the locations of available cars. After booking one using the app, you can just get in and drive. An hour-long trip to the store can cost $8 for the cheapest Zipcars.

Rob Weisberg, Zipcar's chief marketing officer, says prices could be lower if not for government policies.

In D.C., Zipcar and other carsharing companies pay $200 to $400 per space, per month, while the price for a resident to park their private car on the street is just $1.25 per month.

"Policies like those ... penalize car-sharing providers," Weisberg said, adding that tax policy is also rigged.

"In car-sharing, the reservation period is generally just a few hours yet these members are being taxed at the full day rate. Car-sharing is taxed like a sin tax, with members paying 40 percent in taxes for a one-hour trip to the store."

Zipcar has hired a lobbyist in D.C., and Weisberg hopes to convince politicians that the extra tax revenue isn't worth it.

"Cities looking ... to reduce greenhouse gas emissions, reduce traffic congestion and increase the availability of parking spaces should be embracing car-sharing," he said.