Uber could have a new market on its hands for expansion as just recently the Finnish taxi market was freed of vehicle and driver quotas set by official municipal bodies. The removal of the quota has enabled new taxi operators to open shop and given free rein to set their own fares. While this is a positive move for market dynamics and customer advantage, there are still key questions that remain about how the markets will take shape and whether all actors be treated equally by the new, less rigid regulation.
Researchers took interest in theis and according to Aalto University researchers, there are distinctive mechanisms at play whenever a regulated market is opened to competition.
‘There are many ways to deregulate a market. The most important issue to consider is whether the playing field will become level or will some see unfair advantages. Airbnb and Uber have shown that new technology can revolutionise heavily regulated industries. Even when markets are opened by amending legislation the need to do so is often dictated by technological development,’ explains Eero Aalto, a doctoral student at Aalto University.
Reearchers are looking into the deregulation of Finnish and Swedish telecommunications markets and trends in political regulation during the 1980s and 1990s.
Convergence of markets refers to a situation where previously distinct market areas and the companies within their confines start competing for the same customers. Oftentimes convergence is the result of changes in legislation or a disruption in the market brought on by new technologies. When disruptions occur, market actors–who have up until that point been protected by regulation–react in a predictable and uniform manner.
Companies protected by strong regulation can, according to the researchers, work against their own interests over the long run. Advocating and lobbying regulation that favours your achieved interests may bring short-term benefits, but when new players enter the protected market, regulations that were previously advantageous can quickly become liabilities.
When a new business model or digital service enters the market, established actors might find themselves in trouble and lose their market position.