Measuring How Much Poorly Thought Out Regulation Hurts The US Consumer?
Following on the footsteps of "BitLicense Part 1 - Can Poorly Thought Out Regulation Drive the US Economy Back into the Dark Ages?" by our CTO Matt Bogosian, I'd like to explore the real world effect of ill planned regulation vs the benefit of letting innovation prosper.
Matt compared the proposed "BitLicense" with a theoretical "PacketLicense" issued in 1994 which, if using the same proposed language as the proposed rules today, would have had the Internet landscape go from looking like this...
What wasn't covered in that entertaining and thought provoking intro was the actual cost of giving the banks - or any group - an effective monopoly over a business segment while technologies such as the Internet protocol or Bitcoin protocol race to make the world a more effecient place. Case in point, the Internet, unfettered and unencumbered by legislation that choked innovation has increased efficiencies and dropped the prices of practically every industry that it has even came near.
This is an excerpt from a Slashgear article in 2011:
Blockbuster went into bankruptcy after its expensive rentals and high late fees helped to drive the average consumer to kiosk rentals and streaming services. Blockbuster was for a long time the biggest rental chain in the country and had multiple stores in many areas. The company isn't alone, the entire DVD market is seeing profits drop. Blockbuster was recently purchased by Dish Network and the rental store has now announced some changes to their in store rental policies.
Blockbuster is lowering prices to appeal to users that have been renting elsewhere. As of May 27, the price of "thousands" of in-store movie rentals dropped to 99 cents per day. The price on new releases was also reduced. The new price is $1.99 for the first day and then 99 cents per additional day. The price of just released films will be $2.99 for day one and then 99 cents daily after.
That's right! Blockbuster DROPPED prices to 99 cents per day, per movie. How does that sound to you? Well, those companies that took advantage of the Internet protocol (and without the benefit of a PacketLicense, like was proposed by the NY DFS) are the cause of Blockbuster's price drop.
Netflix charges $7.99 per month for tens of thousands of movies, to be watched on demand and as often as you wish - streamed to your desktop or portable device. Now, let's look at this from an analytical perspective. Without even bothering to adjust for inflation, Blockbuster (even after a dramatic price cut) is literally multiples more expensive that Netlfix. Why? The technological advances of the Internet protocol were allowed to be leveraged unfettered and superior business models simply displaced the inefficient, legacy business models. This would not have happened if Netflix had to have a PacketLicense, along with the draconian (at least to sparsely funded startups) measures that are proposed to go along with the BitLicenses. As a matter of fact, if the PacketLicense would have been in effect, Blockbuster would not have went out of business and it would not have faced competition from innovative companies such as Netflix. As an additional matter of fact, you would probably be paying $3.50 per movie rental, per day (as in before Blockbuster dropped its fees) as compared to $7.99 per month for all of the movies you can consume per month. We're talking a 30x difference in price for avid movie watchers - and this doesn't tell the whole story because real wages increased by a 1/3rd percent, making the Netflix price discounts even steeper in reality. In addition, you'd probably be renting these movies through a bank (the NYDFS Bitlicense excludes banks from the rigors that Bitcoin startups are held to)!
These rapid drops in pricing due to the Internet protocol affects more than just movie rentals. Look towards the ubiquitous smartphone industry. In 2011, An unsubsidized iPhone 4S cost anywhere between $649 and $849.
Today you can get better functionality in an LG D90 Android phone for $179. I can personally attest to this because I bought 3 of them for less than the cost of the bottom of the line iPhone from 2011 model year (which I purchased as well).
The cheaper phone is faster, has a better screen, expandable memory and a vastly superior OS and incomparable battery life (at least as compared to the iPhone).
BUTTTTTT...... When you look towards the financial industry you find protection by clauses such as those proposed in the NY DFS proposed BitLicense. These proposed protections are actually coming at the cost of innovation, the same innovation that Netlfix and LG brought to their customers. As proposed, the NYS DFS proposes Bitcoin startups have:
- 100% reserves,
- inability to invest in the currency one does business in,
- fingerprinting requirements for ALL employees,
- bond requirements,
- KYC and AML requirements, etc. - among other things.
All of these requirements are waived for anyone with a banking license (Hmmmm!) but required by startups with a mere $100,000 in funding. So what does such protective regulation do for banks and the consumer in the face of Internet and now Bitcoin protocol technology driving down prices EVERYWHERE else?
Just Google it?
Aug 20, 2012 - Not only is it harder to find a free checking account, but fee increases have made it more challenging for people — especially those in lower ...
business.time.com/.../youll-never-guess-what-banks-have-started-ch...Feb 20, 2013 - Sovereign Bank Increases Fees, Adds New Ones Boston Globe; UnionBank ... the airline model, where everything — even a shorter hold time — has a price? ... It will show up as a debit when it comes through your account.
Nov 15, 2013 - You may want to take a closer look at your bank's fee schedule next year ... are cautiously increasing the fees they charge on a variety of services in order to make ... interest rates, since they now have to give 45 days' notice ahead of time. ... they used to get away with, such as high over-limit and late fees.
online.wsj.com/.../SB1000142405297020343690...The Wall Street Journal
Already, banks have introduced new fees for wire transfers, certified checks and banking through tellers. Others have raised monthly maintenance charges on ...
www.nytimes.com/.../banks-quietly-ramp-up-consu...The New York Times
by Eric Dash - Nov 13, 2011 - Bank of America abandoned its $5 a month debit card usage fee in late ... new charges or taking fees that have always existed andincreased them, ... so over time you win more business and make more money,” said Todd ...So, why and how do banks get away with charging higher fees to their customers and consumers when the rest of the world benefits from lower fees AND superior products due to Internet and Bitcoin protocol technology? I suggest you ask the banking regulators who, whether purposely or inadvertantly, protect the banking cartel's oligarchy and effectively pass the cost of such on to you - the banking consumer. This costs EVERYBODY more - consumers, businesses, investors, speculators and savers.Do you want to do something about it? Do you want to, as a banking customer or client, want to start spending less money rather than more just like those Netflix and smartphone and (fill in the blank, it's just about the whole world, sans bank customers)?Well, now you can do somthing about it. Stop the BitLicense proposed legislation that simply furthes the forces that allow these price increases in the face of global price deflation. I strongly urge you to voice your own opinions to Superintendent Lassky, the man who has the authority to put a stop to this overpricing power (althought current actions are heading in the opposite direction) right now.