Good afternoon, Vice Chair Geist and members of the Transportation and Telecommunications Committee, my name is Nicole Fox, and I am here today to testify on behalf of the Platte Institute in support of Senator Friesen’s LB461.
As you know, the Platte Institute has brought significant attention to occupational licensing reform. We are working to assure that occupational licensing requirements do not prohibit individuals from pursuing a career of their choosing.
Like occupational licensing, Certificate of Public Convenience and Necessity (CPCN) laws exist, and the Platte Institute wants to bring to your attention today how the requirement to obtain these certificates can prohibit individuals from starting a business.
Current Nebraska law requires individuals wishing to operate a passenger carrier or household goods moving business to first obtain a Certificate of Public Convenience and Necessity. After the application for the certificate has been completed, existing businesses get the chance to file their objections if they don’t want to give the potential business permission to compete. There is a public trial-like hearing before the Public Service Commission where the applicant must prove that there’s a “public need” for their new business while competitors voice “concerns” stemming from wanting to protect their own private interest.
A Certificate of Public Convenience and Necessity is a regulatory barrier to free enterprise. It is also known as a “Competitor’s Veto1.” It prevents people from entering a business not because they are unskilled or unqualified, but because existing businesses don’t want competition. Certificates of Public Convenience and Necessity forbid people from going into business unless they first get permission from their own competitors. Proof of “public need” is often arbitrary and hard to define2.
How do you prove that the public “needs” a new product or service? What if Starbucks had to prove that their Seattle coffee shop was needed back in the 1970s? What if Godfather’s Pizza had to get permission from Valentino’s to open back in 1973? What about the multiple formulas of Coke and Pepsi that have been introduced over the years? Several of them failed despite paying millions of dollars for market research and advertising. The public hearing does the would-be entrepreneur no favors. Who would expect potential customers to take time out of their work day to attend a government hearing and testify in favor of a business that does not yet exist?
Government-created scarcity creates high price tags. These laws raise prices for consumers by blocking out competition; deter innovation by assuring existing companies that they have no need to improve or change, because they won’t be threatened by any new company offering some new idea; and restrict opportunity for those who need it most.
A perfect example in the transportation arena are ride-sharing services like Uber and Lyft. Taxi companies in Nebraska opposed these services heavily, but these ride-sharing services are now serving Nebraskans well. Residents and tourists now have more options from which to choose to meet their transportation needs, and the growth of Uber and Lyft have provided income for many Nebraskans. Uber and Lyft are offering services in response to consumer demands such as the ability to request specific types of vehicles and the ability to carpool with other riders for decreased costs. Nationally, more ride-sharing services are evolving, and you can now download ride sharing apps like Curb, Beat and Juno.
Certificates of public convenience and necessity are gradually becoming a thing of the past. Several states have repealed their laws, including our neighbor Missouri in 2011. As far as Nebraska’s other neighboring states, only Colorado and Kansas require these certificates3. Legislation similar to LB461 has been introduced in Kansas.
The public convenience and necessity requirement is anticompetitive and goes against principles of the free market. Consumers and entrepreneurs—not the government and existing businesses—should be the ones to decide whether a new business is necessary and ultimately whether it is successful.
I ask the committee to advance LB461 out of committee.