Uber, Virtual Law Offices & Ma Bell: Which One is Not Like the Others?

220px-Bell_System_hires_1921_logoInnovation has been intensely analyzed and discussed as a topic in business schools, magazines and thousands of books.  Yet, innovation remains one of the most important subjects for business owners, because of the acceleration of development in products, services and technologies.  As I often say, everyone today is selling tomorrow’s buggy whip.  That is to suggest that virtually every product or service offered today will become obsolete, replaced or delivered differently one day in the future.  Everything is changing or subject to change.  Almost no industry, product or service is immune from change.  Here are some examples:

Car Transportation Services

For decades, if you needed to hire a ride in a car from one side of town to another, you had two options.  You could hire a private car or limousine, which was expensive, or you could take a cab.  Generally speaking, you had to go to a street curb, often in bad weather, look down the street or around the corner for a cab that did not already have a fare, and lean into traffic in hopes of flagging down an empty cab without getting hit by an inattentive driver in another car.  Then, once inside the cab, you often were greeted by a less-than-friendly cabbie, who had not cleaned the chewing gum off the floor or seat left by a rider weeks earlier.  Cabs are often old, beat up and smelly.  So too are many cabbies: old, beat up and smelly. If you are in a small town, you would make a telephone call to a cab company and hope that the cabbie actually showed up on time.  And then, after all that, cab service is not cheap.

Why is cab service so bad?

Cab companies in a particular town share a monopoly: an oligopoly.  That means a few companies control the market.  Local governments require cab companies to buy a medallion or license, and there are often limits on the number of licenses that are made available.  Many cab markets are highly regulated, and there are taxes and fees, which raise fare rates.  Without competition and with high taxation and regulation, costs are high, the quality of service is low, and consumers suffer.  These are basic market forces of supply and demand.

By contrast, lower regulation and competition almost always lead to innovation, lower costs and higher customer satisfaction.  In short, the reason free markets and competition work is because consumers can “vote with their dollars,” meaning the companies that offer the best price and greatest value attract most of the consumers in that particular market.  Why do so many people want an iPhone?  Because the iPhone is an amazing piece of technology that can be offered to consumers at a fair price.  Why does Apple keep upgrading the iPhone?  Because Apple has competitors, who want market share, and that competition leads to innovation and lower prices.

Remember Ma Bell?

If you are old enough to remember Ma Bell, you might recall that Bell Telephone Company held a monopoly on phone services across most of the United States and Canada for more than 100 years, until 1984, when the federal government mandated the break-up of the Bell System into smaller companies.  For 100 years, consumers had no way of “voting with their dollars” and had no alternative to the services offered by “The Telephone Company.”  If you needed a phone at your home, you were likely to get the same color and model of phone that your neighbors had, and you had to schedule a time for an installation.  There was only one place to call to get your phone installed or repaired: Mother Bell.

As a result, Ma Bell never felt pressure to innovate, recreate or reinvent itself to better the services it offered.  Arguably, we would not have smart phones or VOIP today, if Ma Bell had not been broken up in 1984.  Once other phone companies and other service providers were allowed to enter the market, new services and products were introduced, prices fell, and consumers benefitted.  In fairness, there was a rough transition period between the monopoly held by Ma Bell, and the phone service options we have today.  It took some time for the market to weed out some phone service providers, who were not prepared for competition and who believed that they were merely acquiring a part of the old Ma Bell monopoly.  However, 30 years later, phone services today are inexpensive and offer consumers tremendous variety and choice.

Breaking-up Taxi Cab Oligopolies: Here Come Uber & Lyft

Today, we are witnessing the break-up of monopolies and oligopolies in the car transportation business with innovative services like Uber and Lyft.   These services allow individuals with cars to connect with riders for short trips at lower costs, all coordinated through smart phone apps that connect the closest driver to the rider.  I recently took my first Uber ride in Las Vegas, and it was fantastic.  I rented a car for a day trip to see friends in California, and returned the rental car to the airport, but needed a ride back to my hotel.  So, I opened the Uber app on my smart phone, and with the push of one button, ordered a ride from an Uber driver that was just minutes away.  The Uber driver’s car was a clean Acura with leather seats and no strange smells.  My driver was a stay-at-home dad, who raises two children by day and drives Uber riders by night.  Best of all, my Uber ride cost me half of what a taxi cab ride would cost.

As a side note, cab companies feel threatened by Uber, and are trying to raise Uber’s costs or force government to pass special laws that prevent competition and protect the cab companies’ oligopolies.  In Las Vegas, for example, cab companies pressured local government officials to hire ticket officers and pay them overtime to ticket any Uber driver who had not yet paid a special permit fee.  In France, the owner of the second largest cab company has personally lobbied the French Interior Minister for laws and lawsuits to shut Uber out of the market.

In the end, market forces will prevail.  Holding off competition through regulation does not work, because consumer demand will eventually erode the political will of government leaders.  Consumers eventually will vote at the ballot box and vote with their dollars (or Euros).  What cab companies should do is compete by finding ways to better the services they offer, and out-perform Uber.  In the long run, cab companies and consumers both would benefit from innovation and the improvements in quality that result from competition.

Are lawyers immune from market forces?

Unfortunately, lawyers, like cabbies, have taken a similar approach to innovation and competition.  By restricting competition through regulation and archaic rules, lawyers are making themselves less and less relevant to consumers.  For example, there are strict rules on how lawyers may advertise and market their services.  As a result, consumers often do not have enough information to decide which lawyer or law firm to hire.  Many of those consumers, out of frustration, turn to non-lawyer services that are less expensive but more predictable.  For example, LegalZoom, Rocket Lawyer and other companies now offer high quality legal forms, and even legal services through their legal services plans, at lower costs.  In response, many lawyers tried to shut LegalZoom out of the market, by filing lawsuits and administrative actions, claiming that LegalZoom was practicing law without a license.  Slowly, state by state, LegalZoom has won those disputes and can now offer consumers self-help services that benefit consumers who might not otherwise be able to afford to hire a lawyer.  In other words, competition in the legal documents and services markets has resulted in more options, high quality and lower costs.

“Unbundled” Legal Services

“Unbundled legal services” is a term that refers to legal documents and services that you select or complete without consulting with or utilizing the full services of a lawyer.  Generally, clients should be cautious in using any legal form without consulting an attorney, because clients often select the wrong document or complete it incorrectly.  However, once a client understands which document to utilize, often the process of filling in the blanks on the right legal form can be completed without having any legal training.

LegalZoom, Rocket Lawyer and other online legal documents companies are utilizing software and innovations to streamline document preparation, which lowers costs.  Those cost savings can then be passed on to consumers, while maintaining quality.  In a real sense, online legal document companies ensure higher quality, because these services remove the uncertainty and risks that come from a client hiring the wrong lawyer.  Not every lawyer is a great drafter of documents, but online documents are consistent from customer to customer.

There is also an element of self-help in online document preparation, meaning the consumer herself is preparing the legal document using online software, and the time normally spent by a lawyer is eliminated from the process.  By not involving a lawyer in the document preparation process, the lawyer’s time is not added to the costs of the document preparation.

One final point here. . .  by lowering costs, more people can get access to good documents online.  In the past, many people used bad documents or no written documents at all, because they could not afford or did not want to pay high legal bills.  Online document services represent an opportunity for nearly everyone to have access to high quality legal documents, because online documents generally cost less than lawyer-drafted documents.

Our Virtual Law Office

The attorneys at GRIFFITH LAW GROUP recognize that lawyers need to and should offer new services to clients.  Innovation is good for law clients and lawyers as well, but only if lawyers embrace change.  We opened our Virtual Law Office (www.indianavirtuallaw.com) for two reasons:

#1- Not everyone needs or wants to pay a big fee to a lawyer to buy a simple document. We recognize that there are times when our clients need a good legal form and nothing else.  Unfortunately, most lawyers want to bill time, rather than offer products without attendant services.  If a client just needs a good form, why should the lawyer bill the client for an unnecessary phone call?  For those clients who want to utilize self-help legal services, a virtual law office is usually a good fit.

#2- You cannot trust every legal form you purchase from websites that are not operated by lawyers.  There are some very good online services that produce good documents. We like LegalZoom and Rocket Lawyer in particular. Unfortunately, there are many other online forms companies that do not produce good legal forms that have been reviewed by Indiana lawyers.

The legal forms on our virtual law office are essentially the same forms we use in our traditional law practice.  These documents are Indiana-specific, and have been tested many times over in real life transactions, closings and court cases.

Caveat About Self-Help Legal Services

Self-help services do not work well for every client in every situation.  There are times when clients select the wrong document from an online service.  We see that often, particularly when it comes to forming limited liability entities, such as a corporation or LLC, and in estate planning.  We often see clients use a living trust, when a traditional last will and testament would be a better choice, for example.  Those are circumstances in which the experience, training and expertise of a lawyer would be helpful, and a self-help service might be harmful to the client. So, coupling self-help services with affordable access to a licensed and experienced lawyer is a clear advantage offered by virtual law offices.  In other words, by using a virtual law office service, you get access to an experienced lawyer, who can help you identify and use the right legal documents, but you control your costs, by completing certain tasks yourself.  A virtual law office, backed by licensed lawyers in your state, can provide you with these “best of both worlds” advantages.

Learn More

To learn more about the advantages of virtual law offices and how innovation can help both clients and lawyers, read more at our website: Indiana Virtual Law

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