In Uber vs. taxi companies, local governments play referee (+video)

As Uber and other app-based ride-sharing spreads, city and state authorities work to balance incorporating new modes of transportation with the demands of traditional cab companies.

By , Staff writer

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    Jen Joyce, a community manager for the Uber rideshare service, works on a laptop before a meeting of the Seattle City Council, at City Hall in Seattle.
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In mid-June, taxi drivers, public officials, and concerned citizens jammed into a tiny room in the basement of a Cambridge, Mass., municipal building for a meeting to discuss potential regulations for ride-sharing companies like Uber, the popular service that connects passengers and drivers with the tap of a smart phone.

The commission isn’t “just looking at Uber,” said License Commission chair Andrea Spears Jackson during the meeting. "And we're not looking to stifle competition." 

No decisions were made; rather, it was the start of a discussion that is beginning to echo in many city halls: how to regulate the rapidly growing world of transportation when innovative start-ups collide with the interests of traditional taxicab companies.

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Cities are finding different answers. On July 3, London's transport regulator said Uber could operate. The day before in Pittsburgh, judges told Uber and Lyft, another ride-sharing service, to stop operations immediately until they had received approval from the Pennsylvania Public Utility Commission. New York's attorney general is investigating Uber for price-gouging.

Austin, Texas, seems to be of two minds: The city council instituted a pilot program for ride-sharing in May with an eye toward developing standards, but the Austin police have used sting operations to impound the cars of ride-sharing drivers.

The battle is sharp, because so much business is at stake, and emotions are running high. 

At last month's public meeting in Cambridge, for example, Donna Blythe-Shaw, a spokeswoman for the Boston Taxi Drivers Association, claimed that business for traditional cab companies was down 35 to 40 percent thanks to ride-sharing, and painted Uber as a big-time corporate threat to the small business cab medallion owners. "Wall Street has come to Main Street," she quipped to the panel, noting Uber's recent $1.2 billion round of fundraising from big-time investors like BlackRock and Google Ventures.

Earlier in the day, Uber posted a blog pointing out a series of damaging regulations being proposed by the city, including a $50 minimum fare for rides not taken through a traditional, registered taxicab company. And it urged customers to turn out in numbers at the meeting to voice their support.

Supporters aren't difficult to find, even beyond Cambridge. 

“Oh, I love it,” says Ceara Nation, an administrative assistant with CVS headquarters in Providence, R.I.  She lives close to downtown but not close enough to walk, so she uses the service primarily for short trips out when she doesn’t want to deal with the hassle of parking. Compared to a traditional cab, she says, Uber offers a journey that’s cleaner, faster, cheaper, and generally more pleasant. “It’s very convenient. I don’t have to carry cash.”

It also feels safer. “As a female, I like that it’s GPS tracked,” she says. “Anytime you get into the car with a stranger there’s a risk there, but [if something happened] there would be a way to find you.”

That feeling, that Uber feels more secure than a traditional cab, is a major problem for the taxicab industry, because it flies in the face of one of the main narratives their advocates are trying to push to slow the rollout of Uber and the nascent ride-sharing industry: that it’s unregulated and less safe.

Led by companies like Uber, Lyft, and Sidecar, ride-sharing has rocketed into the mainstream in a relatively short time frame. Uber started up in San Francisco four years ago, and has since expanded to 128 cities worldwide. The company's most recent valuation came in at an eye-popping $18 billion. Uber founder and CEO Travis Kalanick has publicly stated that his company is doubling its revenue every six months.

None of this is good news for taxi companies. In May, drivers protested outside Uber’s Boston offices calling for stricter regulations for ride-sharing companies. In London, an estimated 12,000 black cab drivers clogged the city’s to protest Uber’s presence. It backfired spectacularly, with London Uber sign-ups surging 850 percent in a week, according to the company. 

If the protests haven’t gained much traction, taxi industry advocates are hoping that safety concerns might. Their argument: By managing drivers as independent contractors and thereby sidestepping the costly training, background checks, and insurance regulations that taxi drivers are subject to, Uber is putting passengers at greater risk.

“When we talk about public safety, talking about the passengers in the vehicle, the driver, but also people on the street,” says Dave Sutton, spokesman for the “Who’s Driving You?” campaign, based in Washington. Launched last year, “Who’s Driving You” is a marketing effort funded by the Taxicab, Limousine & Paratransit Association, which counts 1,100 licensed transportation companies among its members. “The insurance that Uber is providing has serious gaps that only move into the general awareness when something bad happens,” he says.

The problem, Mr. Sutton notes, is that Uber drivers aren’t covered by an expansive commercial liability insurance that protects them while off the clock. Though the company expanded its insurance coverage earlier this year, Uber drivers still don’t have the round-the-clock coverage required for a commercial cab.

“Who’s Driving You?” has also taken aim at Uber’s background checks, charging that the company’s screening easily allows convicted felons to slip through the cracks. “Uber does not submit to regulations, so they cannot use background checks that use FBI fingerprinting,” Sutton says. “They use private companies and cheaper background checks that are not as comprehensive.”

But Uber spokesman Lane Kasselman calls such accusations “scare tactics,” by rich, multinational corporations. “Instead of improving customer service they’re complaining about opposition,” he says. “The taxi industry has decided to play dirty politics instead of compete.”

Uber’s criminal background checks, Mr. Kasselman says, are as comprehensive as the law allows for business purposes. On the insurance end, he says that perceived gaps are due more to the fact that insurance regulations weren’t written with a company like Uber or Lyft in mind: "Insurance companies have obviously been around for decades, and they aren’t quick to adjust their products.”

Requiring the round-the-clock insurance that Uber’s critics are demanding, he says, would be like “trying to fit a square peg in a round hole.”

Still, concerns about coverage expand beyond the taxicab lobby. Since Uber drivers are independent contractors, rather direct employees, the company is not responsible for incidents that occur when a driver is off the clock, and what “on the clock” means has been a point of contention. After a San Francisco Uber driver en route to pick up a rider struck and killed a young girl last year, the company expanded its coverage to include the time between when a driver accepted a ride and when an actual passenger entered the vehicle.

Some states want more: California has proposed a rule that would require ride share companies to cover drivers anytime the ride-share app is on. Uber has come out against such a rule, but is “for regulations, we just want them to be sensible and reflective of an evolving industry,” Kasselman says.

Ride-share customers might have some complaints –  Uber’s Boston Yelp! page has its fair share of bad reviews, mostly about high prices during peak times and drivers who occasionally get lost  – but insurance liability and safety concerns are “not really” a priority, says Ms. Nation, the Uber user from Providence. She’s never felt uncomfortable or unsafe using the service, “and I’m a scaredy-cat.” 

Still, the Cambridge meeting raised concerns about Uber's more hands-off administration of its drivers. Sassy Outwater, a blind Cambridge resident, told the committee that app-driven transportation services like Uber are in many ways more convenient for the disabled community, but noted that she had been refused Uber rides on several occasions because of her seeing eye dog (which is illegal under the Americans with Disabilites Act). 

Meghan Verena Joyce, Uber's representative at the meeting, replied that Uber was taking steps to educate its drivers on such matters, sending out e-mail notices and punishing drivers who didn't comply. 

But the next speaker, a former cabbie turned Uber driver, torpedoed the idea that an e-mail blast was enough to adequately govern drivers. "I've picked you up before, because I don't mind dogs," he told Ms. Outwater. "but that's a pet, and some drivers, they might be allergic." 

"No, it's not a pet," Ms. Jackson of the License Commission sharply corrected him. "You see, this is the type of thing we need to address," she told Uber's Ms. Joyce. 

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