Should car-sharing operators brought together through Uber.com and Lyft.com be regulated just like taxicabs and limousine operators?
We turn our spotlight on car-sharing operations, such as Uber or Lyft, that are threatening the cozy world of taxi drivers, limousine companies and medallion owners while providing consumers more efficient service. Previously, we examined legal problems directed at room-sharing websites such as airbnb.com. Both ride-sharing and room-sharing pit entrenched systems against progressive web-based ideas.
As these ride-sharing companies have grown rapidly and find themselves with astronomical valuations—$18.2 billion, in the case of Uber — should they be subjected to consumer protection laws and driver registrations that traditional taxi and limo drivers face? Even more important to tax authorities — should these web operators be forced to provide similar accounting and tax filings to the government? Or, does this upheaval show that current rules are passé and should be abolished?
Protests about Uber and other ride-sharing websites have erupted worldwide by both taxi and limo drivers as well as the big money interests that own valuable taxi medallions in major cities across the world. The others who are protesting are municipalities and destinations — like airports — that depend on taxi and limousine charges to support their budgets.
They are not all protesting against Uber and ride-sharing websites. Many are protesting about the anachronistic taxi commissions that have ladened taxi drivers with rules and regulations that prevent them from effectively competing with these new ride-sharing entrants.
Earlier this month, the strikes organized by taxi drivers in Europe had an unexpected consequence — a surge of people who signed up for Uber accounts in record numbers while the taxi drivers were protesting. According to CNN,
Uber said it had seen a surge in demand Wednesday, particularly in London, with customers rushing to download the app.
“We’ve seen our biggest day of signups in London today since launch two years ago,” said an Uber spokesperson. “In fact, today we’re seeing an 850 percent increase in signups compared to last Wednesday.”
Uber placed advertisements in London newspapers in advance of the protest, offering customers discounts on travel.
The firm also said Wednesday it would allow traditional London Black Taxis to join the Uber service and pick up Uber customers.
Here in the US, protests have been just as animated. In Virginia, the Department of Motor Vehicles (DMV) sent cease-and-desist orders to both Uber and Lyft to stop their operations that the DMV claims are violating state law. (So far the only law they seem to be breaking is that they aren’t authorized to do business in the state. And, of course, the state has no rules, yet, for these kinds of companies.)
In the case of Uber, the upstart has decided to defy the state regulators. They sent an email to their users noting, “…we plan to continue full-speed ahead with our commitment to providing Virginians access to safe, affordable and reliable rides.” The message to the public went on to say,
Uber has set the standard for consumer safety in the Commonwealth. All uberX rides in Virginia are insured up to $1,000,000, nearly 300 percent more than the $350,000 required of for-hire drivers by the Virginia DMV. While the Virginia DMV does not require that all for-hire drivers pass background checks, all drivers on the Uber platform pass rigorous background checks at the county, state and federal level before they are ever allowed access to the technology. Our commitment to safety far exceeds the requirements set by the Virginia DMV — making their actions puzzling.
On the other side of the country, the California Public Utilities Commission sent a “stern” letter to the ride-share operators. In this case, the rules state that taxi and limousine services are required to pay for permits to operate at airports, but the operators lack airport permits, proper identification and insurance.
Again, Uber is leading with its response to the regulators.
“We have spent countless hours with airport managers and their staff to help develop requirements that are aligned with CPUC regulations and embrace the spirit of ride-sharing,” said spokeswoman Eva Behrend. “The tone of the majority of these conversations has been mutually respectful and productive. It’s unfortunate the CPUC is not allowing the airport process they designed to proceed by allowing ride-sharing companies to continue working with California airport authorities on their permitting process.”
So far, the Uber/Lyft squabbles have involved regulators and taxi drivers. Now, the medallion owners (those who purchased the rights to operate a cab) are getting into the act. An article in the Washington Post notes how high the stakes are for medallion owners.
In New York, taxi medallions have topped $1 million. In Boston, $700,000. In Philadelphia, $400,000. In Miami, $300,000. Where medallions exist, they have outperformed even the Standard & Poor’s 500-stock index. In Chicago, their value has doubled since 2009.
This brings a new foe into the battle. These medallion owners are big money guys, with lots of investment capital behind them — estimated to be $2.4 billion just in the Chicago market. Their influence in some big cities may prevent ride-share operators.
Deep pockets run this market. The system in Chicago and elsewhere is dominated by large investors who rely on brokers to sell medallions, specialty banks to finance them and middlemen to manage and lease them to drivers who own nothing at all.
So far, the new ride-share operators are winning more of these political and regulatory battles than they are losing, and the car-hire landscape is shifting dramatically.
What is clear to see is that nothing is clear in this battle between traditional regulation of taxi and limousine companies that provided a government-imposed monopoly on the system and the new smart-phone-centric Uber/Lyft and other start-ups operations. If the old-school operations win out, consumers will lose when it comes to choice and flexibility by traditional current choices. On the other hand, one or two accidents involving ride-share drivers carrying sketchy insurance or questionable pickups will set the table for fierce negotiations and an attempt to shut the new operations down.
And, if this is not enough, a kind of Uber for air has launched. Wait until the airlines get wind of that operation.