Is Uber the future of urban transport – or is it a menace?

© Leocha

Should car-sharing operators brought together through and 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 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.

Should ride-share websites be allowed to operate without regulation?

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  • dcta

    Here in DC I have been using taxis more and more since we dropped the zone program and the meters went in. (And incidentally, several drivers have begrudgingly admitted that they are doing more and better business since then.) In my cohort (50s, empty nesters, urban dwellers) I find that more and more people are ditching their cars, joining ZipCar and using taxis more often. For a long drive – like to see MIL in Pittsburgh, we either take a ZipCar for the weekend or sometimes rent. For a ride from DC to Dulles – we use Embarque (owned by Carey – non-limo transfer service at very competitive rate).

    Personally, I’m not getting into another individual’s vehicle when it is a business transaction, unless I can count on him/her having appropriate insurance and/or some “professional” driving training.

    As for the other issue – it seems to me that Uber and Lyfft drivers area actually “independent contractors” and just like ICs in my industry, should have to be incorporated and should be receiving 1099s at the end of the year and filing their taxes appropriately. I predict that will be the next move from the DC government – telling them to get incorporated…

  • mizmoose

    I believe that in *theory* there should be some regulation for safety reasons. However, I also recognize that most of that is handwaving and trivially ignored “rules.”

    I come from a city that has, basically, just one taxi company. The city likes to claim there are really two, but the second one only works on pre-arranged, 24-hours-notice required service. Virtually useless if you need a cab at 2 am; so, there really is just one.

    This single company has a stranglehold on the city and likes to keep it that way. Your cab didn’t show up? Your driver overcharged you, or caused an accident, or physically assaults you? They don’t care. You can complain to the licensing people, you can file a charge with the police, you can make noise in the papers, and they don’t care. The company typically responds with something like, “We take these things seriously, but, really, we only license the cabs to the drivers. It’s the driver’s fault, not ours.” So much for any regulation.

    Lyft and Uber are now creeping into this city and the primary taxi company is going nuts both trying to fight it and trying to imitate it. But the interesting thing is something I’ve heard – that at least one of the new companies is having the same problems with their drivers that the big main company has – drivers causing accidents, cheating, and attacking customers, And their response to these issues has been eerily familiar. “We take these things seriously, but, really, we only connect the drivers to their fares. It’s the driver’s fault, not ours.”

  • TonyA_says

    More power to the people. I take Medallion cabs and private car hires in NYC. They are not cheap. Recently I saw a black car with an uber sign written on a piece of paper hanging from the driver’s window. I wonder what is the difference between that and those black cars the W hotel in Time Square allow to wait in front of their hotel.
    I see absolutely nothing wrong with peer-to-peer sharing venues. If 2 consenting adults wanna exchange something I say go ahead, leave them alone, and get the government off their backs.

  • Margery Wilson

    There is no such thing as a “cozy world for taxi drivers.”

    I live in a city and gave up car ownership thirty years ago (after growing up in Southern California where I could never imagine not having a car it was a big transition!) Because I do not own a car I depend on public transportation, and thus I have met and interacted with many cab drivers. In many ways the local taxi company is like extended family.

    Typically, each municipality sets taxi regulations, and petty politics too often plays a role. What is best for taxi drivers or passengers is not at the top of the list for these regulators. I would hate to see Uber and Lyft subjected to this patchwork of effective and downright ridiculous regulation, but I would love to see a broader regulation system that would provide a basis for safety for passengers while assuring fairness for taxi drivers.

    I know it is common for people to look down on taxi drivers. They are often foreigners, they often speak with an accent, and the few bad apple drivers who cheat tourists have created a stereotype that leads us to judge all cabbies as scammers. I travel extensively and have met taxi drivers all over the world. By and large I find them to be interesting, helpful and friendly. (I even wrote an appreciation piece to cabbies: )

    All over the world cab drivers are usually living far from their countries of origin and struggling to make a living for themselves and large, extended families. They are often living on strict budget and sending money home to support families in places where daily life is a life and death struggle.

    I am in favor of enterprises like Uber and AirBNB. I think there is a place for them in our increasingly internet-connected world. However, I do not want to cut off an important income opportunity for those at the lower end of the employment ladder. (Driving a taxi is often one of the only forms of employment new immigrants can find.) I think regulation is important. In my perfect world I’d like to see sensible regulations set for Uber and Lyft, as well as all the taxi companies. A level playing field is a goal that may not be possible, but I can dream it.

  • LFH0

    It is difficult for me to distinguish between the Uber/Lyft services and established car and taxi services. There may be a difference in the way in which the vehicles are hailed, and in the employment of drivers, but the services themselves–transportation of individual small parties by motor vehicle on demand–are the same. The real issue that I see is whether or not regulation of that type of service is unnecessarily overbearing. Most regulations fall into one of two categories: economic and safety. Economic regulation involves government controls over, inter alia, fares and entry into the market; safety regulation involves government controls over, inter alia, vehicle inspections and insurance. Most people accept safety regulation (at least when the safety items are not a surrogate for economic regulation), but increasingly there has been opposition to economic regulation. Most forms of transportation were deregulated by the federal government in the late 1970s and early 1980s–and the marketplace took control thereafter–but regulation of local transportation continued in many cases, including taxi transportation. One argument for retaining economic control is so that the government can mandate that taxi companies serve all parts of a jurisdiction, and not discriminate by refusing to accept fares to and from less affluent, or less profitable, neighborhoods. But I think overall the marketplace is better to regulate the economics of the industry better than the government. So long as fares are disclosed, and there is a reasonably accessible forum in which fraud and other disputes can be adjudicated, economic regulation of car and taxi services is probably unnecessary.

  • TonyA_says

    The real question is why does a medallion cost so much in the first place?
    Seems to me there are very powerful people who want to artificially control the supply of all things – cabs. Something that is really so easy to produce. Now if this ain’t a scam then what is?

  • cowboyinbrla

    It’s all supply and demand, Tony. If a governmental body says “We’re only going to have 500 cab medallions out there”, and you can’t run a cab without one, then the medallion has value. If you’re confident the government isn’t going to flood the market with more medallions and authorize thousands of new cabs, then the owner of one can charge a premium price, because it’s the key to generating revenue. And whoever owns it can lease it out to a cab driver, for whom those payments become part of his operating/overhead expenses, like fuel and repairs.

  • seeemeeego

    I used Uber last week in Philadelphia and Boston. I loved it. I use private car services constantly in London and Paris. Same difference for me as a consumer. I prefer it over taxis/cabs.

  • MeanMeosh

    We just went through a sordid episode in Dallas where the city’s monopoly cab company, the owner of which is a major campaign contributor to city elections, attempted to put Uber and Lyft out of business. The company’s lawyers wrote up an ordinance dictating, among other things, that rides couldn’t be ordered via smartphone app and a minimum purchase price of car-for-hire vehicles, then got the then-assistant city manager to try and sneak through the change on the council’s “consent agenda”, which basically means it gets approved with no vote or public debate. Thankfully, an eagle-eyed TV news reporter caught wind of it, a huge stink was raised in the media, and the attempt was foiled. It was later discovered that this same cab company had called in some favors in the police department to sic the cops on Uber/Lyft drivers and ticket them for operating without cab licenses. Incredulously, that assistant city manager was later rewarded with a promotion to city manager after the old one retired…

    Anyway, I’m with LF10. I’m all for any car-for-hire or ride sharing service to be subject to basic safety regulations – minimum insurance, background checks, vehicle inspections, etc. But otherwise, I think city government should stay out of the fight. Services like Uber and Lyft were born because the market had a demand for convenience that the traditional cab companies weren’t delivering. This fight needs to be hashed out in the marketplace. I might add, there is absolutely nothing stopping a cab company from competing by offering services like app-based rides.

  • neal1

    I have no problem with Uber with an exception. I think if taxis are regulated, then so should Uber in respect of licenses, insurance, vehicle safety compliances. In DC you are required to get a hack license and sticker of inspection. I think Uber needs to follow. What baffles me is why aren’t the taxi companies developing a similar app to compete.

  • PastryGoddess

    I love Uber. I use Uber Black. I get a private car for the cost of a taxi. water, snacks and a very courteous driver. I have tried Uber X, but not all of the cars are decent.

  • BobChi

    I think Uber is a great idea, but yes some regulation is needed. I’ve been in countries where gypsy taxis operate outside the law to the clear detriment of rider safety. I was robbed once. I’m not saying Uber is like that, but if it’s allowed to operate unregulated, what would prevent a more unscrupulous imitator from joining the market?

  • robertb

    Ever try to hail a cab in mid-town Manhattan – especially on a cold or rainy night? It can be frustrating to say the least.There is certainly a demand. If Uber or Lyft can provide a safe reliable service so I don’t have to stand in the street waiving my arms looking like a banshee,
    then I’m all for it.