Regulatory road must be level for Uber, taxis
Houston’s City Council should treat Uber the same as any other ride-for-hire service, even if it means the company abandons America’s fourthlargest city before the Super Bowl.
Now that the city is rolling out a ride-hailing smartphone app for traditional taxis, Uber’s lobbyists are at City Hall demanding changes to the taxi ordinance that will better suit its business plan, which relies on amateur, part-time drivers using private vehicles. Taxi company lobbyists are fighting to maintain the current system, which benefits the limited number of citypermitted professional drivers in marked taxis.
Protecting these competing business models is at the heart of the debate, not passenger safety, and that’s the problem.
Ever since 1605, when London’s first horse-drawn carriages-for-hire started operating, there’s been debate on regulating the industry. Parliament passed the Hackney Carriage Act in 1635, sparking 181 years of kvetching.
The current system of licenses and permits grew out of drivers abusing passengers, and too many taxis flooding the streets. Cities started requiring insur-
ance and background checks, to ensure passenger safety, and limited rates and permits to guarantee that professional drivers could make a living without price-gouging.
These ordinances exist for public safety and consumer protection, not out of a deranged desire to regulate. But the rules created monopolies, in which a limited number of companies own most of the permits and then lease cars to independent drivers licensed by the city.
Transportation networks like Uber, though, want to blow up that system. They don’t buy permits or own cars. They simply enlist drivers with cars, run inexpensive background checks, and then use smartphones to connect drivers and passengers.
Citing that business plan, Uber executives insist they are not a taxi company, and therefore the normal taxi rules should not apply. This claim is deeply annoying because the service provided is the same: Passengers pay for safe transportation from point Ato point B. That’s a taxi, and that makes Uber a taxi company, just one with a different business plan.
Customers don’t care about business models, and neither should politicians. The only concern for regulators should be consumer safety. The best business plan is the one that wins.
The city currently regulates Uber and other transportation network companies differently, exempting them from the permit requirement because the cars are unmarked, don’t use taxi ranks and can’t be hailed without using a smartphone. But drivers must go through the city’s criminal background check, undergo physicals, take drug tests and present their vehicles for inspection.
Those safety requirements, particularly the fingerprintbased background check, are still too burdensome for Uber, said Leandre Johns, a regional general manager who is lobbying for new rules.
“The regulations have made it more difficult for us to attract drivers as quickly ... and the deterrent is the background checks,” he said. He rejected complaints that low pay was why drivers won’t pay $150 for the city’s background check.
If the rules aren’t changed soon, he said, Uber won’t be able to bring in drivers from other cities for the Super Bowl, which will lead to a shortage of drivers, long wait times and high prices.
“That’s what’s getting set up, and we don’t want that situation,” Johns said, explaining why Uber would leave.
Before the council panics, though, members should con- sider the experience of Austin, which Uber also abandoned after 54 percent of Austin voters rejected Uber’s attempt to drop the fingerprint requirement in May.
Since then, 11 transportation network companies have moved to Austin and are filling the void left by Uber. I asked Johns why Uber couldn’t comply with the rules while his rivals could.
“Being able to do the things we want to do ... the options are going to be limited in cities that have really tough and rigid regulatory setups,” he replied in a typically vague response. Uber’s business also involves a delivery service, and he said the rules will affect new businesses the company is developing.
Council members should also know that Texas voters want companies like Uber to follow the same rules as taxis by a margin of 54-46, according to a statewide poll released Wednesday by the Texas Lyceum, a nonpartisan leadership development organization. Voters also think cities should set taxi ordinances — not the Texas Legislature — by a 5-point margin, an important factor for state lawmakers to consider as Uber asks them to take away local control of taxis.
Other Texas cities, including Fort Worth and Dallas, have virtually eliminated vehicle-forhire regulations to meet Uber’s demands and in turn have become a test bed for whether the old safety precautions are still needed. Houston may want to consider that option to encourage innovation, if it is willing to risk passenger safety.
Texas is known for its laissezfaire attitude toward markets and safety. But one thing the council must always ensure is that every company that offers a ride-for-hire service faces the same rules. That’s fundamental to creating a competitive, free market that will allow the best companies to prosper, and it’s the only acceptable form of regulation. Chris Tomlinson is the Chronicle’s business columnist. His commentary appears on Sundays and Wednesdays. He also posts a daily news analysis at HoustonChronicle.com/ Boardroom. chris.tomlinson@chron.com twitter.com/cltomlinson