Uber puts city on notice

Ride-hailing company says it’ll leave if rules aren’t changed

Ride-hailing giant Uber threatened Wednesday to stop operating in Houston unless city leaders amend local regulations the company said are making it tough for them to recruit drivers.

The ultimatum, the latest skirmish in what has been a contentious relationship between Uber and the city since it started operating here two years ago, drew a strong rebuke from city leaders.

“This is just not how we do business in Houston,” said Mayor Sylvester Turner, who added the city “will not compromise on public safety.”

Uber and city officials have sparred since the company arrived in Houston in February 2014, notably after city regulations went into effect in November of that year requiring all drivers to submit to fingerprint background checks. Uber prefers another background-check method that uses publicly

available data compiled by Social Security numbers. The company and city disagree on which is more successful in securing rider safety.

“We have worked hard and taken extraordinary steps to help guide drivers through the current process in Houston,” Uber’s Houston manager Sarfraz Maredia told City Council in a letter. “However, a year and a half later, it is clear the regulations are simply not working for the people of this city.”

Later, Maredia said the consequence of inaction is clear.

“If the City refuses to act, we will have to cease operations,” he said.

No departure date has been set, Uber spokeswoman Debbee Hancock said.

“We have not set a specific deadline,” she said. “We want to work with the city to develop regulations that work for riders, drivers and the entire community. We understand this process may take a few months.”

The Uber announcement, which officials viewed as a threat to meet the company’s demands or lose the service, was met with frustration by city leaders, some of whom have grown increasingly exasperated by the tumult.

“If you don’t want to follow the rules we all agreed to, have a good opportunity in another city,” District E Councilman David Martin said. “But we cannot be blackmailed when it comes to public safety.”

Taxi firms in almost every city around the globe have fought Uber and similar ride-hailing companies, saying they are unregulated and taking advantage of the taxi industry by ignoring traditional safety practices. Regardless, riders have flocked to the smartphone-app ride services.

Houston officials have insisted fingerprint checks of Uber drivers are necessary to ensure public safety. Drivers fail background test

Turner on Wednesday reiterated a previous claim from the city that numerous Uber driver applicants have failed the fingerprint check. One, the mayor said, had 24 aliases and five birthdays, making a Social Security check unproductive.

The topic received intense scrutiny after a Houston driver was accused of sexually assaulting a passenger in April 2015. Though a grand jury failed to indict him, the issue divided Uber and Houston because he was operating on the Uber smartphone platform without a city license. Houston officials said he would have failed their background check because of a prior federal drug conviction, which Uber’s background check did not catch.

Still, Houston is an outlier in requiring drivers’ fingerprints. Only New York City — a huge taxi market where Uber drivers must have the same license as a cabdriver — also requires a fingerprint background check, though Houston officials quickly noted that other cities are considering requiring it.

The company, meanwhile, has left Corpus Christi and Galveston over fingerprint requirements.

Since the fingerprint rules went into effect in November 2014, Uber officials said 20,000 people have signed up to be drivers in Houston and then not completed the city’s licensing process. As a result, according to a report presented with Maredia’s Wednesday letter to city officials, fewer part-time drivers in Houston partner with Uber.

“Houstonians who could most benefit from such flexible economic opportunities are often the ones who are least able to access them,” Maredia wrote.

Uber’s Hancock said applicants either gave up during the licensing process or didn’t even start it once they reviewed the city’s regulations.

The number of Uber drivers here remains a company secret, and the city is prohibited by a Travis County district court injunction from saying how many licenses it has issued for drivers.

Uber, in a report on its Houston operations, did not give specifics of its inner-workings, but released details of how Houston’s rules make it a different place to do business.

Much of its ride-share business is based on part-time drivers using their personal vehicles. In Houston, however, drivers log more hours. Outside the city limits but within the Houston metro area, 77 percent of drivers average 10 hours or less per week providing rides. In Austin, where Uber faces similar regulations, 79 percent of drivers log 10 hours or less. In Houston, only 59 percent of drivers average 10 hours or less.

Uber and its supporters argue that part-time driving for the company helps people make money while keeping rates for riders cheap.

The company in its report said drivers take an average of four months to sign up with Uber and complete the city permitting process. Houston officials said the longest a driver has waited is two months, and that the average time to clear the regulations is 11 days. About 47 percent of drivers received a license within a week, officials said.

“What they are putting out is factually incorrect,” Turner said, adding that he thought the company’s motive is to put pressure on politicians to capitulate.

He said Uber’s secrecy about its operations keep Houston from seeing how well the company is doing in the city.

It is a critical time in Houston for upheaval in the ride-hailing market, with the Super Bowl being played here in February 2017. If Uber leaves, Turner said other firms will emerge to meet demand. Uber demand growing

As the city and company spar, use of Uber in Houston is surging. The city argues use means Uber is profitable even with its regulations, though company officials say they stifle its supply of drivers.

“Demand continues to grow approximately twice as fast as our ability to onboard qualified drivers,” Maredia told Houston officials. “Riders ultimately end up paying the price, when there are not enough drivers on the road, particularly when demand spikes during major events. For example, over the Final Four weekend in Houston, one in three trips involved surge pricing. This is unsustainable.”

Uber has suggested leaving Houston before, during its battle opposing similar regulations in Austin. Voters there will decide on May 7 whether to tighten regulation of ride-hailing companies.

Turner indicated the Austin vote might have played a role in the company’s announcement, saying it is part of Uber’s attempt to dictate terms to cities.

“If you don’t want to follow the rules we all agreed to, have a good opportunity in another city. But we cannot be blackmailed when it comes to public safety.” City Councilman David Martin