A needless roadblock to a new vital service
It’s never been easier to get a ride in San Francisco. Instead of waiting for a taxicab that may never come, more and more residents are opting to use ride-matching services like SideCar, Uber or Lyft, which can be easily accessed through smartphones or computer programs in real time.
The need for these services is obvious: There aren’t nearly enough taxicabs to meet residents’ demands, especially at peak times. The San Francisco taxicab industry has been remarkably resistant to any attempt to make itself more consumer friendly, and seems to have little interest in serving the public.
The overwhelming success of these new companies (2-year-old Uber, for example, has been growing at a rate of 30 percent a month) makes it plain that there is a need. In addition to making customers happy, the new companies offer private drivers a way to supplement their income, or provide private individuals with a way to maximize their existing assets (their cars) at little to no cost. It’s a setup that has made frustrated consumers and cash-strapped locals happy.
So it’s sad, but not surprising, that there are a lot of interests aiming to shut down these companies.
Acting on behalf of San Francisco taxicab drivers, attorney Gary Oswald filed a class-action lawsuit against Uber on Nov. 9. Oswald’s suit claims that Uber, the private car service that users can hail with the help of a smartphone app, is not properly licensed in San Francisco.
The lawsuit is classic rent-seeking behavior — instead of trying to compete with Uber on price or service, the taxicab industry is trying to protect its market share by taking the company to court. It’s bad for consumers and bad for San Francisco.
Meanwhile, the California Public Utilities Commission, in its role as regulator of commercial vehicles, sent citations on Nov. 13 threatening to shut down not just Uber but also SideCar and Lyft of San Francisco and Tickengo of Daly City. The latter three use smartphone apps to allow people to find rides with private individuals for a fee.
Comparing the companies to the kinds of “rogue operators” that attempt to shuttle you into their unlicensed cabs when you’re leaving the airport, CPUC general counsel Frank Lindh said, “Our view of the law is that they can only offer transportation for hire if they’ve got proper licensing and commercial insurance.”
Asked why these requirements would apply to companies that are providing a way through which private individuals can offer a service to other private individuals — as SideCar, Lyft and Tickengo do — Lindh said, “We would argue that they are charter companies, and they would argue that they are not.”
It’s not a small distinction. The taxicab industry has every interest in avoiding competition by insisting that ride-sharing companies have the same business model that they do — and should be subject to the same rules.
But these are companies that wouldn’t exist without the latest technologies, which have made it possible for casual drivers to find casual riders in a smart way. The drivers are not under contract with these companies; the companies own no cars. Are they really in the same business as the cab companies?
We would argue no. This is a new kind of business that requires a different kind of oversight. The CPUC knows that its regulations are outdated — Lindh said that “our commission is very likely to want to launch a rule-making commission to see if we can modify our rules on this issue.”
But while the PUC contemplates getting up to speed with 2012 technologies, it is still willing to issue citations that either slap on a $20,000 fine or shut down a company. That’s not in the public’s interest.
These companies will need regulations in order to protect the public’s safety. At a minimum, drivers must have current licenses, full car insurance, registered vehicles and no criminal convictions. But is it fair to ask casual drivers to carry commercial insurance? Should the companies that simply provide a platform for people to find each other be held responsible for this insurance? Should companies be required to disclose information about drivers to riders, and vice versa? Who has liability in an accident?
These are important questions, and they need to be figured out within a public process. They deserve a partnership with the CPUC on these issues, not a shutdown.
“Let’s sort out what the appropriate rules are and what kind of consumer expectation there should be about different kinds of services,” said Sunil Paul, co-founder of SideCar. “But to shut us down when we were trying to have those discussions with the PUC — well, it took us by surprise.”
Lindh confirmed that the PUC had been in discussions with the companies but said, “You can talk until you’re blue in the face, but we have to move forward with enforcement.”
“Moving forward” — even though it means a likely shutdown of companies that are finally providing much-needed competition in this industry. “Moving forward” — even though the only beneficiary is the taxi industry, which isn’t even regulated by the CPUC.
Paul told us that his company plans to appeal the citation, as most likely the other companies will.
“Whenever there’s an innovation in the marketplace, it sometimes takes court cases to get things clarified,” Paul said. “Which is a shame, because it could be worked out with thoughtful public policy.”
Unfortunately, that’s not what’s happening here.