Ride-share companies have been fighting for exemptions from the regulations that traditional cab companies must deal with.
By Daniel J. McGraw
(Photo: Justin Sullivan/Getty Images)
The taxi industry is a business that is regulated like many others: The drivers in most cities are licensed, the companies have to provide basic services to the city, and the number of cabs on the streets is decided by the city—not the industry.
But in many respects, the ride-sharing companies cropping up across the country have argued that they are different from the traditional taxi service, and therefore should not be subject to the same regulation as their older cab cohorts. As Uber and Lyft see it, their services are not company business operations at all; it’s just one independent individual giving a ride to another for some money. No need for regulation under such an arrangement. And while a few cities do license Uber and Lyft drivers (New York City for one), most still do not.
But if both operations provide basic transportation services, with one business model slightly different from the other, should only one of those be regulated?
In at least some cities, the answer appears to be “no.” Last week, voters in Austin approved a measure requiring that car-share drivers be fingerprinted as part of a background check. In response, both Uber and Lyft pulled their services in the city. Meanwhile, in San Francisco, there’s been a push to make car-share drivers pay a $91 annual business registration fee.
Uber and Lyft drivers can refuse service if they want, facing action only by the companies themselves.
It’s not only San Francisco and Austin. Across the United States, as car-sharing ventures — Uber and Lyft being the most widely known — pull more business from cab companies, this issue of regulation is becoming more pressing. The conversation tends to focus mainly on whether the drivers associated with these companies should be required to go through government background checks or pay business registration fees. The pro-Uber/Lyft argument centers on the fact that the drivers are just trying to pull a little extra coin, and that the government should not install regulations making it harder for them to do so.
But the debate has been focused too much on the issues of drivers, free market economics, and government oversight, and less on how this new form of taxi actually affects the customers who need transportation services.
Though it’s the tourists and the commuters who get all the attention, the basic services to grocery shoppers and doctors’ appointment-goers are just as important. Traditional cab companies have had to pay attention to the lower-income customers because they are regulated. The same can’t be said of the newer ride-share contractors.
The taxicab has traditionally served a very functional purpose within cities’ transportation networks of providing to the lower-income areas (and, yes, offering rides to and from airports and hotels). Through the years, a city’s decision to award a franchise permit to a cab company depended in part on the taxi’s willingness to serve all constituents. Regulated cab drivers have to pick up fares if they are hailed on the street; they cannot legally refuse fares based on geographic desirability. Failure to adhere to these laws can result in hefty fines, even the loss of a license. Such a punishment system is meant to prevent racial discrimination.
Historically, the deal between the cities and the traditional cab companies goes like this: The city gives the cab companies the right to use the public streets for their for-profit venture so long as they take care of basic service requirements while doing so. No, it doesn’t always work out perfectly, but the intentions are very clear.
But Uber and Lyft contend they are not transportation companies; they’re technology companies, they argue, albeit ones that operate on the roads. You have one person selling something (the driver), another wanting to buy what they are selling (the passenger), and Uber/Lyft processing that transaction through their app and taking a cut for providing their platform.
That’s a big part of the problem. The new companies’ reason for being is simply to process the fare transaction, and how the drivers serve the community is sometimes secondary. The traditional cab companies have generally known their role and the reason they’re allowed to operate: serving as a small but vital part of that transportation network within cities. And they have always known that, as a part of the arrangement — through regulations in the deals they cut with cities — they have to serve the whole market.
It is difficult to map out the transportation data on low-income and elderly residents for every major city, but this much is known: The poor and elderly are less likely to have the high-tech access to Uber and Lyft, and they cannot get service unless they do.
The new ride-sharing companies have done wonderful things to speed up service and provide people with ways to make a little extra cash. But one has to have a smartphone to make the connection with a driver, and, according to the Pew Research Center, about one-third of American adults do not have a smartphone. People without smartphones tend to skew poorer and older, and this means the newer ride-sharing services are not being used by the city’s low-income and elderly residents.
The data bears this out. A study by the American Public Transportation Association that surveyed frequent ride-sharing users in seven cities last year found the average household income of those users was about $91,000. This is not evidence that Uber and Lyft are consciously discriminating by income; it is, however, evidence that the more wealthy have greater access to the Uber and Lyft services.
“While some of the services might provide a dramatic improvement in underserved areas, these benefits may not equally apply to all income ranges,” researchers from the Eno Center for Transportation wrote earlier this year. “Lower income travelers that do not have access to a smartphone or cannot afford the new services might be left worse off as the traditional transit services they rely upon lose market share.”
That “losing of market share” is the key part of all this. The Uber/Lyft drivers are skimming the wealthier users off the top. The traditional cab companies have always known that serving the entire community is part of their deal, whether they like it or not. But Uber, whose market share in New York City has gone from four percent in 2014 to 13.5 percent last year, has shown little interest in what happens to those who would have a more difficult time getting rides in the absence of a traditional taxi service.
The old cab companies have been woefully inadequate in keeping up with societal and technological changes in their industry. But if cities are going to welcome these new ride-sharing companies to improve the taxicab industry, they must serve as part of the whole transportation network, and not just be an outside transaction facilitator.
That wouldn’t mean getting rid of the GPS/smartphone app. But it might mean adding operators who answer calls from people without cell phones or Internet access, or having kiosks at hospitals and grocery stores where people can access their service, or committing to paying the fees and necessary registration to work the airports and hotels. And, most important for drivers in Austin, it could mean the ride-share companies shift their view of city-issued background checks.
Cities have to deal with all of the community when deciding how services should be provided, and they can’t have businesses providing transportation services that exclude a large swath of the populace.