BY IRIS DIMMICK | April 3, 2014
Members of the City’s Public Safety Committee agreed with San Antonio Police Chief William McManus on Wednesday that, pending a final decision, rideshare companies Lyft and Uber violate San Antonio’s Vehicle for Hire ordinance.
It was standing room only in the B Room at the Municipal Plaza Building. Dozens of company owners, drivers and other supporters of the taxi and limousine industry greatly outnumbered the group of about 10 drivers, riders and young professionals that came in support of San Antonio “rideshares.” Both sides were given the opportunity to speak.
“Rideshare” mobile phone applications are hooked up to a network of company drivers called to a rider’s location with the click of a button. No phone numbers or private information are exchanged with the driver. All transactions take place through the app once the rider has arrived at their destination.
It’s becoming a classic story in this age of technology-driven innovation, startups, and entrepreneurship. Time-honored processes and regulations with rigid hoops for players to jump through are challenged by disruptive technologies that solve a problem for some while obviously creating a challenge for others.
It’s all part of the the so-called “sharing economy.” Airbnb is perhaps the most parallel analogy – instead of going to a licensed motel, hotel, or bed & breakfast whose operators collect and pay occupancy taxes and abide by local codes, Airbnb (for a nominal handling fee by the website) connects hosts and guests who can rent rooms or entire homes at affordable rates and avoid more expensive and less appealing hotels or motels.
‘Software is eating the world,’ the phrase coined by Silicon Valley kingmaker Marc Andreessen has become industry shorthand for macro trends in technology, business, and society that seem destined to make software triumphant. In other words, investors told me, innovation is outpacing regulation, and sooner or later government will have to answer to the ‘social energy’ of consumers.
Representatives of Lyft and Uber, which launched its local branch last week just after Lyft’s arrival in San Antonio, said they will operate at no cost to the rider – for now – as part of a pilot program that avoids violating the ordinance. As long as no money exchanges hands, they’re not technically breaking the law, said Uber Dallas General Manager Leandre Johns after the meeting.
The committee, chaired by District 7 Councilman Chris Medina includes District 3 Councilwoman Rebecca Viagran, District 5 Councilwoman Shirley Gonzales, District 9 Councilman Joe Krier, and District 10 Councilman Mike Gallagher, will review the matter at May 7 meeting when McManus, in collaboration with the Transportation Advisory Board, will present a proposal for going forward.
How the ordinance will be enforced until then will be kept a “secret” for now as a part of normal SAPD operations, McManus said, provoking a round of laughter after nearly revealing how police intend to catch offending drivers after Viagran posed the question.
Other than that moment, there wasn’t much levity in a room filled with people who fear a loss of their livelihood.
Some “rideshare” opponents vilified the two San Francisco-based companies, equating their arrival in San Antonio to a “barbaric invasion,” planting the notion that women will be sexually assaulted. They mocked the pink mustache. Others offered more reasoned objections to the new arrivals and the threat to the status quo.
Beyond the emotional arguments, opposition comes down to two things: regulation and insurance.
“We just want a level playing field,” said more than a few taxi drivers and company owners – professionals with years of experience. “We all have to jump through the hoops, why don’t they?” said another. If the rules don’t apply to Lyft and Uber, opponents argued, than they shouldn’t apply to traditional companies either.
“We urge one single set of regulations,” said Dave Sutton, spokesperson for the national “Who’s Driving You” awareness campaign of the Taxicab, Limousine & Paratransit Association during a phone interview Tuesday evening. ”We want a level playing field that’s fair for business but there is a secondary reason, the accessibility and (taxis often) serve underprivileged communities.”
During the citizens to be heard session, John Bouloubasis, president of Yellow Cab of San Antonio, pointed to the lack of accessibility for people with disabilities and asked how the ‘rideshare’ services would serve people that can’t afford smart phone or don’t have a debit/credit card.
“These companies cater to the affluent,” he said, pointing to the fact that fares are regulated for taxi companies, “rideshare” competitors could theoretically charge premium price when demand spikes, such as during Fiesta.
All valid points. Yet it seems Lyft and Uber have already found a niche market in San Antonio – they wouldn’t be here if there wasn’t a need or want for a faster, premium service that utilizes reliable, user-friendly technology. Late-night taxi service consistently has long wait times and withdrawn drivers. It can take more than an hour for a cab to arrive, even after customers are told more than once by dispatchers that the driver is minutes away. Town car services, owned by the same taxi owners, already offer enhanced service for a price.
According Paige Thelen of Lyft communications, the company has recently expanded its $1 million commercial liability insurance coverage. The policy continues to cover drivers while they are en route to a customer and while they are carrying a passenger.
“This policy was also designed to drop down to the first dollar in the case that a driver’s personal policy is not collectible. While we do expect personal carriers to cover the time period prior to carrying a passenger, in order to erase any uncertainty, Lyft also provides additional protection,” Thelen stated in an email. “This new protection provides backstop coverage to drivers when they are in ‘match mode’ and are not providing rides.”
“It behooves Lyft to be safe,” Gonzalez said, who is optimistic that some sort of compromise will be reached similar to that in California.
The California Public Utilities Commission passed rules in September 2013 specifically for “rideshares,” the first of their kind in the U.S.
The new regulations establish a new category of business called a Transportation Network Company, and it requires those companies to obtain a license from CPUC, conduct criminal background checks, establish a driver training program, and hold a commercial insurance policy with a minimum of $1 million per-incident coverage.
The taxis have been slow to embrace new technology, but more often than not, taxi rides go smoothly – it’s a simple transaction, after all. Many drivers use cell phones only to talk to third parties while driving, annoying customers trapped in the back seat. Most taxi company mobile applications are glitchy and sub-par. The City’s Taxicab Permit Allocation Committee issues one permit for every 1,700 residents. Many people end up calling a friend for a ride.
Lyft and Uber want to be that “friend,” but they want to charge you, too – and Fiesta is only a week away.
In order to comply with the Vehicle for Hire ordinance (which is pretty typical for most municipalities), you have to have a background check (criminal and driving record), a vehicle permit, dispatcher permit, company permit, drug tests, written tests, a vehicle less than eight years old, regular car inspections, capped fares, and commercial insurance. All have to be renewed at certain intervals. Everyone pays taxes throughout this process, too – and a chunk of fees goes directly to the City.
Instead of these hoops, they’ve set up their own. Extensive background checks are conducted by Sterling Infosystems.“The checks include a social security number trace, a county criminal record check, an enhanced nationwide criminal search, and a Department of Justice 50-state sex offender search,” stated Thelen.
Local Lyft representatives conduct 19-point vehicle inspections, they’ve set up a specialized insurance policy in the event that a driver’s personal insurance doesn’t cover injuries or damages in the event of an accident.
I’m putting quotations around the word “rideshare” because its definitions and connotations seem to be evolving and highly contested at the moment. And it’s probably a good place to start talking about this local and national debate.
As defined in previous legislation and as used by SAPD Assistant Director Steven Baum, a “rideshare” is technically just a carpool – it’s a friend or acquaintance giving you a ride to somewhere they were going anyway. The driver is dictating the destination and the rider is, well, along for the ride. Additionally, “the cost recovered (by the driver) does not exceed the cost of the trip provided.” Basically, you’re not profiting from it, so you don’t need a commercial license. The idea is that you are “sharing” the time and cost to get to your destination.
Taxi companies and Baum take issue with the use of this term because these companies and drivers are profiting from the rides. The technical term for Lyft, Uber, and other self-proclaimed “rideshare” services like Sidecar is “transportation network companies” (TNCs). Way less hip, but probably more accurate, because while they’re not a traditional taxi or towncar company it’s also not “sharing” if you’re charging.
“‘Ridesharing’ is a definition that’s being shaped right before our very eyes. We’re dealing with definitions that are going to have to evolve or be expanded because of technology,” said Luis González of OCI Group, the local consultancy hired by Lyft. ”I don’t think alternatives are going to detract from (a taxis core demographic) … this is another transportation option.”
What’s the difference between a TNC ride and a taxi? Almost every customer I’ve talked to over the past weeks has said some variation of “It’s just more fun,” “The drivers are really friendly,” etc. Lyft trains each driver to initiate a fist bump to break the ice with customers. At it’s core, it’s simply a “cooler” cab. What does Uber say the difference is?
“It’s technology,” Johns with Uber Dallas said of the highly-adaptable business model. “(We’re finding) gaps and improving on them … and we’re creating efficiencies.”
If anything comes of this dialogue, it may be that it’s time to take a look at Vehicle for Hire ordinance and processes yet again, now that these TNCs are at the table. It’s a daunting task to rework code and the fact that San Antonio just went through an overhaul of its ordinance in August 2013 doesn’t help. At the time, there was no such thing as a “rideshare” app in Texas, it was just beginning to gain real traction in California. “We were not a part of that conversation (in San Antonio),” Johns said.
One wonders what could have been achieved if the taxi industry had invested earlier in stronger mobile application and regulation reform. As the modern business mantra goes, “Innovate or die.” (Or a startup will find its niche.)
On a personal note, González said, “That’s why the tech startup business is for everyone. There’s room for different types of people that need different types of structures … and we have a lot of diversity in San Antonio.”