(Source: LA Times)
The U.S. isn't exactly a "free market" at times, with outright bribery -- condoned by the U.S. judicial system -- or collusive public-private cartels leading to some products and services being banned from the market. Just ask Tesla Motors Inc. (TSLA) whose electric vehicles have been banned from sale in many states. That debacle arose due to the fact that Tesla has no dealerships and fearful dealership lobbyists banded together to pay off state politicians to ban direct auto sales.
I. Carpooling Gets Digital Era Makeover
Now the same principle is being applied to stymie the emergency of another set of companies in the transportation sector -- cloud-driven ride-sharing services.
Ridesharing -- also known as carpooling -- involves members of the public contacting each other via a smartphone or PC internet networking service and arranging to ferry each other to various destinations for fees. The practice in informal form is almost as old as the automobile itself, but in the digital age app-enabled ridesharing has seen an explosion in interest, threatening the commercial taxicab industry and the city officials who depend on that industry for revenue.California often is characterized as a leader in onerous regulation, but at times it can flirt with being laissez-faire.
On a state level, that has been the case with ride-sharing. Many companies in the field are based in California and rolled out their first services in the state. Startup ridesharing services Sidecar, Uber, and Lyft are all based in San Francisco, Calif.
After initially threatening fines against these in-state startups, the California Public Utilities Commission (CPUC) backed down and agreed to create a new regulatory category [PDF] -- "Transportation Network Companies". While perhaps not as good as no regulation at all, the move has allowed the service to grow within California without fear of being banned at the behest of the threatened taxicab lobby.Elsewhere, the trio are proving less lucky.
All of the ride-sharing companies operate on the same principle, claiming that their fares are "voluntary" and admittedly fluctuating based on supply and demand. Because they aren't charging rigid rates, they claim they are not subject to local ordinances in various cities that require taxicabs to pay per-cab tolls to city transportation departments/agencies.
Cities transportation agencies are pretty upset about not getting their cut of the pie. They've circled the wagons in many jurisidictions, backed by the traditional taxicab industry who views these disruptive new players as an unlawful threat.
II. Philadelphia Shows Sidecar Drivers no "Brotherly Love"
The funny thing is that many cities supported ride-sharing as part of "eco-concious" initiatives when it was on a smaller scale and largely greenwashing. But once it expanded and money became involved many cities had seen enough.
Sidecar -- a Google Inc. (GOOG) funded venture -- opened operations in Philadelphia, Penn., the "City of Brotherly Love" in late 2012. But of late there's been little love for the disruptive startup from the city government.
In 2013 the Philadelphia Parking Authority (PPA) -- a city authority that derives its revenue from taxicab licensing -- decided it was time to put a stop to the business, which hadn't paid its toll. It conducted a sting, seizing cars, ticketing drivers, and shutting down the operation. Marty O’Rourke a PPA spokesman told TechCrunch:
[Sidecar drivers are] passing themselves off as taxis and they’re not. It’s clearly not about technology. This is about public safety. [The sting] was an operation to impound vehicles because they were operating illegally. If we find them out there again, we’ll impound them again.Sidecar vigorously disagreed. It points out that its drivers don't claim to be taxi drivers and are simply engaging in the time honored practice of carpooling with a small fee for the time and gas.This month Sidecar was in court to try to defend itself, but it has yet to win the right to deliver services again or get some of its property back in Philadelphia.
III. Gotta Ban 'em All
Likewise Austin, Texas saw outcry from taxicab drivers who successfully petitioned the Austin City Council to in Feb. 2013 send cease and desist letters to the ride-sharing service ahead of the yearly South-by-Southwest (SXSW) festival. Sidecar took advantage of the publicity, offering rides for free to spite city regulators. But later in 2013 it had basically ceased operations in the city. It's trying to petition the City Council to reconsider via a Change.org petition (which closed with 3,727 signatures), and local business leaders have also asked the council to change its mind. But so far there has been no breakthrough.Sidecar's last opportunity for action in Austin is the courts, where it filed a lawsuit in Mar. 2013. Company VP Margaret Ryan blogs:
This lawsuit is bigger than Austin, Texas. What happens here matters for the entire sharing economy. Sharing resources is not a crime – it’s a solution for a better and more sustainable way of life. Rideshare is good for Austin and we’re going to defend this position in Austin City Court.Uber, Lyft, and Sidecar all operate in Seattle, but in February the city council passed an ordinance that Sidecar says will effectively ban ridesharing in the city, if it takes effect. That oridinance does not outright prohibit ridesharing, but limits each company to 150 passengers/drivers on the road at once.
Minneapolis, Minn. in Feb. 2014 announced it would ban/ticket any Lyft drivers who did not file for expensive taxicab licenses and would do likewise for participants in any other popular ride-sharing service.In New York City -- where taxicab licenses ("medallions') cost up to $1M USD -- crackdowns are also picking up steam. Efforts are also under way to ban the services in Las Vegas, Nev., Washington D.C., Chicago, Ill., and Cambridge, Mass.. In short the number of cities where paid carpoolers can legal operate is dwindling at an alarmingly rapid rate.
At this point quite literally the risk of carpooling is becoming that you will get your car impounded/seized and be forced to pay steep fines.
IV. California City Officials: If Paid Carpooling is Allowed Taxi Businesses Will Fail
But perhaps the most dire sign for Uber, Sidecar, and Lyft is that in their home state -- where they supposedly "won", local officials are threatening to do what state officials would not -- ban ridesharing.
Officials at the San Francisco International Airport in April 2013 banned the ridesharers from picking up or dropping off passengers at the airport.
In June 2013 Los Angeles also banned ridesharing. Los Angeles Yellow Cab manager William Rouse was elated at America's "captialist" system disallowing competition via strong-handed regulation. He comments:
These rogue taxis are bypassing all safety regulations created to protect riders and drivers. Not only are these high-tech bandit cabs unsafe, they are breaking regulatory standards and disenfranchising safe, legal taxi drivers.And in San Francisco this month, city officials and taxicab drivers were eyeing a knockout blow to the carpoolers. Comments Supervisor John Avalos:
We’ve gotten to almost a crisis mode. We cannot let [the taxicab] industry fail.Mark Gruberg, a spokesman for United Taxicab Workers, claims that carpoolers are a menace to society, stating:
People are being injured while they are fiddling, and their rules do not protect the public. These are taxicabs in every sense of the word.Critics are using a New Years Eve incident as a rallying cry. On Dec. 31, 2013, a 6-year old in San Francisco was struck and killed by an Uber driver. The driver was not transporting anyone at the time, but taxicab unions and the city departments that profit off them have gleefully seized upon the death as evidence that carpooling is "unsafe".
V. Taxi Business Owner Compares Carpoolers to Napster, Implies They're Stealing and Killing
Atlanta, Geor. Checker Cab owner/CEO Rick Hewlett writes in an op-ed:Government has no more important responsibility than to provide for public safety, and many of our laws are for this purpose, including regulations covering vehicles for hire.
Because there is a clear potential for harm to life and limb when individuals are transported in automobiles by strangers, the reasons for regulating vehicles for hire, such as taxicabs and limousines, are obvious and crucial. Accordingly, there is a compelling need for government oversight and standards pertaining to all aspects of the vehicle for hire business.Chris Dolan, the San Francisco lawyer who is suing Uber over the New Year's Eve death comments to Mr. Hewlett:
New technology does not eliminate well-established legal principles.But if carpooling is illegal, the question becomes where should the government stop. After all, what about a roommate who gives you money for a ride to the grocery store? What about a group of friends who pool their money to go to a concert? If app-connected carpooling is illegal, aren't those people also breaking the law?
Mr. Hewlett didn't write about such examples, but he did compare Uber, Lyft, and Sidecar to Napster, the infamous P2P company that based its business on stealing musicians' copyrighted work.No matter how crazy that comparison it is, it's not atypical. Ride sharing and carpooling for pay in the U.S. -- once a booming field of dreams -- has been methodically shut down and beaten back by the loving hand of government regulators and taxicab industry. Thanks to those cartels, this once thriving sector is now on the death's door, as the nation's top cities approach a ubiquitous ban on sharing, which they say is anything but caring.