Commentary: What’s at stake in Seattle’s ride-sharing debate

Representatives from the taxi and for-hire industries speak with Councilmember Bruce Harrell after Friday's meeting.

Representatives of the taxi and for-hire industries speak with Councilmember Bruce Harrell after Friday’s meeting.

Last Friday, a Seattle City Council committee met to discuss how to regulate ride-sharing services that have emerged in the last few years as alternatives to taxis and other for hire vehicle services.  Companies like Lyft, Sidecar and Uber/Uber-X are being targeted as “unregulated” services.

lewmcmurran

Lew McMurran

This 57-page draft ordinance was the centerpiece of the Dec. 13 hearing. This issue has been percolating for months and action has been taken in other jurisdictions, notably California.

While it is plainly obvious the public has taken to these services as a reliable form of hired transportation, technically these services are out of compliance with various laws. Any type of ride-for-hire arrangement is regulated under either state law or local ordinances.

Underneath some of the legitimate safety and licensing concerns, however, is a classic “turf battle” between the current group of ride providers (taxis, for-hires, limos) and new market entrants that are nimble, use technology effectively and provide flexibility for both drivers and passengers. The fact that unions are involved adds another political dimension to the issue that the new entrants need to be wary of. This is because the elected officials listen closely to the unions because of their political clout, not necessarily because of their arguments.

Taxi and for-hire vehicle regulation is underpinned by limiting supply. By limiting the number of taxi and for-hire licenses, the market becomes skewed toward suppliers, as opposed to buyers. The reason for this limitation of supply makes sense if the goal is to maintain a certain level of revenue for ride providers. Jurisdictions then limit the price that can be charged so that consumers are not gouged, presumably leading to a balanced market between riders and drivers.

lyft-pink

The size of “trade dress” such as the pink Lyft mustache would be among the practices regulated under Seattle’s draft ordinance.

What the new ride-sharing companies have done is to use technology to balance the demand between those needing and willing to pay for rides with drivers who want to provide rides for income, either part time or full time. In other words, a classic disintermediation play. The driver/passenger rating systems that some of the ride-sharing service employ adds another layer of customer service that one doesn’t get with taxis and for hire vehicles.

Any time a regulated industry is threatened by unregulated entities, the regulated industry stiffens its back and employs the “good ol’ boy network” to limit the new players. In the case of ride sharing, it means getting the unions involved since that is a well-known tactic to scare politicians in this region from doing anything that the unions perceive might hurt them. The unions are well known for exacting political retribution on those that are not with them 100%.

The union taxi drivers and others who are currently regulated came out in force at the Friday public meeting to express their desire for a “level playing field”, i.e. one that regulates the currently unregulated ride-sharing companies. There are some legitimate issues of safety and liability that need to be addressed. What was missing from the testimony at the Friday meeting was any complaints from riders who have used the unregulated ride-sharing services. The majority of complaints are about taxis that don’t show up on time and lack of availability at certain times in certain neighborhoods.

An interesting angle on this topic was given by Flywheel Software, a company that sells software to for-hire and other regulated transportation providers in both Seattle and San Francisco. They have developed a dispatch system that is more effective at matching riders with for-hire drivers. They state that their system has improved efficiency and has helped both riders and drivers within the current regulatory system.

The City of Seattle has to tread carefully as they must balance all the various interests involved — regulated entities, new market entrants, the riding public and the need to regulate the city’s transportation system.

The proposed ordinance itself is lengthy and complicated.  It creates a two-year pilot program of regulation of “transportation network companies” (TNCs, i.e. the ride-sharing companies) that must pay $50,000 annually for administration of the ride-sharing regulations.  Ride-share drivers must have adequate insurance and vehicles must have safety inspections.

Another feature of the proposed ordinance is an increase in taxicab licenses up to 1000, from the current level of 850, thereby recognizing that the demand for rides is outpacing the supply of those providing them. The City commissioned a study of taxis, for hire vehicles and limousines to get better information on this subject. That study is here.

California’s Public Utilities Commission (CPUC) spent a great deal of time on this topic as these new ride sharing services have disrupted the taxi and for hire industries in San Francisco. You can review proceedings from earlier this year here.

The Seattle City Council committee considering the regulation is made up of Council President Sally Clark, Councilmembers Bruce Harrell and Mike O’Brien. They are not going to act immediately on this topic but they will act relatively soon as this issue does need resolution before an injunction is filed to shut down the ride-sharing services and so that the riding public and transportation providers understand what regulations they must comply with.

Under any circumstance, it seems inevitable that Lyft, Sidecar, Uber/Uber-X and others will have to step up to a higher level of regulation.  The question is: Will that regulation allow for continued innovation in ride-sharing/matching or will consumers still have to wonder if the cab they called to get to the airport will show up in time?

Lew McMurran has been lobbying for various companies, local government and trade associations for the last 24 years, the last 13 of which were spent with WSA/WTIA, representing the tech industry in Olympia. He is now an independent government relations consultant working with tech companies on issues related to state and local government. He doesn’t represent any of the companies involved in this issue. Follow him on Twitter @lewismcmurran.

  • Vroo (Bruce Leban)

    “technically these services are out of compliance with various laws”

    In other words, they’re breaking the law. In what way is “technically” breaking the law OK? Are drug dealers just misunderstood entrepreneurs because drugs are only “technically” illegal?

    I don’t deny these companies may be innovating. But the part where they’re breaking the law isn’t innovation. Criminals have been doing that since laws were invented.

    • J. F.

      Maybe this is an opportunity to recognize that these are bad laws that should be repealed.

      • Vroo (Bruce Leban)

        There are people who work to change laws they disagree with — like I-502 proponents. There are others who just break the laws they disagree with — like drug dealers.

  • Bryan Mistele

    Let’s be honest. “Unregulated” means “untaxed”. The fact that the city can’t collect a tax against these new innovative service, and that unions can’t control them, is what has the left so upset. The regulations were enacted to establish a government run monopoly on taxi services operated by the unions. Uber and others are great examples of how innovative thinking and products advances a society. These are great, convenient, safe services, but the left and the unions are trying to protect their monopoly through regulation much like the buggy manufacturers did at the turn of the last century when the automobile was introduced.

    I can’t imagine how Seattle will continue to be though of as a high-tech center of innovation by being known as the city that bans Uberm Lyft and Sidecar.

    • Vroo (Bruce Leban)

      Let’s *really* be honest. “Untaxed” doesn’t mean there are no taxes, it means that only the law-abiding services are paying the taxes.

      When you cheat on your taxes, it means that those who are paying the taxes they owe are carrying your load.

    • ClaimsAdjuster

      Let’s be honest. Shirking their taxes is only part of it. “Unregulated” means that UberX, Sidecar, Lyft gain advantage by cutting corners on insurance and not having to pay the license fees and L&I premiums to cover their drivers that their competitors do.

    • That Guy

      Poor yuppie techno geeks! They might have to ride in a cab driven (gasp!) a black person, and (argggh!) that carried a poor person! Oh noes!

  • dollared

    There’s innovation, and there’s regulatory arbitrage. These companies are the latter. As soon as they provide the same level of service, at the same rates, to all areas and income levels, as the taxi companies, then they can put the taxi companies out of business. Until then, they are skimmers – they are little Enrons

  • That Guy

    It’s not “ride sharing.” Uber, Lyft, and Sidecar drivers SELL rides, same as Green, Yellow, Orange, etc. Use of the “sharing” term implies that the new entrants are more benevolent. The opposite is true. They don’t have insurance that covers passengers, pedestrians, and other drivers, and Uber in particular jacks up its rates EIGHT FOLD during rush hour in New York.

    These new companies are pirates. They are funded by greedy techno geek venture capitalists who aren’t don’t want to be in the taxi business but are rather in the software business. That’s fine as far as it goes, but like it or not the companies are operating taxi dispatch, and as such they should be subject to the same rules that apply to all other hire cars.

    As far as supply and demand balance goes, there are two things to say. First off, Seattle tried complete deregulation in the 1980s, and so did some other cities. It was a disaster wherever it was implemented, including here. Drivers were sleeping in their cabs; service standards plummeted; ripoffs were legion. In this city, the taxis were re-regulated within two years, at the request of hotels and restaurants whose customers needed honest, reliable taxi services.

    Secondly, there are plenty of studies out there available to anyone who cares to search for them. The consensus is that taxi deregulation doesn’t work. Remember, the greedy venture capitalists don’t actually care about what happens to taxi service here or anywhere else. They are in this for an “exit strategy,” which is to say to take their dispatch software companies public, or sell them privately, at huge markups.

    Let’s hope that Seattle doesn’t fall for their self-interested propaganda.

    • Eric LeVine

      The troll is back. The troll is back. The troll is a taxi driver. Move to Utah Mr. Taxi Driver.

      • That Guy
        • Eric LeVine

          Move to Utah cabbie.

          • That Guy

            “Encore! Encore! You’ll sing it until you get it right!”

          • Vroo (Bruce Leban)

            And just to be fair: this personal attack is also uncalled for.

          • Eric LeVine

            Bruce, are you reading?

          • Eric LeVine

            Haha. Troll.

          • That Guy

            Haha, Microsoft jerk.

          • Eric LeVine

            What is your goal here? To just add to an ever growing list of insults? I very proudly worked at Microsoft for 13 years.

            Why are you afraid to use your real name? What do you WANT out of all this other than to just offend people?

      • Vroo (Bruce Leban)

        Hey, Eric. Even if “that guy” is or was a taxi driver, your ad hominem attack is uncalled for. Does the fact that you used to work at Microsoft render you a troll anytime you make a positive or negative statement about that company?

        If you have rational arguments against what he said, let’s hear them.

        • Eric LeVine

          Look up his comments on a prior article on this topic. Then tell me about ad hominem attacks. I am not going to waste my time trying to make a rational argument with a troll, and if you spent even 30 seconds reading his comment history you would understand. I expect a lot more attention to detail from you Bruce.

          • That Guy

            Eric, have you been hitting your wine cellar again? Are you drunk, or are you just another arrogant techno geek CEO? You people are just soooooooooo obnoxious. Want to know why normal people just despise the techno geeks and wish you’d all move to California where you belong? Go look in the mirror, a-hole.

          • Eric LeVine

            Why are you so utterly abrasive? There are actually some very good points (that favor your POV) in this comment thread, but you just blast away, shock and awe style, with seemingly no intent other than to deride or offend. You have called me a racist, an asshole, a kike (really nice, since edited out), an elitist, arrogant, geek. Do you think that will elicit a constructive response? What is your goal here? Just to piss people off or to actually sway opinions?

            As a consumer, I happen to be a big fan of UBER (and Car2Go) and have used each many times in a variety of cities. That said, if any of these companies are doing things that are illegal or create issues, that doesn’t mean I will just turn a blind eye.

            So what do you want other than for me to die and/or move to California?

          • That Guy

            For the record, I never called you a “kike,” edited or otherwise. I stand by everything else.

          • Eric LeVine

            You really do like to edit your responses quite a lot. This one seemed to change 4 or 5 times since you originally posted it.

            By the way, what exactly did you mean when you called a poster here a “shyster” or told someone that “Your tribe is narrow and selfish.” That’s a fascinating choice of words. Code in fact. Very specific anti-Semitic code. You should be more careful. You have also played the race card a dozen times in your comments.

            What is your goal here other than to insult and inflame? Please do enlighten us.

          • That Guy

            I never called you a “kike,” period. I don’t do that. I would never do that. I have a low regard for anti-Semitism, to put it ever so mildly.

            “Shyster” is defined (by Merriam Webster) as “a dishonest person; especially : a dishonest lawyer or politician.” How is that anti-Semitic? Is it because is traces back to Shylock, who I believe is a Jewish moneylender in a Shakespeare play I’ve never seen? I do believe that the language has changed a bit since then, don’t you?

            Tribe? Yes, tribe. Meaning kindred group. How is that anti-Semitic? As in “the 12 tribes of Israel?” If that’s where you’re going, it’s quite a reach.

            Yes, I edit my responses to make them more accurately reflect what I mean to say. This is a problem? I don’t think so. Again, I never called you a “kike.” I might even say it’s beyond the pale for you have alleged that I did, but of course that could also be anti-Semitic in your eyes, because the phrase originally referred to “the pale of settlement” in the late middle ages, beyond which Jews weren’t allowed to go.

            Bottom line: You won’t stop at anything. Reminds me of the woman in the other thread who talked about how she’s afraid of being sexually assaulted in a taxicab driven by one of the incumbents. When I wrote that, as the new entrants become more popular, the rapists would move there too, she accused me of having a rape fascination.

            I am increasingly convinced that the new entrants are using shills of all kinds to throw ridiculous charges at the incumbent operators and anyone who doesn’t support the new companies. I’ve already been called a pervert and an anti-Semite. I wonder what’s next.

          • Eric LeVine

            Well maybe you didn’t write kike, although I am convinced I saw it flash by. You do seem to edit every post 4 or 5 times. If you say that you never did then fine, I will take you at your word.

            The thing I still don’t understand why you are so aggressively throwing around insults and swears. It is unbelievably hostile and abrasive, and it detracts from any substance in your arguments.

            I have already said I am a fan of UBER (many positive consumer experiences) and not a big fan of Seattle taxis (many negative experiences, pretty much all just having a hard time getting a cab to come when they say they will). Nonetheless, I have seen another side in many of the comments here that point to some troublesome aspects of the new entrants. I just don’t think you are helping your cause by crapping on me and others so aggressively.

          • Eric LeVine

            By the way, being a paying consumer doesn’t make me a shill. I am not in investor in any of these companies. I don’t have investors. I am purely wearing my consumer hat. Sometimes it makes sense to listen to consumers instead of accusing them of being shills or pointing flamethrowers at them…

          • That Guy

            If you saw the word “kike” flash by, you did not, not, NOT see it under my moniker. I could rattle on about that, but all I’d do is wind up being maudlin. You did NOT see it from me. Of all the things I’ve read on this site, that particular allegation bothered the most, by far. You did NOT see that from me. Not ever.

            I don’ take a position one way or the other about Seattle taxis. I use Orange to go to the airport and I use whoever’s there to come back. They are a mixed bag, as most taxicabs are.

            I have written the following before: I have no problem with new entrants, whoever they are. Ordering on on a smartphone doesn’t thrill me, but then my smartphone doesn’t especially thrill me either. Maybe it’s because I have an Android, and Androids leave a fair amount to be desired in the real world.

            In any case, different strokes. If a new entrant or three makes waves by allowing smart phone dispatch, and if that winds up being a competitive advantage, fine. Let the market decide that one, although I personally will want to make a phone call to a human being. But who knows, maybe that will change. I buy a lot on the Internet, and maybe I’ll buy taxi rides that way.

            My biggest issue is the level playing field. Uber says they have insurance buy they don’t want anyone to see the policy. That’s bullshit on a stick, especially when their website explicitly disclaims any liability. The others don’t appear to have insurance. Everyone in the commercial ride selling business should comply with the same insurance requirement, and the policies should be disclosed. I would impose the same requirement on the incumbents.

            There are a bunch of other regulations. We can argue whether or not those regs are worthwhile. But I do not accept the idea that some operators should be exempt. That’s special privilege, and it’s not sufficient to call your taxicab company a “ridesharing” outfit and to put moustaches on the front bumper.

            Stepping back and looking at my invective about techno geeks, I do that because these new entrants have been described in terms far, far too glowing for my taste, especially when they are basically trying to skim the cream off the top of the market while redlining out the poor. I also look quite dimly on their variable pricing structure, which I think is gouging, plain and simple.

            The techno geek promoters are wrapping all of this in the boosterish rhetoric of innovation. Yes, there’s some innovation in the method of dispatch, but that’s all. The rest, to me, is just classic techno geek promotionalism. Someone has to call bullshit on it, so that’s what I’m going. Unfortunately, too many techno geeks think their shit doesn’t stink. Guess what? It does, and someone needs to call things by their real names once in a while.

            But, once more, I did not EVER call you a “kike.” All other wrangling aside, that one offended the living hell out of me. I’m tempted to go into my whole maudlin speech about how much I detest anti-Semitism and exactly why I do, but it is maudlin and it could look like a cheap effort to curry favor. So please just take it on faith that I would NEVER, EVER even THINK of doing that. EVER.

          • Eric LeVine

            Thoughtful and substantive response appreciated. I must have been mistaken about the slur.

  • ClaimsAdjuster

    The author’s argument that “union taxi drivers” are a factor in this debate is a joke. Taxi drivers are not employees- they are independent contractors- and cannot be represented by a union. It is true that some Yellow cab drivers and taxi owners have formed a quasi-union somehow affiliated with the Teamsters. But this union is acting as an industry lobby that is going after any competition to taxis, whether they are legal such as For Hire Vehicles, or illegal, such as the TNCs. Don’t expect these “union taxi drivers” to be going on strike , bargaining with Yellow cab or doing any of the things that real unions do.

  • linc321

    I heard an interview with a woman who manages one of the ride sharing groups, and I suddenly understood another reason the cab companies seem to be so hot to regulate ride sharing. She said that they’ve had a number of cab drivers switch to driving for their service. The cabbies get to make more money each month, because they don’t start out in the hole. That looks like more incentive for cab companies to cry foul.