David Meyers was in New York on business last spring when his travels took him to a dicey area of Brooklyn for a meeting. After the appointment, his hosts ordered him a ride back to the subway.
He went outside to wait, expecting a cab. “I’m standing out there, like at the edge of the earth,” said Meyers, a Gaithersburg resident. “This guy drives up in this late-model Camry. He had no light. No meter. Nothing.”
Meyers’ hosts had called Uber, one of a number of so-called ride-sharing companies that have sprung up in the last five years. Uber, Lyft, Sidecar and others use a cell phone app to connect riders with drivers using their own car. Payment is conducted electronically. Ride-sharing businesses are becoming a worldwide phenomenon, but this was Meyers’ first experience, and he was nervous about stepping into the unmarked car.
“I walked around his car several times. He showed me his registration. I just couldn’t get it through my head.”
That first-time experience is becoming increasingly rare as Uber and its rivals move into more cities. Ride-sharing has been embraced particularly by young urbanites, for whom calling Uber is as natural as sending for a pizza.
With its quick response time, clean cars and cheaper prices, Uber, the most high profile of the services, has upended the traditional urban taxi system in every city it has entered. Uber’s policy is to begin operating in a city and let the law catch up with it. This has led to pushback, especially from taxi companies which have the most to lose in the short run from Uber’s surge. But where some see chaos, as Uber takes advantage of regulatory gray areas, others see a new order being born.
In Pennsylvania, Uber and Lyft briefly became an electoral issue on Sept. 5 when Gov. Tom Corbett (R) said he supports the ride-shares in the state.
The city of Pittsburgh has written in support of Uber to the state Public Utility Commission, which has granted Uber and Lyft temporary permission to operate locally. But two administrative judges with the PSC recommended that the ride-share companies be denied a permanent license.
The Philadelphia Parking Authority, which regulates cabs and limousines, meanwhile, conducted a sting operation against UberX (the cheapest version of Uber), which the PPA said is operating illegally in the city. On a Saturday night, the agency impounded the private cars of five Uber drivers.
Last week, the D.C. Council passed what has been called model legislation for normalizing Uber and other app-based ride-sharing services. Approved Oct. 28 by a vote of 12-1, the Vehicle-for-Hire Innovation Act of 2014 said drivers must be 21-years-old and pass a criminal background check going back seven years. Drivers must also carry liability insurance and register with the D.C. Taxicab Commission.
Taxi drivers, who opposed the bill because they said it creates an uneven playing field, immediately launched a protest. It did not garner any popularity for the cabbies, who had just been hit by the news of an undercover operation by the District of Columbia Taxi Commission. It found that of 308 rides tested over a 30-day period, drivers didn’t stop for 27 percent of the people who wanted a ride. They included “African Americans and whites, males and females, and a range of ages, as well as an individual in a wheelchair and a person requiring the assistance of a Seeing Eye dog,” according to the commission’s report.
A host of questions
Dissatisfaction with taxis is certainly helping to fuel Uber’s rise. People are attracted to convenience, good customer service and low prices. The “sharing economy” promoted by Uber and others evokes the friendly give-and-take of equals.
But when Uber rolls into town, it brings with it a host of questions.
“This is perceived as a transformative change in mobility,” said Steven E. Polzin, director of mobility policy research at the University of South Florida. “The competition and prospects of better service are appealing. But I do caution people: it’s very early in the lifecycle of this technology.”
Uber says its drivers are not employees, but independent contractors who are making use of the Uber app. The company sets prices and takes 20 percent from each payment made to a driver, according to the company. (New UberX drivers in San Francisco must give 25 percent of its earnings to Uber, Forbes reported.)
Critics say that to keep its prices low, Uber shifts its business costs to its drivers. And it’s unclear whether Uber riders and drivers understand the rules of this new game. Or even what the meaning of “work” is.
In January, when an Uber driver in San Francisco struck and killed a young girl while on the way to pick up a passenger, he found himself in a loophole in Uber’s insurance coverage.
Uber requires its drivers to carry insurance and extends coverage to its drivers while they are working. The driver believed he was covered by Uber because his app was on and he was driving to pick up a customer. For Uber, he was not working because he was alone in the car – hence he had to rely on his own insurance.
As a result of the publicity the incident caused, Uber closed the insurance loophole in March: “Our standard $1 million insurance policy for UberX ridesharing covers from the moment a driver partner accepts a trip request, through the completion of the ride,” Uber spokeswoman Kaitlin Durkosh wrote in an email. “We also have a contingent liability policy when driver partners have the app on, but are not on a trip. When driver partners have the Uber app off, their personal policy is in effect.”
Unlike cabs, the D.C. survey notwithstanding, Uber drivers can choose their passengers. They can even rate them. So it’s questionable whether Uber will be a boon to people with disabilities or others whom a driver may find inconvenient.
“It’s not clear how [they] will deal with it,” Polzin said, “if every independent driver has to be handicap fitted. That alone could make or break the business model.”
Hardball tactics
The answer to leveling the playing field between taxis and ride-share companies is not to regulate Uber but to deregulate the taxi industry, said Stephen E. Schlickman, executive director of the Urban Transportation Center at the University of Illinois-Chicago. “Old services need to merge with what rideshare is doing. Cabs need to be deregulated – that’s how we level the playing field.”
The ride-sharing universe is in a flux, Polzin added, and could look very different in the future.
“These business models have yet to be proven,” he said. Uber’s driver fleet largely works part time to help make ends meet in a still-soft economy. “Can they find drivers when unemployment is 4 percent?”
Polzin said Uber’s “heavy lifting” in opening the market to ride-share companies could come back and haunt it. “It might make it easier for a newcomer” to move in and snatch Uber’s business.
Uber is ready for battle. In August it hired former Obama aide David Plouffe as senior vice president of policy and strategy. He joined the company just as Uber was caught trying to poach customers from competitor Lyft.
More recently Washington Post columnist Catherine Rampell worried about where these and other hardball tactics were leading.
“Nothing about their behavior suggests the ultimate winner of the ride-sharing wars will wield its power beneficently when it controls the market and can raise consumer prices at will,” she wrote. “Consumers will just be trading in one monopoly – loathed Big Taxi – for another, less regulated one.”
Schlickman said the situation will have to be watched closely to make sure that doesn’t happen. And it turns out that the ride-shares aren’t the only ones disrupting the status quo. Last month, Uber drivers in five cities turned on their apps and went on strike, calling for better working conditions and a bigger slice of Uber’s profits.
It was a token demonstration but a reminder that in a sharing economy, the sharing has to go both ways.
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@DavidHolzel
