Idled for Now, ‘Rideshare’ Apps Offer Free Rides

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The now-famous pink mustache, Lyft's calling card. Photo by Iris Dimmick.

The now-famous pink mustache, Lyft's calling card. Photo by Iris Dimmick.

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.

Lyft screenshot courtesy of Iris Dimmick.

Lyft screenshot courtesy of Iris Dimmick.

“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.

Ainsley O’Connell sums it up well in her article for Fast Company:

‘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.

Lyft drivers Darren Murphy (right) and Marcus Wennrich hold pink mustaches as they wait amid a sea of taxi industry workers. Photo by Iris Dimmick.

Lyft drivers Darren Murphy (right) and Marcus Wennrich hold pink mustaches as they wait amid friends and a sea of taxi industry workers. Photo by Iris Dimmick.

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.

John Bouloubasis, president of Yellow Cab of San Antonio addresses the Public Safety Committee on the safety risks of "rideshare" apps. Photo by Iris Dimmick.

John Bouloubasis, president of Yellow Cab of San Antonio addresses the Public Safety Committee on the safety risks of “rideshare” apps. Photo by Iris Dimmick.

“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.

TechCrunch’s Anthony Ha reports:

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.

Taxi drivers and media crowd the Public Safety Committee meeting room. Photo by Iris Dimmick.

Taxi drivers and media crowd the Public Safety Committee meeting room. Photo by Iris Dimmick.

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.

SAPD Chief McManus listens to the citizens signed up to speak at the Public Safety Committee meeting regarding "rideshare" companies in San Antonio. Photo by Iris Dimmick.

SAPD Chief McManus listens to the citizens signed up to speak at the Public Safety Committee meeting regarding “rideshare” companies in San Antonio. Photo by Iris Dimmick.

“‘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.”

Related Stories:

Car Share Conversation Now on City’s Agenda

Dear Chief McManus, Let’s Welcome Lyft to San Antonio

San Antonio and The Green Dividend

10 Steps to Hit the Reset Button on VIA’s Modern Streetcars

12 thoughts on “Idled for Now, ‘Rideshare’ Apps Offer Free Rides

  1. Good article Iris. What will be probably more of an issue will be the fees the city will need to charge to get at least close to “level playing field.” All the cities with TNC regs in place are either charging or getting ready to charge fees for things like licensing or airport pickup. Seattle is requiring a $50K network license fee per company and $50 per driver.

  2. Thank You Iris! It’s section 1501 on page 156 titled Real-Time Ridesharing.

    It’s unusual that they’re enforcing something that really hasn’t been put in the books yet. The existing ordinance on the Municode website covering Vehicles for Hire and has Taxi Cabs, Pedicabs, Tour and Charters Services, Limosines as well as Horse-Drawn Carriage services covered. All of these separate services have their own fees, taxes, insurance requirements, fare requirements and so forth with Taxi Cabs being the most regulated service.

    Is Mr. Baum really using section 1501 to enforce an ordinance that doesn’t apply? When an ordinance is ambiguous, it must be interpreted to give effect to the legislative intent. This ordinance is in relation to Ride-Sharing is ambigious.

    How can they enforce something without the appropriate amendment?

    Man I can’t wait until technology replaces the need for legal services!

  3. Also, Chicago in its hope to become a hub of innovation (just like San Antonio) is okay with unregulated ride-sharing (for now). I hear a lot of talk but no action.

    Actions speak louder than words and this controversy reminds of the most recent issues surrounding food trucks and pedicabs. Our leaders spoke up and applauded the new markets only to have those same markets swallowed in a tidalwave of regulations and enforcement.

    I don’t think we’ll be able to evolve for some time. Our archaic system needs a boost. Thankfully, the privatization of industry is changing markets for the better. Yes, some things should not be privatized (Prisons) but other things like space exploration should be encouraged. If San Antonio is to evolve we really, really need some introspection.

    Self Regulation is a key to this equation and lyft and uber have done that. Why are we standing in their way?

  4. David, actually that self-regulation is not cutting it for cities around the nation. I just completed a blog entry about the state of things with TNCs. There is no way this will move forward without some level playing field. Based on the comment from Uber, it appears the TNCs are trying to be the Walmart of For Hire transportation, even after getting over a quarter of a billion in funding.

    What are you referring to regarding Section 1501? I can’t find it in the City Code so if you can provide reference to what you cite.

  5. The Lyft drivers are always open for discussion, but they called us cockroaches, called local drivers an invasion and all kind of negative words.
    One speaker even discriminated men that like to wear pink, I hope that the public wakes up after all these negative and offensive comments and sees that people that speak such words shouldn’t be allowed to be the greeters for San Antonio.
    I don’t want that my friends will be welcomed at the airport with the words: We had men that wear pink.

  6. Self-Regulation is important. Do you remember Henry Ford, he was the king of self regulation (See Fordism). Yes, it isn’t perfect and both government and markets should work together. My point is that it can work. The quote by Arun Sundararajan (in the article below) best represents my point –

    Yes, we should have a fair playing field. That playing field is called the free market where goods and services are chosen based on the companies ability to provide services efficiently, quickly and at a low cost. Some companies have advantages over others so it’s important to

  7. Huh..I am sure this is coming, if not already here in some form, to my small city. I am hoping the taxi companies invest in smart phones for their drivers, get them trained and develop some kind of new system for them. A level playing field goes both ways.
    However, I work at the parks operations division in my city and to this day we have some staff (great workers, not cockroaches) that refuse to carry cell phones or keep them off because the technology is just to confusing and annoying to them.
    Our taxi drivers might no be so lucky to keep their livelihood without some innovative changes to keep up with the coming competition. They need to start preparing now for those coming opportunities and niches.
    Thanks for this great article Iris.

  8. So David, to create a level playing field are you suggesting eliminate the fees currently imposed on the taxi companies in San Antonio? Honestly, I’m not seeing a lot of real information from you on this. Just a lot of links to ideologies. Does self-regulation take care of issues like over capacity? Our airport can only handle so many vehicles. How is that managed? Who manages inspections of the vehicles? BTW, if you’ll notice in my blog entry, during the HOU sting operation, a vehicle slipped by Lyft’s stellar inspection with an expired TX inspection sticker.

    My suggestion is for you to research the actual market we’re discussing here and give the ideology a little rest.

  9. The Taxi companies are serving a niche audience (see recent RR article about this) so they’re really not on the same playing field. So no, I don’t support the elimanation of fees. As it stands, there are two ride sharing companies and I don’t know how many taxi companies and transport companies in total.

    They (the Taxi companies) have had too much time in the market and have too much leverage. How can you say that Taxi companies should get a cut in fees? They have too much control of the market. It’s crazy that they are even arguing about this. They even have their own lobby.

    Their job is transportation. That is it. Yet I have seen them playing games (at game parlors), eating inside restaurants, and enjoying a level of complacency that is far different from their peers in other transportation industries.

    I was a truck driver for two years from the beginning of 2011 to the end of 2012 in the Eagle Ford. I worked hard for the money I earned. I didn’t enjoy a whole lot of breaks. If I wanted to eat I would go in and get out within a few minutes. I barely enjoyed any time off and I received just compensation for the time spent. I know my time is valuable.

    How can you support members of the industry who are complacent about their roles? How can you support regulators who are indulgent of a stagnant industry?

    The people who could not show up to protest may be the same people who were out there at that very moment earning a living.

    For the other issues, we faced those problems with the taxi industry and have learned from it. The ride sharing companies will learn from it. Self Regulation isn’t quick and doesn’t happen right away. It takes time just like everything else. My point is that self regulation is important. It’s not an idelogy.

    The fact is that industries and government must hold themselves accountable.

    The free market plays a vital role. The problem is that we don’t hold each other accountable for our actions and some of us ask the government to address our grievances with regulation. Power continues to maintain a good grip and society loses ground. I believe entrepreneurs play a vital role in the destabilization of power (or the status quo as some people call it). New markets form and new rules must go up. It’s a daunting process that I don’t care for.

    Everyone in this free market is responsible.

    – The consumer must ask questions, get to know the driver, verify responsibility (insurance), so on and so forth.

    – The driver should maintain the vehicle (license, insurance, inspection, tire rotation, oil changes, etc.), build rapport with the customer, understand maps and road conditions, and so on.

    – The company (Ride Sharing) should maintain the application, maintain lists of drivers, maintain insurance, respond to customer complaints immediately, maintain list of qualifications of drivers and so on.

    It’s a whole new market with its own set of opportunities and problems. Problems will happen. It’s a fact of life. It’s unnecessary to argue about all of this.

    I’m just worried about overregulation. Sure, add some costs to doing business. That’s what governments are for. How does it add to public safety? I have visited lots of inspection stations. Do you believe inspection stations are perfect? Do you know these inspection stations fail often and the vehicles inspected are on the streets right now? You assume that the system is perfect, without fail. This is not true.

    Ideology – a system of ideas and ideals, esp. one that forms the basis of economic or political theory and policy.

    Yup, it’s ideology!

  10. My feelings for on the free market is an ideology while my thoughts on the self regulation isn’t ideology, but fact.

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