According to R Street Institute, a public policy think tank that promotes free markets and effective government, “Upstart transportation-for-hire companies like Uber, Lyft and Sidecar have attracted millions of riders, rattled competitors and upended markets with the whirlwind forces of creative destruction. Their success has sparked heated debates in city halls across the country, as lawmakers grapple with antiquated transportation regulations and their many self-interested defenders.”
A prominent example of the new sharing economy, wherein people rent beds, cars, boats, tools, bikes and other personal property directly from the owner via smartphone application, the free-market entrepreneurial objective is twofold:
• Disintermediation — aka the removal of middle men
• Disaggregation — the marketing of spare personal resources as consumable goods and services
Juliet Schor, professor of sociology at Boston College and Distinguished Visiting Professor at the Radcliffe Institute, Harvard University, in her article, “Debating the Sharing Economy,” sees this app-enabled, peer-to-peer economy as a powerful new force of commercial exchange “centered on genuine practices of sharing and cooperation in the production and consumption of goods and services.”
But, as she challenges, achieving that egalitarian potential requires “democratizing the ownership and governance of the platforms,” which is where regulation comes in.
Mayor Paul Soglin of Madison, Wis., explained it this way in a blog last year:
“A major function of government is to bring equity to the market place and to ensure the health and safety of the public … Cities like Madison … have regulatory standards for taxi cab companies designed to protect the public … Uber and Lyft refuse to meet these standards … choosing to muscle their way into the Madison market … (and) have no ability to provide equal transportation to people with disabilities, which is inconsistent with our ADA and EO ordinance.”
In response, Uber and other transportation networking companies assert that they are not, by legal definition, transportation companies. They are technology companies, and thus exempt from public transportation regulations.
State of Michigan Senator Rick Jones disagrees. In March this year he spearheaded Senate Bill 184 to regulate Uber drivers.
“MDOT has told Uber ‘You are not licensed to operate in the state, that you are violating the law, and you need to stop all operations immediately.’”
“Applying an antiquated regulatory framework to this new industry is a backward-looking approach and will stifle innovation and economic growth in Michigan,” countered Uber said in a March 15 statement to 24 Hour News 8. “These bills reflect a misunderstanding of our business model.”
Yet things are rarely simple when matters of liability are involved. One of the most contentious issues of the ride sharing conundrum revolves around who covers what when accidents occur.
The city of Des Moines, Iowa, had no warning that Uber was launching its ride sharing service in September 2014.
Deliberating the issue, Des Moines officials took a chilling look at tragic circumstances in another state where an Uber driver, on the way to pick up a fare, hit and killed a pedestrian. Since the Uber app does not get activated until the passenger enters the driver’s car, the commercial insurance that Uber provides was not in effect. However, since the driver was en route to pick up a commercial fare, the driver’s personal insurance provider was also exempt from liability because the vehicle was, at that moment in time, being driven for commercial purpose.
In Akron, Ohio, as elsewhere, another bone of contention is surge pricing. Also referred to as dynamic pricing, transportation network company fares increase during peak demand. Municipalities have taxi regulations to protect the consumer, which require that rates be posted and can only change periodically. It is alleged that surge pricing encourages price gouging by unscrupulous drivers who can fabricate higher demand by intermittently turning the app off , thus fooling the system into upping fares because fewer drivers are available.
Still, TNC passengers are typically happy with the service.
Illustrating the turbulent regulatory sea, in January of this year Chattanooga, Tenn., adopted code spelling out requirements for all TNCs operating within its jurisdiction. By June, local ordinances were trumped by state laws that allow TNCs to operate statewide.
With terms agreeable to both the TNCs and insurance companies, the Tennessee legislation — which took effect in May — was one of the first collaborative negotiations brokered by legislators. Tennessee State Senator Bo Watson, the primary sponsor of the bill, told media that he sometimes grabs rides with Uber or Lyft and believes that ride sharing “is representative of the new economy that we’re all experiencing where business is done over a smartphone, business is done over a computer and government’s trying to adapt to that.” Still, this win-win potential is not readily embraced by cab and limo companies.
Raleigh, N.C., is exemplary of the cities where TNCs thrive. Th e high population of college students and young professionals but lack of extensive mass transit makes it prime ride sharing territory. It’s also one of many states where little regulation exists outside of traditional cab and limo services.
“We’re seeing all over the country that cities and states are taking interest in companies like Uber because what we’re seeing is that consumers are flocking to these new technologies,” said Rachel Holt, Uber’s regional general manager for the East Coast, told North Carolina lawmakers. “We’re very supportive of reasonable, commonsense regulations.”
In Richmond, Va., new statewide guidelines took effect July 1 this year with high hopes of mitigating concerns and disambiguating considerations, which stem from long-held commercial ideologies that everyone who transports a passenger for a fee, no matter how that fee is collected, should be held accountable to the same standards and that to do otherwise is unfair to the taxi industry.
Th e new regulations mandate background checks for drivers, disqualify drivers with a history of driving under the influence or other serious moving violations, stipulate zero-tolerance policies regarding the use of drugs or alcohol, require all TNC drivers be 21 or older and to maintain at least $1 million of liability coverage from the moment a trip request is accepted until the passenger leaves the vehicle.
Virginia Governor Terry McAuliff e has noted publicly that when the laws governing taxi services were originated, the concept of ride sharing services did not exist. Virginia, like other cities and states, is test-driving regulations that allow the such innovations to coexist with protections for users and the proper local and state oversight and remuneration.