You have probably heard of Uber, the app that lets you pre-arrange transportation from your smartphone. You may also have heard of its competitors Lyft and Sidecar. Uber, Lyft and Sidecar have described their services as "ride-sharing." They claim they are not a taxi company, or even a car service. Instead, they claim to provide "marketplaces" where drivers can offer their services and users can get a ride. Lyft even goes so far as to describe their users, on both ends, as a "community." It's "your friend with a car," according to the website - not a driver you are hiring.
There is an obvious tension in New York City, and around the country, between our traditional idea of a car service and the model that Uber, Lyft, and Sidecar provide. This is at the heart of the debate over government oversight and fairness to traditional car services, who are heavily regulated in New York City. The California Public Utilities Commission (CPUC) was the first to categorize Uber, Lyft, and Sidecar as an entirely new category of transportation services: transportation network companies, or TNCs.
The issue of what exactly a transportation network company is has plagued Uber and its competitors across over the country and around the world. So far, some city governments have embraced Uber and Lyft like they are the best thing since sliced bread, while other officials have been unimpressed by the companies' insistence that they are not providing transportation, and therefore get to skirt around regulations that are in place for the safety of the riding public.
Uber, Lyft, and Sidecar would rather have you think of them as technology company. As Uber wrote in a legal filing with the CPUC:
Uber operates no vehicles, and does not hold itself out or advertise itself as a transportation service provider. In fact and law, Uber does not provide transportation services of any kind and does not own, lease or charter any vehicles for the transportation of passengers. On the contrary, Uber is a technology company that licenses the Uber App to transportation service providers. The transportation service providers pay a fee to Uber to use its software technology; the passenger of the transportation service provider pays the transportation service provider for transportation services received.
Current car service owners in New York City, who have been in the industry for dozens of years have retorted that Uber’s claim to be a technology company is a farce. This is so because Uber sets the rates for both the passengers and the drivers. They collect the money and pay the driver. They hire the drivers. They blackball undesirable passengers. They tell their drivers where the best places to pick up are and, if the drivers don't pick up a high enough percentage of the fares, Uber fires them. But Uber isn't in the transportation business. Right!
Some believe that government agencies and regulators who agree with Uber’s take that they are a technology company are likely to be in the pockets of politicians who make the laws and government regulators who have resisted the calls of the traditional car services to subject Uber to the same regulations as any other car service.
While Uber disclaims that it is a “transportation company,” Uber has previously referred to itself as an “On-Demand Car Service,” and goes by the tagline “Everyone’s Private Driver.” Indeed, in commenting on Uber’s planned expansion into overseas markets, its CEO wrote on Uber’s official blog: “We are ‘Everyone’s Private Driver.’ We are Uber and we’re rolling out a transportation system in a city near you.” Other Uber documents state that “Uber provides the best transportation service in San Francisco . . . .” Moreover, Uber does not sell its software in the manner of a typical distributor. Rather, Uber is deeply involved in marketing its transportation services, qualifying and selecting drivers, regulating and monitoring their performance, disciplining (or terminating) those who fail to meet standards, and setting prices.
The central premise of this argument is Uber’s contention that it is not a “transportation company,” but instead is a pure “technology company” that merely generates “leads” for its transportation providers through its software. Using this semantic framing, Uber argues that its customers buy dispatches that may or may not result in actual rides. In fact, Uber notes that its terms of service with riders specifically state that Uber is under no obligation to actually provide riders with rides at all. Thus, Uber passes itself off as merely a technological intermediary between potential riders and potential drivers. This argument is fatally flawed in numerous respects.
First, Uber’s self-definition as a mere “technology company” focuses exclusively on the mechanics of its platform (i.e., the use of internet enabled smartphones and software applications) rather than on the substance of what Uber actually does (i.e., enable customers to book and receive rides). This is an unduly narrow frame. Uber engineered a software method to connect drivers with passengers, but this is merely one instrumentality used in the context of its larger business. Uber does not simply sell software; it sells rides.
A United States District Judge in the Northern District of California recently said in a court decision that”
“Uber is no more a “technology company” than a Yellow Cab is a “technology company” because it uses CB radios to dispatch taxi cabs, John Deere is a “technology company” because it uses computers and robots to manufacture lawn mowers, or Domino Sugar is a “technology company” because it uses modern irrigation techniques to grow its sugar cane. Indeed, very few (if any) firms are not technology companies if one focuses solely on how they create or distribute their products. If, however, the focus is on the substance of what the firm actually does (e.g., sells cab rides, lawn mowers, or sugar), it is clear that Uber is most certainly a transportation company, albeit a technologically sophisticated one.”
TNC’s have been operating in many states by thumbing its nose in the air and laughing at government regulators. These TNC’s are taking advantage of loopholes in local laws to sidestep regulations that protect the public, drivers and others. Although they purport to provide “ridesharing” services or be the provider of a “marketplace”, the business model of TNC’s is in direct violation of any traditional understanding of ridesharing and the means by which transportation is provided and regulated, especially in the City of New York.
In New York City, some people still use a telephone to call a car service for pre-arranged transportation, while others use smartphone app created by the TNC. Some car services in New York City actually have their own smartphone application, just like the TNCs, that allows the customer to pre-arrange transportation. But in New York City, the traditional car service that has its own smartphone application is subjected to a whole set of arcane rules and regulations, while the TNC’s are not. This is truly a distinction without a difference.
The laws that apply to car services and their drivers require measures to safeguard the safety of the public who uses such services. Our elected officials must provide a public policy rationale that justifies having two sets of standards. One for car services and one for for TNCs. Politicians like to support TNC’s because the reference to innovation is sexy and these TNC’s are heavily funded and are able to pay for access to elected officials who make the laws. They also have access to high powered and costly lawyers who can go into court to defend their claims of being the creator of a “marketplace”, rather than what they actually are, which is just another provider of transportation, albeit a technologically savvy one. A passenger’s safety in one vehicle should not be any less valuable based on arbitrary differences.
At the end of the day, the fundamental acts of either a TNC or a car service are essentially the same – a passenger entering a vehicle, either pre-arranged or hailed by a smartphone app, and then being transported from point A to point B. There are no other differences between traditional car service and the new TNCs. The only difference is the manner in which transportation is arranged. Either the TNC’s must be subjected to the same regulation as the other car services in New York City or the traditional car services must be freed of the vice grip that the NYC Taxi and Limousine Commission has placed on them over the years and continues to do so despite their insistence that TNC’s should be treated differently. To do otherwise would not only be unfair and irrational, but would jeopardize the safety of the riding public.