Honolulu Passes Bill to Cap Uber, Lyft Surge Prices

The city and county of Honolulu becomes the first government agency in the nation to pass a bill that caps fares charged by ridesharing services.

by / June 7, 2018
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 Amid a packed council chamber Wednesday, Honolulu’s city council passed Bill 35 which puts a cap on ridesharing fares charged by transportation network companies (TNCs) like Uber and Lyft.

The Honolulu City Council’s 6-to-3 vote will now move over to the mayor’s office, giving Mayor Kirk Caldwell 10 days to sign the bill into law, veto the bill, or allow it to become law without his signature. 

Constituents voiced their opposition and support for the bill during its third reading, which lasted more than an hour. Those in attendance included taxi drivers, toting signs calling for “equal rights for taxi drivers,” TNC drivers and TNC riders. 

Should the bill become law, Honolulu’s director of customer services will be tasked with establishing a cap on TNC fares above the current taximeter rate and the certain requirements needed to avoid abiding by that cap. The task of setting a cap will be extremely difficult to determine and implement, according to the agency’s deputy director, Randy Leong.

Crunching the Numbers

Leong repeatedly told council members, “the department is in opposition to setting a maximum fare.” He explained consumers can see the price of the fare before they choose to accept a TNC ride and that setting a cap will be challenging given there is no precedent, guidelines or benchmarks for the department to follow.

"It would be difficult to determine the maximum fare given we are new to this. We just don't have the knowledge at this point of where to begin," Leong told councilmembers at the meeting. 

When councilwoman and floor leader Carol Fukunaga questioned how the department can set a cap for the taxi industry but find it challenging for the TNC industry, Leong responded that the TNC industry uses algorithms to set fares.

Representatives from the TNC companies also attended the council meeting to express their opposition to the bill. Timothy Burr Jr., Lyft director of policy, and Tabatha Chow, senior operations manager in Hawaii for Uber, spoke of the jobs their TNC companies create for Hawaii, as well as the transparency in fares it provides to users who can then decide whether to go with a TNC driver or a taxi cab.

"The imposition of a maximum price threatens and undermines Lyft's reliability by removing incentivies for drivers to respond to the areas with the highest demand," Burr told council members. "With zero complaints to the department of customer service on pricing, this bill is uncessary and a step backwards."

Uber, which serves more than 300,000 local riders on the island of Oahu with its pool of more than 3,000 drivers, generally charge 40 percent less than taxicabs, Chow said. She acknowledged surge pricing generally occurs during rush hours, weekend nights and when major events are held, but as more TNC drivers sign in during those times the surge pricing edges down.

"Bill 35 is a solution in search of a problem," she said. "It restricts innovation, limits consumer choice and imposes a regulation that doesn't exist anywhere else in the country."

TNC Drivers and Taxi Drivers Face Off 

TNC drivers expressed concern that the supplemental income from serving as an Uber or Lyft driver would be reduced as a result of the cap. But their greatest fear was that Uber and Lyft would pull out of Honolulu County, as the result of the bill’s passage. 

However, Councilman Trevor Ozawa told the attendees he received direct word from both companies that they would not leave the island should the bill pass. Ozawa made the observation that should one TNC ultimately leave, the other would reap the benefit created by its competitor’s departure.

Taxi drivers pointed to a steep drop in business they have incurred since Uber came to Oahu in 2013 and how some have not only quit the business but also taken their life as their finances were squeezed.

Debbie Buono, head supervisor for TheCab company, asked council members when during the meeting why TNC riders are penalized because TNC companies do not have adequate driver coverage during peak periods. She compared it to a local grocery store raising its rates between 10 p.m. and 6 a.m. because they did not have enough people to staff the store.

Other speakers included TNC riders who noted that they understood the reason for surge pricing, which is based on supply and demand, but added it afforded transportation at times when it may be difficult to hail a cab because of the time of day, dicey location, or because of a major event in town.

Council Members Face Off

Price gouging, especially of military members, was repeatedly expressed by councilwoman and vice chair Kymberly Marcos Pine, a strong supporter of Bill 35. In addition to pointing to an example of a surge price fare of over $200 for a ride that typically costs roughly a quarter of that, Pine questioned the fairness of holding taxi drivers to a cap and regulations while allowing TNC drivers to operate without such restrictions.

But councilman Brandon Elefante, who opposed the bill, stated TNC riders have the benefit of being able to see the cost of the ride before choosing to take it, compared to jumping into a taxi cab and not knowing the cost until the end of the ride. 

"I continue to have concerns about this bill," Elefante said. "I think we need to do more work on it and also there are several issues we have not addressed at all, so for these reasons I am not able to support this bill at this time."

Dawn Kawamoto Staff Writer

Dawn Kawamoto is a technology and business journalist, whose work has appeared in CNET's News.com, Dark Reading, TheStreet.com, AOL's DailyFinance and The Motley Fool.