IE 11 Not Supported

For optimal browsing, we recommend Chrome, Firefox or Safari browsers.

Uncertain Regulatory Road Ahead for Ride Services

Policy lags behind innovation, as some cities throw up regulatory roadblocks to Uber, Lyft and Sidecar.

Road Blocks for Ride Services: Lawmakers nationwide are grappling with how to regulate smartphone-enabled ride services like UberX, Lyft and Sidecar. Some bar them outright; others want them to comply with taxi rules, which the services say are too strict. Several states and cities may emulate California’s model, in which the Public Utilities Commission crafted guidelines to give the services a green light. Data via the San Francisco Chronicle

From coast to coast, regulatory roadblocks threaten to slow the fast-paced growth of Uber, Lyft and Sidecar even while the app-enabled ride companies muscle into new markets.

Lawmakers in more than a dozen cities and states demand more oversight over the industry. Cities like Miami, Las Vegas and St. Louis ban the services outright. Seattle is close to limiting each company to 150 active vehicles at a time, a cap the services say would cripple them. San Francisco supervisors are exploring whether to regulate the companies, even though the state's Public Utilities Commission already does so.

Regulators say they want to protect consumers by imposing standards on issues like insurance, driver screening and vehicle inspections. But the ride companies, all based in San Francisco, say some rules are simply fueled by a taxi industry unused to competition.

"By clamping down and being very restrictive and overly responsive to the taxi lobby, city councils will destroy this innovation," said Sunil Paul, founder and CEO of Sidecar. "Local cities have the power to shut us down, but they will be denying the people in their cities something valuable."

Some Cities Resist

Sidecar pulled out of three cities - New York, Philadelphia and Austin - after they started to impound its drivers' cars last year, he said. Seattle's proposed cap, slated for a city council vote this month, "will effectively shut us down," Paul said.

The debates demonstrate how lawmakers are constantly scrambling to keep pace with new technologies that upend established industries.

"Policy is always a lagging indicator," said April Rinne, chief strategy officer at Collaborative Lab, which consults on "collaborative consumption" - shared access to products or services. "Policies are drafted when a new social or economic behavior has taken root to the point it signals a cultural shift."

In the case of the ride companies, "if you regulate them like traditional businesses, you've killed them before they have a chance to get going, but there are issues of public safety that have to be addressed," she said.

Regulators are trying to decide whether to define the new services as taxis or technology enterprises.

"They are offering the same services we are; therefore they should abide by the same rules and regulations we do," said Al LaGasse, CEO of the Taxicab, Limousine & Paratransit Association, a trade group representing 1,100 companies with 100,000 vehicles. "Simply using a different device to order your taxi service" doesn't make a difference.

Not so, say the services.

"This is a fundamentally new model," said Erin Simpson, a Lyft spokeswoman. "It is not easily placed in an existing regulatory framework." 

Uber, Lyft and Sidecar let anyone request rides with a swipe of a smartphone app, which also handles credit-card payments. Rides for Uber, Lyft and Sidecar are provided by independent drivers in their own cars. Uber also offers black cars akin to limousine services.

The app-ride industry is fighting back hard. The companies spend big bucks on PR, advertising and lobbyists to try to craft favorable legislation. But their biggest weapon is to marshal their riders and drivers to show up at city halls, sign online petitions and bombard elected representatives with emails.

'The People Speak'

Corey Owens, head of public policy at Uber, said its fervent supporters, who contact lawmakers by the thousands to support bills that favor it and denounce ones that would hurt it, have a huge impact.

"When the people speak, the legislators will listen," he said.

Last September, California laid out guidelines for insurance, driver training and vehicle inspections, allowing the businesses to operate. Other places - including Chicago, Colorado and Maryland - are now considering laws based on California's rules.

Matthew Daus, president of the International Association of Transportation Regulators, a nonprofit group that represents government regulators, is a vocal critic of the ride companies. He says California's rules are inadequate and decried other areas piggybacking on them.

"Once California created the TNC (transportation network company) category with less-stringent standards (than taxis), the companies realized this gave them some cover," he said. "They realized they can do some minimal stuff and claim they have a license. They used social media to distort what they are doing so they could be held to different standards."

For the ride companies, the prospect of trying to operate under a patchwork of different laws is daunting. But Owens thinks regulators and the services will work something out - sooner rather than later.

"This space is evolving fast," he said. "Within a couple of years, I think most of these debates will be settled. It's not clean, it's not pretty, but the arc of history is long and points toward progress."

Investors Still Bullish

Investors appear to agree that the ride companies will overcome their regulatory struggles.

Lyft late last week filed papers for a funding round of $150 million ($80 million of which it has already received), giving it a valuation above $700 million - a big bump up from its $275 million valuation just 10 months ago.

Uber has a $3.5 billion valuation and raised $250 million last summer. Sidecar raised $10 million last summer, doubling its backing. Its valuation is unknown.

©2014 the San Francisco Chronicle