Seattle Tries Restricting Rideshare Services

Rideshares are at odds with taxi companies in many cities. (insurancejournal.com)

Regulations on rideshare companies like UberX, Sidecar, and Lyft are on hold as the City of Seattle crafts a new agreement between them and taxi companies. The rideshares appeared only recently (Sidecar in 2012 and Lyft in 2013), and after a year of debate the City Council passed a restrictive ordinance that was approved by the mayor on March 19th. The three companies reacted during the month-long grace period by collecting enough signatures to suspend the ordinance and force it to a citywide vote. Mayor Murray announced a 45-day negotiation period, which ends June 1st, to see if the City can avoid a vote and come to terms with the two groups.

The issue is partly about protecting traditional taxi, for-hire, and limousine companies and drivers. These companies have strict requirements on driver licensing, insurance, and vehicle inspections. Seattle also caps taxi licenses at 850, with only about 688 being used, and about 195 for-hire licenses are in use. (See here for a primer on the differences.) Drivers are typically immigrants, and licenses can cost thousands of dollars. People use these companies by hailing on the street or calling a company office, and pay with cash or credit cards based on per-mile or per-minute fees. Destinations and directions are relayed verbally.

The issue is also about innovation; Sidecar, Lyft, and UberX are new to the car-ride market and present a competitive threat to taxis. Users request a ride via smartphone applications, precisely map their origin and destination, and pay with the apps. Users also typically pay per-mile and per-minute fees and can leave tips that are anonymously transferred to the driver, and the overall cost is somewhat lower. Users are encouraged to sit up front and chat with the driver. The app lets drivers and riders rate each other. In many locales, however, these drivers are operating illegally without commercial licenses. Seattle was hesitant to regulate them, with many drivers being college students or other unemployed people, until cab drivers started protesting.

The situation has been playing out similarly in other U.S. cities. Taxi drivers sued Chicago earlier this year for failing to enforce rideshare companies. California recently approved the companies’ operations, but San Francisco is still struggling with how to regulate them. Portland, of all cities, has outright banned them. Many cities are using undercover police to fine and impound drivers.

In February the Seattle mayor proposed a comprehensive review of the city’s taxi regulations, but the Council moved ahead of him. On March 17th they unanimously passed an ordinance that limits the companies, called “transportation network companies” (TNC), to 150 vehicles each on the road at any given time; Seattle is the first city to have done this. It also requires the companies, but not the drivers, to be licensed and carry insurance. The mayor reluctantly signed the measure into law two days later but pledged to continue studying the local taxi industry. It may be the move that the King County Council and neighboring cities (where the rideshares are rapidly expanding service) have been waiting for before initiating their own controls.

However, the rideshare companies quickly formed a coalition named “Keep Seattle’s Ride Options” and initiated a referendum campaign to block the Seattle law. The City has a formal process for this; the coalition needed to gather the signatures of 16,510 registered Seattle voters, which is eight percent of the turnout in the last mayoral election. The coalition turned in 36,000 signatures on April 17, which effectively blocked the ordinance from taking effect. It takes about three weeks for the signatures to be processed, which involves checking for duplicates and verifying with the county election commission that each is valid. The deadline for appearing on the August ballot was May 9; with no news in the last two days, the referendum will presumably appear on the November ballot unless city leaders, taxi companies, and rideshare companies can come to some sort of regulatory compromise and withdraw the referendum.

I am in favor of requiring the rideshare companies to be held to the same standards as taxi companies, particularly in terms of driver background checks, vehicle safety inspections, and insurance coverage. But the limit on drivers is troubling, especially because it would reduce supply during times of peak demand; ridesharing companies reportedly have some 2,000 drivers in Seattle, which compares to an estimated 4,000 peak-time drivers in San Francisco. At 150 each, the three main companies would be limited to 450 drivers at any time despite the services’ growing popularity. Seattle residents should have as many transportation options as possible, especially given the threat of major bus service reductions. This space will be updated as the situation evolves over the next few months.

I have used both regular taxis and rideshare services, and can share my experiences for comparison. On a recent weekday morning I had to travel to Kitsap County for a studio project, and I was waiting at the Seattle ferry terminal when my friend told me our sailing was cancelled. (Quickly, let me rant at WSF: I didn’t know about this because I got my ticket with an automated kiosk, but she did because she talked to a teller. There were no signs or verbal announcements of the cancelled sailing, and I had arrived half an hour early. What kind of customer service is that?)

She said we could use her car to drive around to Kitsap. But she lives in Capitol Hill, which is neither within easy walking distance nor has a direct bus line from anywhere near the terminal. We scoured Alaskan Way for taxis, which are typically lined up outside the terminal. But none were in sight, so I took out my smartphone. I had signed up for Lyft based on my experience in Atlanta.

A Lyft driver was two minutes away. I put in the request, the driver called to confirm, and I said I’d wave him down. He showed up right where we are and on time. My friend sat up front to give directions, and our conversational driver took a few shortcuts that I would not have thought of. We were at the apartment building in under ten minutes. The fare? Six bucks, plus tip, paid entirely wirelessly. A cab ride would have easily cost at least two or three times that, had we even been able to find a cab. We grabbed my friend’s car and arrived at our destination on time.

The final time I took a cab was a few months ago. A few friends and I were headed from Capitol Hill to the U-District after midnight, when bus service is minimal, and we piled into a cab on Broadway. When we arrived, the driver refused to drop us off at our individual homes and instead stopped at a central location. A couple of us tried to pay with credit cards, but the driver resisted as   he collected cash from the others. I could see the card reader in front, but he insisted (and clearly prefered to hurry back to pick up new fares). I wasn’t in a mood to argue, so I begrudgingly handed over my $25, escorted a friend to her place, and then walked 20 minutes home. That was the end of taxis for me.

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4 Responses to Seattle Tries Restricting Rideshare Services

  1. Andrew Brick says:

    great rundown. i generally oppose regulation, in part because in this day and age, and with this particular type of service, we have moved a lot closer to the “perfect information” required for a market to function efficiently. ride-share companies have an incentive to self-regulate in terms of the background of their drivers, and reputation (of drivers and companies) are real and highly visible. i would imagine that regulations on traditional taxis were imposed in part due to safety concerns; back in the day, the average joe could not get the information required to make an informed decision about whether or not to take a cab driven by a particular person. now he can (at least with ride-shares). if a ride-share driver is crappy or has a crappy car, everyone using the service will know. on the other hand, if a taxi is dirty and the driver is particularly rude (or takes the ‘long way’ home), that information disappears, and the bad driver is, in a sense, protected by the very regulation designed to make taxis a homogeneously good service.

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