Driving into the Future

Ride share and e-hailing services guarantee creative destruction in the business of paying for rides


Spiros Vathis / Foter / CC BY-NC-ND

Last month, California became the first state to establish a set of regulations on the bevy of new companies that summon rides-for-hire via smartphone apps. Most prominent among such services are Lyft (a pure "rideshare" in which the fee you pay is officially a donation) and Uber (which offers various services in 31 cities in the Americas, including ones that summon taxi cabs, some that send licensed limo drivers, and some that just send, like Lyft, private individuals in their cars).

The regulations from California's Public Utilities Commission (CPUC) came in the face of lots of heated opposition to these services on the part of existing licensed and regulated taxi drivers, who hate the competition. Sometimes that opposition is expressed through political activism, such as hundreds of drivers protesting the very existence of the services in Los Angeles—a city that briefly tried to ban them entirely.

Los Angeles City Councilman Paul Koretz, even after the CPUC promulgated its regulations, has been making noises about legally challenging the state's ability to regulate those services against the city's wishes. Koretz still sounds like he'd rather the services didn't exist, no matter how many consumers want them or how many people make their living from them.

Sometimes, as I learned from interviewing an Uber driver and a Lyft driver from the San Francisco Bay area, that opposition from traditional taxi drivers who see their turf threatened can get quite personal. I'll call them "Tim" and "Jess" as both wanted to remain anonymous because their business is very public.

Each driver has a profile and rating through the app that allows every customer to know exactly what person and vehicle they are dealing with, and how other customers have rated them. Uber driver Tim finds the Uber lifestyle—he works when and how long he wants—suits his desire to not deal with "authority figures" and be "micromanaged." He says he sees visible hostility from cabbies regularly.

Lyft driver Jess got involved because she needed a flexible moneymaking gig while she launches her own business—and because her 11-year-old daughter became obsessed with the big pink moustaches on cars that are Lyft's cutesy identifying mark. Jess tells me of a fellow Lyft driver who lost his personal insurance because an angry cabbie sent photographic proof of the incriminating pink moustache—showing that he used what he told the company was a personal vehicle as a vehicle for hire, something the companies don't cover in personal policies—to every insurance company he could think of.

Part of the new CPUC regulations require companies to maintain a million dollar per incident insurance on each vehicle in this new "TNC' classification (for "Transportation Network Company"). The CPUC says that Lyft and Uber have already been doing so under an agreement that has kept them operating pending these new regulations, though neither driver I talked to felt confident about that and knew their personal insurance would not cover any incident occurring while they were driving professionally.

Jess personally says she gets "flipped off by cab drivers. I just smile at them. I kind of empathize with their position but the stories I hear of bad experiences with SF cabbies—they are not nice, demand cash, don't show up—honestly I feel they created this situation themselves, they created a need for a new system."

The cruel market forces of the apps make drivers obsessed with perfection. Both services have public passenger ratings of drivers and anything even slightly less than a perfect five can harm their ability to get riders. Tim and Jess both say that the fact that they don't have visible running meters—which would make them taxis—means there can sometimes be real sticker shock for Uber riders, or a recommended price that strikes the rider as too large, for Lyft. In the information-rich world of Lyft, a driver can ensure if they wish that passengers with records of paying below any given percentage of donations won't have their ride requests received by the driver (though drivers can never know the specific payment records of specific passengers).** Jess says "that little tidbit needs to be out there. Passengers should know that if they pay much less than recommended, they do hurt themselves."

[Related: Uber Wars: How D.C. Tried to Kill a Great New Ride Service. Story continues below video.]

CPUC's regulations are not designed to make these services impossible. They will, to quote the regulations, "require a criminal background checks for each driver, establish a driver training program, implement a zero-tolerance policy on drugs and alcohol, and require insurance coverage" and make drivers "register in the Department of Motor Vehicle (DMV) Pull Notice program, conduct a 19-point car inspection, and require a one-year driving history from the driver." Many words in the regulations are concerned with making sure the app-driven driving services are sufficiently accessible to the disabled. The TNCs must pick up only prearranged fares via apps, never street hails.

The new regulations requirement for registering as a TNC will not go into effect for 60 days after their September 19th issuance, so both drivers say they haven't yet been affected by them. The regulations and the medallion system for regular cab drivers discouraged Tim from entering that system. But even getting his state charter party carrier license to be an official limo driver for the UberBlack service, "you couldn't get any more anti-big government after trying to go through all that bureaucratic red tape" —cost many months and many thousands of dollars, he says.

"I've had this conversation with a few passengers," Tim says. "I used to be a lifelong Democrat, but I'm probably voting Libertarian now, to be honest. I'm starting to feel the pains of Joe the Plumber—it's like I'm Tim the Driver." But even after they are fully regulated, forget about one of the most lucrative services for hired drivers in urban areas, airport drop offs and pickups. Those are still illegal unless you go through another time-consuming wait to get approved by the airport authorities, and give them their substantial cut.

As of now, your Ubers and Lyfts are not supposed to enjoy that privilege. Some drivers were arrested or cited at San Francisco International Airport this year. Tim says Uber has promised to pay any fines they accrue for illegally delivering passengers to SFO Airport, but still "we take precautions, take our phone out of the cradle and hide it. If you can get the passenger to sit up front, do so. Ask them to give me a hug and pretend we're friends. I joke with my passengers I feel like a coyote taking illegal aliens across the border. "

Tim worries that if all the UberX drivers—another service he provides for Uber, a lower cost one competing directly with Lyft with normal drivers driving their personal vehicles—have to be visibly stickered with the new "TNC" classification, the airport gravy train could be over for them and "that can be 40 percent of our income."

Jess was already nabbed at SFO, though she got off with a warning. An airport snoop noticed the pink moustache stuffed in her trunk when the passenger took out his luggage. "They told me what they look for—for people in back seats, for fist bumps [another Lyft tradition between drivers and passengers], for phone holders on the dash." Even if Lyft paid any fines, she could still suffer driver's license points, Jess says. She was scared straight—for a while. She's been doing clandestine airport deliveries again, hiding the moustache deeper, and constructing stories with the passenger about being cousins.

Such gambits may seem silly or even sad for representatives of a technology that is revolutionary for an industry that, as Steven Juliver says, is one where "80 percent of the fleets still operate like Danny DeVito in Taxi." Juliver is CEO of a smartphone dispatch service called NexTaxi that works exclusively with existing regulated taxi fleets and, unlike Uber, allows them to maintain their own branding. On the side of the existing taxi fleets he serves, he said, "I love the tech, we are in the tech business. I understand what [companies like Uber and Lyft and others] are doing and why they are doing it. But it has to be a level playing field." 

In California, localities have the legal power to regulate cabs, while the state claims that right for other forms of hired drivers. So the CPUC's actions will never be seen by taxi companies or drivers as leveling that field; the political fight over these services is not over. And while Uber is being hobbled in various ways in cities from Portland to Miami, it has also won victories in New York CityWashington, D.C., and Colorado. Uber has big money behind it—a recent quarter-billion investment and partnership with Google. Tim says he and some fellow drivers see Uber making the mere conveying of passengers by drivers obsolete: they see Uber's system as a perfect final step in, say, Amazon's need for swift real-time delivery. In the Google Ventures alliance, they can't help but darkly suspect within a decade Uber cars will all be driverless Google vehicles.

A traditional taxi driver in San Francisco—the fourth city in which he's been a professional cabby—named Heath knows exactly what he thinks about UberX and Lyft drivers: "Scabs!" He's an old-school working class man, and sees them as the equivalent of the forces that made "a city full of factories close down and go to China."

He's attracted to the old cabbie glamour of the lone ronin, refusing to give his number to passengers who love him, taking a perverse pride in how he's often dealing with "a crack whore who spits on me" while others just "want to get in a car with a young white person and fist bump and say 'hey dude, what's up?' I'm just not that person." He's proud of both his curmudgeonliness and a deep knowledge of the city's underbelly that will be lost when his ilk is gone; "are you going to Yelp about a handjob?"

Every new technology destroys old ways of life while opening new possibilities. While the CPUC's regulations in California will make business a bit more expensive for the companies and a bit more annoying for the drivers, it doesn't seem likely to, or intended to, cripple the technologies. A series of annoying—and expensive—legal battles will undoubtedly still haunt Uber and Lyft across America. But it's hard to believe taxi interests will succeed in squashing such a useful, even if disrupting, technology.

Heath, reveling in the dark and gritty glamor of the traditional urban taxi driver, seems equally aware he's an endangered species. He doesn't love the thought, but he sees it coming. "I've seen my business fall about half [since the rise of Lyft and Uber], just since the new year. It's crazy how fast it's changing." Next time he goes on vacation to Mexico, he thinks, "I might come back and it's all gone. I'm fine with it." To Heath, a culture of people "walking around staring at their iPhones bumping into each other" will be getting what it deserves. He's probably right.

**Correction: An earlier version of this piece mistakenly implied that Lyft drivers could see specific donation information on specific passengers and make an active choice to ignore their pickup requests.