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Regulatory Gridlock Puts Pennsylvania Ridesharing in Jeopardy

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As anyone who has tried to buy a six pack of beer in Pennsylvania knows, the state has a penchant for puzzling laws. The contention over the legal and regulatory status of ridesharing has proven no different, with government regulators playing catch-up with transportation innovations—and stifling them in the process.

In July of this year, the Pennsylvania Public Utilities Commission (PUC) slapped an immediate cease-and-desist order on the Pittsburgh operations of Lyft and Uber's uberX—the service that connects riders with private drivers who don't hold a limousine license. The order effectively banned the services across the state. The months since have witnessed a flurry of back and forth between regulators and the ridesharing companies.

At the time of the order, the PUC judges acknowledged the benefits and popularity of ridesharing, but decided to issue the order anyway on the nebulous grounds of "public safety." The PUC cited concerns about driver background checks, insurance, and inspections.

Uber then pointed out that its insurance policies and driver vetting standards are stricter than those required by the commission. In characteristic fashion, the company declared it would continue offering its uberX services anyway while it applied for licenses to operate. Lyft promised to do the same.

Thanks to this flagrant disobedience, an administrative judge ordered Uber and Lyft to hand over trip data as part of the ongoing license application process. Uber refused. 

Wisely, as it turned out. Lyft did hand over trip data during the application process. After the PUC granted temporary approval to Lyft and later Uber for operations in Allegheny County (but not elsewhere in the state), the PUC proposed a $6.9 million fine on Lyft for offering ride services during the cease-and-desist period.

The temporary approvals were both set to expire this past week, but the companies were granted extensions until the commission decided on the permanent license applications. These applications appear to be in jeopardy, however, after two PUC judges in September recommended they be denied in Allegheny County and in the rest of the state. According Jennifer Kocher, the PUC's press secretary, the commission has yet to decide on the applications and it is unknown when it will do so.

Kocher acknowledged that much of the problem stems from outdated PUC regulations that haven't caught up with the digital age. She says that "the best fix is a legislative fix, creating a separate regulatory category for transportation networks."

The current legislation on the table would redefine digital ridesharing services like Uber's uberX and Lyft as "transportation network services"—effectively bringing the services out of the umbrella of current passenger transportation regulations and legalizing them across Pennsylvania. However, the legislation seems dead in the water for now. The legislature said it would not consider it this session. Several House Consumer Affairs Committee members have said that the process has been "going too fast" and they need more time to consider.

That's exactly the problem. The ridesharing industry is growing at a remarkable clip and it's unclear why innovation should slow at the whim of angst-ridden regulators. Instead of satisfying consumer demand, companies like Uber and Lyft have to spend valuable resources fighting fines and haggling with capricious commissions. And given the PUC's hostility to the companies, this could be the new normal for a while.