Transportation Network Companies

We’ve heard lots of feedback from those who work in the District that increasing the availability of cars-for-hire should be an important goal for the city of Austin. We want to start the conversation about these issues, and see productive solutions proposed that enhance our city.

Regulating Disruptive Innovation:

Uber, Ridesharing, and Austin’s Transportation Woes

Plainly stated, Austin’s transportation eco-system is in trouble, and at the rate we’re growing things are only going to get worse. From public transportation to parking, our city faces a number of challenges today that will directly impact our ability to grow and prosper tomorrow. One of the more intriguing and immediately actionable issues affecting Austin’s transportation woes is the debate between disruptive ridesharing startups like Uber and Lyft (legally known as “Transportation Network Companies” or “TNCs”) and the heavily-regulated and entrenched taxicab companies trying to protect their industry.

It’s a complicated issue with a lot of moving parts, but we strongly believe that it’s time for Austin’s citizens and business leaders to take action before decisions are made for them.

Failing the Consumer

If we are to remedy this issue, we must first understand and accept that there is an issue worth solving. It is plain to see that Austin’s taxis aren’t adequately serving the market’s needs. The issue is three-fold, stemming from a lack of supply, unmet service expectations, and delayed technology adoption.  

As a city with a population rapidly approaching two million, Austin currently has 756 taxi permits, a figure that hasn’t increased in three years. It’s an issue that directly affects taxi availability and customer satisfaction, as increased demand for taxis disincentivizes individual taxi drivers from taking unappealing fares.

From a consumer satisfaction point of view, the number of taxi complaints increased 78% from 2012 to 2013, according to a KVUE Defender study. Many of these complaints stemmed from taxi drivers’ unwillingness accept passengers traveling to undesirable or inconvenient locations.

Moreover, our Chief of Police, Art Acevedo, believes that the lack of taxi availability during peak nighttime hours is resulting in another Austin-sensitive issue, more frequent occurrences of drunk driving. “On any given weekend night, or when there’s a special event, anytime past midnight, good luck catching a cab,” Acevedo said. “It’s just not going to happen.”

Once in a cab, passengers additionally complain about drivers with a “poor service attitude” and “the unwillingness of some drivers to accept credit cards,” as found in this 2011 study.

This refusal to accept credit cards is indicative of the taxi industry’s systemically sluggish adoption of technology, and this is the crux of the issue at hand here. While their efforts towards increasing driver accountability are applauded, their ability to actually enforce these standards of accountability is severely limited by their inability to adopt the kinds of mutual feedback tools that apps like Uber offer. (Yes, some cab companies have apps, but these are widely disparaged as buggy and ineffective.)

Enter Uber, Lyft, and the rest of the upstart TNC industry. These companies enjoy wildly positive consumer satisfaction scores, and it is precisely because they are improving on the issues neglected by the taxi industry. They offer a choice of driver and vehicle type, clear pricing, reliability, and a mutual feedback mechanism to ensure that both the driver’s and the passenger’s expectations are met.

The alternative is stark and the benefits abound, so what’s all the fuss about?

Unequal Playing Fields are Unfair

First and foremost, TNCs aren’t playing by the same rules as the industry they aim to upend. Taxi companies are subject to hosts of rules and regulations, piled on for decades, that limit their ability to be as agile and flexible as startups. Many, if not all of these regulations, were put in place for the same cause we’re aiming to progress today: to protect consumers.

We can all generally agree that operating without any regulation is flippant and even potentially dangerous. Unlicensed cab operators have been known to pop up in Austin during peak hours and often don’t have anything beyond standard personal insurance. They operate without transparent and clear pricing models, and are incredibly risky for passengers who cannot be sure a driver has a clean safety record.

Focusing on common factors that might cover both taxicab operators and TNCs would allow for increased competition while maintaining appropriate consumer protection regulations for things like insurance, background checks, and passenger satisfaction.

  1. Insurance:
    All providers should have a standard of commercial (not personal) liability insurance that fully protects parties and property involved in transportation.
  2. Safety:Ensuring that drivers and passengers are equally safe in the transportation environment is critical. Passengers should be able to trust that any vehicle they step into is driven by a professional driver who has passed a background check and has a clean driving record. Similarly, protections for drivers should be a priority. TNCs have taken a transparent approach, allowing both drivers and passengers to see who they are riding with and rate them after the drive. This encourages improved service and gives everyone involved an increased level of safety.
  3. Passenger/Driver Satisfaction:Different transportation services come with varying levels of consumer expectation (riding in a pedicab is different from riding in a limousine), but it seems self-evident that all forms of hired transportation be held to standards of passenger satisfaction. From reliability to cleanliness, this is an area where TNCs are outpacing taxicabs. As mentioned previously, one of the large consumer benefits of using a TNC is the transparent nature of the system. Today, reporting a cab for refusing a credit card or short trip results in very little apparent action. On the reverse side, drivers should reasonably hold passengers to similar standards of reliability and respect.

Let’s have a conversation

We must have productive discourse around this topic. Protectionism for the sake of protectionism isn’t any better than change for the sake of change. Allowing the community to understand the issues and propose pragmatic solutions will result in a better Austin.

TNCs are popping up and succeeding all around the country. Taxi companies are naturally defending their own interests, but why is that preventing us from discussing the pros and cons of this issue?

There is no quick fix, but Austin’s transportation issues are very real and time-sensitive. If we ignore disruptive alternatives outright, we only further jeopardize our city’s future.

Cheat Sheet

Interested in getting an overview of the issue at hand?

Terms

Transportation Network Companies (“TNCs”): TNCs were defined by California in 2013 as as “any company that uses an online-enabled platform to connect passengers with drivers using their personal, non-commercial, vehicles.” The term has caught on as an umbrella for most transportation startups we’re talking about today.

Ridesharing: A somewhat problematic term that connotes services more in line with “carpooling” than with “paid transportation.” Companies such as Lyft, Sidecar, Carma, and Uber all claim to promote “Ridesharing” even though their business models differ drastically.

Limousine/Livery Service: In Austin, a  Limousine service consists of “prearranged service that is operated on irregular routes and schedules.” UberX and Uber SUV are currently categorized under this definition, and held responsible for the $55 fare minimum dictated in Austin’s City Code.

Driver Caps: Austin’s cab permits are currently limited to 756. While cab companies and city officials alike have argued to raise the number of permits allocated, there hasn’t been an increase in three years. According to Edward Kargbo of Yellow Cab, Driver Caps exist in theory because: “You can have 1,000 drivers making $35,000 or 35,000 drivers making $1,000. If everyone is a cab driver, no one is a cab”. In other cities, such as Seattle, Driver Caps have been instituted across TNCs, capping the number of drivers able to use such services as Uber & Lyft.

TNC Players

Uber: uber is a venture-funded startup based in San Francisco, California that connects passengers with drivers of vehicles for hire and ridesharing services via a mobile application. uber’s brand includes:

uberBlack,  uberSUV, uberLUX: Luxury services connecting insured, professional, and regulated drivers with passengers. These services are legal in Austin, but their current classification as “Limousine Services” holds them to a $55 fare minimum, making it untenable in uber’s opinion.

uberTaxi: Standard service that connects uber passengers with registered, insured taxi drivers. Availability of uberTaxi is subject to individual partnerships with local taxi commissions.

uberX & uberXL: Lower-priced “ridesharing” service offering non-luxury cars operated by non-professional drivers.

Lyft: A TNC specializing in peer-to-peer ridesharing, Lyft bills itself as a “Your Friend With a Car.” Currently operating in over 60 cities, Lyft has addressed many security and insurance claims by offering $1 million in liability insurance and background checks for each of its drivers.

Carma: Carma is a Cork, Ireland based start up specializing in the “carpool” section of the TNC spectrum. It allows users to connect with one another in order to share in daily commutes, reimbursing drivers for the federally-acceptable rate of $0.17 a mile.  Unsurprisingly, neither the city nor the taxi industry has had much beef with Carma.

Aus

  • Cap Metro
  • Movability
  • ATX Safer Streets
  • Yellow Cab