Making ride sharing legal is akin to the DSL battles of yore

When new technology enters the marketplace, there can be major disruptions to the way that our existing legal system was constructed with the older incumbent technologies in mind. Such is the case with Uber, Lyft and the other ride sharing services. The legal battle is with the metropolitan taxi commissions that want to protect the incumbent taxi companies.

I am reminded of the events of the late 1990s, when competitive DSL carriers wanted to enter the Internet access market and were blocked by the local phone companies. The first order of business for these DSL carriers back then was to deploy lawyers at the various state capitals and argue before the public utilities commissions that their services were legal and worthy. Many of these new carriers had to fight tooth and nail to get their gear allowed inside the local central phone offices. Often, the incumbent phone companies would say they ran out of room to house the new guy’s equipment. Yeah, right.

Fast forward to today, and companies such as Covad and Rhythms – the ones with all the lawyers running around the countryside — are long forgotten. We now get our DSL service mostly from Ma Bell. Ironic, isn’t it?

aa1The same thing is happening with the ride sharing services. Sue now; figure out how to implement later. Here in St. Louis these services are still illegal, and while things aren’t as bad as in Paris, it is still very messy. Last week we had in the span of a day an offer by Uber to provide free ride-shares for the holiday weekend. This offer was quickly withdrawn when the taxi commission said whether they are free or not, the drivers still need permits issued by the commission.

Last week in Paris, the taxi drivers staged a protest stopping traffic and burning tires over the UberPop service, which is about half the cost of the more typical UberX service that is its most popular service and uses registered drivers. The French are always good for labor strikes, and have taken things a step further by indicting the two local Uber managers for breaking their laws. Uber is available in more than 100 cities in the USA and in 57 countries, Lyft in more than 50 US cities. Some of these cities only have the Uber Black (akin to a private limo) while others have the cheaper UberX. It is confusing because Uber refers differently to its various services depending where they are offered, in an attempt to game the legal system. Maybe it is time to hire some of those DSL telecom lawyers that haven’t had much to do over the past several years.

I have not yet used any of the ride sharing services, but know many friends who have and are quite upbeat on them. They have their advantages in that you can see how far away your ride is on your phone, and in some countries the taxi commission has added a 15-minute wait time no matter how close they might be to level the playing field. Even so, it is like have a private driver without having to pay through the nose for one.

The sharing services get around the driver registration system with a two-way rating system: drivers rate passengers, and passengers rate drivers. This is a key element of their service: while there is some log-rolling (you rate me highly and I will do the same for you), it does tend to weed out the worse elements of both. Imagine if the incumbent taxi companies had something similar, our cabs would end up looking like Japan’s that are spotless.

The sharing services also have their disadvantages. They make use of surge pricing, so popular times, such as holiday evenings, cost more. You also don’t know the final cost of your ride until you leave the car, unlike a traditional taxi where you know while you are still in the car. And if you want to use multiple services, you need to download an app for each one to your phone.

Back when DSL was first founded, we had 17 different varieties and speeds and feeds of the service. No two were compatible, and consumer confusion was significant. (Here is an article that I wrote back in 1999 that describes the situation.) Now I just call AT&T and order U-Verse and tell them how much I want to pay a month.

The same thing is happening with the ride sharing services. The early days (say in 2012/2013) saw many cities initially ban them, then eventually allow them. The taxi commissions around the world will continue to block these new technologies under the mistaken mandate of protecting their citizens. But eventually things will change: we will have multiple ride sharing vendors, all offering some confusing array of services, and eventually they will be incorporated into the incumbent taxi companies, if they can see the future properly. Or maybe Google will end up owning all of them and substitute driverless cars instead. Their Waze subsidiary is already planning to roll out ride sharing in Tel Aviv later this year.

8 thoughts on “Making ride sharing legal is akin to the DSL battles of yore

  1. David,

    Great post and very thought provoking. In my experience, Uber and Lyft are winning because they provide an incredible experience. One that’s far more delightful than most taxi experiences. It seems as if the Taxi commissions spent as much effort creating an Uber-like app experience for the existing taxis, they wouldn’t need to fight Uber because the service would be incredible. – I believe some have started to do this, but are lacking the marketing prowess to make the public aware they exist. Uber has also shown us there is far more demand for a “ride service” than anyone ever thought. In the end, Uber and Lyft are raising the competitive bar and will lead to a better experience for all end users, whether in 10 years that is with Uber, Lyft, Google (Apple maybe) or a “taxi”.

  2. Thanks Nathan. FYI here is a set of tweets from another STL-based CEO, Gabe Lozano:

  3. Jim Libersky of Barrier1 writes:

    How true. Having lived the transition from circuit to packet and what all of the issues, both good and bad, put out there by the carriers, we find ourselves with the same tactics going on in Uber as well as network security. New ideas are always challenged from the incumbent. If the new ideas are not allowed to seek the market place faster, the ability to solve problems or provide a more Faster, Effective and Affordable solution will turn us into a stagnant society. One of my favorite lines. It is the same church just a different pew.

  4. Well, yeah — mostly. One difference, though, is that local businesses and many individuals (individuals!) invested large sums in what they thought — were led to believe, over decades — were long-term viable opportunities. It’s a bit hard-hearted to simply write them off as buggy whip manufacturers — or entrenched and inflexible and maybe evil telcos — sad but unavoidable victims of the new transportation technology revolution. And it’s more than a bit unreasonable mocking them for resisting losing those investments. Change is tough and often creates losers. But there’s nothing wrong with requiring a level playing field — allowing/forcing incumbent business to adapt and compete, perhaps faster than they’d like — and ensuring traveler safety. Without, of course, imposing such draconian regulations as to prevent change. Balance/fairness to both sides.

  5. Another reader, of my generation, writes of a recent business trip he took.

    I took a taxi from the airport to the hotel in San Diego and an Uber back. The experience was completely different. The taxi driver was nice and answered questions. The Uber driver was interesting and shared his life story. The cost of Uber was half of the cost of the taxi. The Uber driver bought and financed his car from Uber. Needless to say he took care of it.

  6. My friend Barry Gerber replies:

    Small semantic disagreement with significant implications. This isn’t ride sharing. It’s for hire transportation, no different from a taxi or limousine service. Uber itself is no different from a company that dispatches taxis owned by itself or owned by individual drivers. Because there are so many Uber drivers and because Uber’s accountability is so ill defined, the potential for harm to passengers from theft, aggressive behavior or uninsured or under insured accidents is greater than with regulated for hire transportation companies.

    I can’t help thinking of the “Citizens United” decision. As Elizabeth Warren said “If you don’t have a seat at the table, you’re probably on the menu.” I think this goes beyond established for hire transportation companies fighting new competition.

  7. I think one of the biggest fears that government has is, like with DSL, what happens when Uber or Lyft cease operations? What happens when the taxi market loses half it’s players because of ride sharing, and then people realize that as a ride-share driver they aren’t making what they wanted and leave? Suddenly you could have large cities with much less than half the transportation they need, and the vacuum could be filled with services that gouge on price.

    To extrapolate, what if Ma Bell had said “Hey, that’s cool. We won’t do DSL or buy any DSL hardware. Come install your stuff.” and then a few years down the road suddenly those companies were out of business for whatever reason. Now Ma Bell would get back into it but the infrastructure costs they would have to spend to catch up would make DSL triple the price, and since they were now the only game in town, maybe 2x that.

    I’m not saying it WILL happen. I’m just saying that’s something to think about. I’ve never used Uber but I have a friend who occasionally drives for them and claims he generally makes less than minimum wage all said and done, but if he has a lazy night and is bored he’ll drive.

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