Like lambs downwind from lions, we nervously twitch our nostrils when we detect the scent of a bill requesting state regulation by the industry to be regulated.
Such bills are invariably promoted as an effort to “protect the public” from bad practitioners, but the real effect is to limit competition by making it harder to enter the field, and thus drive up prices.
The latest industry seeking regulation is what used to be called “ride-sharing,” but now prefers to be known as “transportation networking,” so as not to be confused with carpooling.
They include companies like UberX and Lyft, which connect persons driving their own vehicles with prospective paying passengers via smartphone apps. Senate Bill 125 would put them under the Colorado Public Utilities Commission.
They seem to be doing fine without regulation and this seems to be an unusual move prompted largely by PUC director Doug Dean. “If legislation is not passed, we will have no choice but to kick them out of Colorado,” he said during a legislative hearing Wednesday. The Senate Business, Labor and Technology Committee heard public testimony on the bill for 5 1/2 hours, but isn’t expected to vote on it until next week.
The bill is opposed by the oligopolistic taxi industry, since UberX and Lyft rides usually cost less than cabs. Any bill opposed by the taxis can’t be all bad.
The measure doesn’t affect Uber Black, the original operation, which connects passengers with limousines looking for business between charters. The PUC abandoned its initial taxi-inspired pursuit of them because, after all, the limousine companies are regulated, and they charge more than taxis anyway. It didn’t hurt that Gov. John Hickenlooper sided with Uber Black.
S.B. 125’s prospects on the Senate floor are good, since it was introduced with 16 sponsors and cosponsors, just two short of the 18 needed. It is truly bipartisan, with such disparate backers as Pat Steadman, D-Denver, and Minority Leader Bill Cadman, R-Colorado Springs. Its fate in the House is uncertain.
The bill would require a “transportation network company” (TNC) to get a PUC permit to operate. Drivers would have to pass background checks and carry at least $1 million liability insurance. Vehicles would have to pass safety inspections. But a TNC would not be classified as a common or contract carrier. That means it would be exempted from much of the PUC’s authority, such as right of entry, rate regulation and operational requirements.
Dean, and other opponents, argued that TNCs should carry much more expensive commercial insurance, since the drivers’ personal auto insurance invariably forbids their providing “livery” service. The extra coverage provided by Uber itself therefore won’t kick in if the underlying personal insurance is invalid.
John Zimmer, Lyft’s co-founder, and Will McCollum, Uber’s general manager in Denver, denied that, maintaining that their companies’ insurance would start with the first dollar if the driver’s private insurance won’t cover an accident.
General managers Brad Whittle of Yellow Cab and Kyle Brown of Metro Taxi — their two companies are seeking PUC permission to merge and they sat together at the hearing — maintained that Lyft and UberX are illegal and the apps they use offer nothing that the cab companies haven’t had in place for years.
Brown said letting the new companies operate would “unlevel the playing field” and predicted “unintended consequences,” such as the possibility of cab drivers quitting and joining UberX.
Exactly! And what would be wrong with that? Driving for a cab company is “industrial servitude,” Uber’s McCollum said after the hearing. A witness now driving for a TNC said when he drove for a cab company he paid more than $800 a week to lease a hybrid; for other cabdrivers, the rates range between $1,800 and $2,700 a month.
Lease rates are “the 800-pound elephant in the room,” testified Ali Vazir, an Uber driver who formerly worked for Metro and Yellow. The first $2,200 he made each month had to pay for the cab, and he was lucky to take home 50 percent of his fare money. The taxi business model is such that it’s impossible for a driver to generate a good living and it “comes at the expense of the least powerful and voiceless.”
The TNC business model requires all transactions to be by credit card and no cash changes hands. Vazir said that Uber deposits 80 percent of everything he makes directly into his bank account and keeps the other 20 percent. He said he now works fewer hours and spends more time with his family.
Former PUC chairman Greg Sopkin, now a lawyer for Uber, told the committee that the cab companies “monopoly profits” lie in the exorbitant lease rates which, he noted, are not regulated by the PUC.
It’s the near impossibility of getting a PUC certificate which keeps entrepreneurial drivers from starting their own companies. Ray Gifford, Sopkin’s law partner, helped get one for Union Taxi Cooperative, which started operating in 2009. He worked for free but if he had billed he would have cost Union about $500,000. Not many lawyers work for free.
TNCs may not drive cab companies out of business, but they might help force them to lower lease rates.
If the cab companies can’t kill the bill they’re likely to try tacking on crippling amendments that would force UberX and Lyft to charge more.
One can only hope that Uber and Lyft, who will get increasing competitors in the TNC field, don’t try to add competition-stifling amendments of their own.
Longtime Rocky Mountain News political columnist Peter Blake now writes Thursdays for CompleteColorado.com. Contact him at firstname.lastname@example.org You may re-publish his work at no charge and without further permission; please give full credit to Peter Blake and www.CompleteColorado.com