Transportation

While Uber Thrives in New York, Its Competitors Lobby Regulators


No one expected a lovefest when Meera Joshi, the chairwoman of New York’s Taxi and Limousine Commission, and David Estrada, the vice president of government relations for ride-sharing startup Lyft, sat on a panel to discuss “Regulation and New Business Models” at a recent conference at New York University. Lyft would love to operate in New York City, but city regulations prohibit the startup’s version of a taxi service, in which nonprofessionals use private vehicles to shuttle passengers.

This is exactly the kind of regulatory obstructionism that infuriates proponents of the so-called sharing economy, but an audience expecting fireworks was disappointed. The mutual affection was so thick that several times the moderator apologetically noted his inability to create any contentiousness.

Why so friendly? Estrada was playing politics. If Lyft wants a chance to operate in what may be its most attractive market, he needs Joshi. New York is the country’s biggest city and has much lower rates of car ownership than the country as a whole. While plenty of people are in need of rides, New Yorkers may also be eager to sign up as Lyft drivers to offset the city’s high costs of car ownership. New Yorkers pay higher insurance rates than residents of all but three other states, according to the Consumer Federation of America, and the cost of gas in the city is above the national average. This is to say nothing of the cost of parking.

While Lyft tries to figure out a way in, Uber is gaining significant traction with New Yorkers. Lyft has a tougher time because its service is considerably different from the activity the TLC is used to regulating. For all the hype, Uber in New York is basically a black-car service with a tech twist. Lyft, on the other hand, wants looser regulations for its drivers. During the panel on Friday, Estrada said Lyft would like to be able to do its own background checks and credentialing and is open to having the city set guidelines for it to do so. But any approach that makes it easier for Lyft’s drivers would likely raise opposition among professional taxi drivers, who have to go through a standardized commercial licensing process.

The city also requires that cars for hire be associated with a base. This is a nonissue for taxi companies, which have traditionally been tied to a dispatcher and a lot somewhere. Uber also has base stations in New York. Lyft’s model is based on drivers who operate without any such affiliation. The service is centralized—all orders go through Lyft’s system—but no physical place is involved.

One of Lyft’s competitors in the peer-to-peer ridesharing market—SideCar—decided to push ahead despite these legal barriers. A little more than a year ago, SideCar launched a test version of its service, only to shut down a few weeks later in response to TLC enforcement. “This is an extremely simple issue. If you are acting as a taxi or a car service, without the benefit of a license, the TLC will shut you down,” Allan J. Fromberg, deputy commissioner for public affairs at the TLC, told the Wall Street Journal.

For things to work out for Lyft in New York, Joshi and Estrada will have to move from mutual admiration to action. That may not be easy. Mayor Bill de Blasio has ties to the taxi industry and has also made traffic safety a priority, which could divert the TLC’s attention from altering regulations to allow new types of ridesharing. But Friday’s session at NYU wasn’t the first indication that the city’s regulators are interested in working closely with companies disrupting traditional industries. Just last month the TLC’s deputy commissioner, Ashwini Chhabra, stepped down from his post. He now works at Uber.

Brustein is a writer for Businessweek.com in New York.

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