The Breakdown

Explaining Southern California's economy

Update: California becomes first state to regulate ride-sharing

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Update 2:00 p.m.: L.A.'s transportation department says it will enforce new regulations on ride-sharing companies.

“The department will enforce the new California Public Utilities Commission rules regarding transportation network companies as part of our normal enforcement activities,” a department spokesman wrote today.

Earlier, the city's taxi administrator, Tom Drischler, referred to ride-sharing services as "rogue apps" and "scam artists," according to e-mails obtained by the L.A. Weekly.

Less than three months ago, Tom Drischler issued cease and desist letters to Uber, Lyft and Sidecar, which the companies ignored.

Drischler declined a request for comment.

Update 12:30 p.m: The California Public Utilities Commission (CPUC)  has voted to regulate upstart ridesharing companies like Uber and Lyft, that connect customers with drivers through smartphone apps. Despite a chorus of opposition from taxi cab drivers, Thursday's vote by the Utilities Commission was unanimous.

"For me this decision is not about Silicon Valley capital or about smart phones or new apps," said CPUC Commissioner Mark J. Ferron. “It's about a new path-breaking approach to transportation." 

But cab drivers see ride-sharing companies not as path-breakers, but as breaking their businesses.

"We're out on the street," a San Francisco taxi driver who didn't identify himself told commissioners. “Every other car is like a black sedan or has a pink moustache. We have a taxi system that's been here for a hundred years. You guys are the regulators. You need to protect a long existing taxi service that's been in place."

Other drivers said that while taxis routinely pick up the poor and disabled from hospitals and grocery stores, ride-sharing companies don't. They worry not just about their jobs, but that the increasing popularity of ride-sharing will exacerbate transportation inequity within a city of have's and have not's.

"You haven't touched on the discrimination of all of these apps," San Francisco taxi driver Robert Gisano told commissioners. "You have to have a credit card and you have to have a smart phone. Approximately forty-percent of the citizens of this city do not have smartphones. I don’t know how many don’t have credit cards.”

But commissioners weren’t swayed by the arguments of taxi drivers. They hailed the regulations as a breakthrough for California, just as the state has been at the forefront in other areas.

"These companies are part of large and rapidly growing sharing economies," said CPUC President Michael R. Peevey. "Does regulation have a part to play in this new economy? Yes I believe it does."

Wednesday: Ride-sharing services like Uber and Lyft have quickly gained popularity in Los Angeles. But for all their “hip” factor, they’ve also been rogue operators.

That could change Thursday, when California could become the first state in the nation to enact formal ride-sharing regulations.

It could be a quick change of fate for ride-sharing in L.A. Less than three months ago, the city’s taxi commissioner issued terse cease-desist letters to Uber, Lyft and Sidecar. The companies neither ceased nor desisted, and a pro-tech and pro ride-sharing mayor came into office.

Now the taxi commission says it will follow the will of California Public Utilities Commission (CPUC). The agency will be voting Thursday to establish a new category of businesses called “Transportation Network Companies.”

“If this type of process allows us to better communicate the way we operate and the safety measures we take,  that’s a positive thing” Lyft co-founder John Zimmer said Wednesday. 

You may have seen his company’s cars, with the pink moustache on the front.

Normally, the last thing companies want is more regulation, but in this case, the ride-sharing operators crave the legitimacy the new rules bring.

If the proposal is approved Thursday, drivers would be required to:

  • Undergo criminal background checks
  • Undergo training
  • Carry at least a million dollars in insurance
  • Obtain a license from the CPUC
  • Follow a zero-tolerance policy on drugs and alcohol

Zimmer says he welcomes the oversight.

“We’re going to do everything we can do to comply with all the new rules, he said.  “But many of these things we’ve been doing since the beginning.”

As you might imagine, the taxi industry is less than thrilled about ride-sharing going legit.

And there are those who worry about the unintended consequences of the new services, like the effect on those who live in poorer neighborhoods.

“The city regulates and pays attention to data about whether taxi companies are responding to calls from certain neighborhoods,” said Gary Blasi, a Professor of Law Emeritus at UCLA law who’s studied the taxi industry. “With so-called ride-share companies, that will be an individual driver decision. I would predict with 99 percent certainty, that will lead to less service.”

Blasi has never taken a ride from the likes of Lyft, Uber, or Sidecar. He says he prefers the bus.

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