Online taxi-alternative services like Uber, Lyft and Sidecar could face new regulations at the state level after a ruling from the California Public Utilities Commission on Tuesday.
In a proposed decision, the CPUC declared that it has jurisdiction over and should regulate companies that use online-enabled platforms (read: "apps") to connect riders with drivers using their personal vehicles.
The decision — if passed at a commission meeting on Sept. 5 — would define such a business as a Transportation Network Company (TNC) and establish new operating requirements, including that it be licensed directly by the CPUC, that all drivers pass criminal background checks, and that it carry an insurance policy more stringent than what's currently required for limousines.
Companies such as Uber, Lyft and Sidecar — which allow anyone with a smartphone to summon up a ride in relatively short order — have generated excitement from investors and users alike for their innovative, easy-to-use and outside-the-box solutions to public transportation woes.
They have also faced backlash from some politicians and legacy taxicab companies over perceived threats to safety, since the nascent industry has to date largely dodged the stricter requirements set for taxi drivers.
"The proposed regulations should be beneficial to these companies as they really become more secure in the market," says Lauren Setar, lead analyst at IBISWorld. The ridesharing services have grown in popularity because they're easy, tech-savvy alternatives to people driving their own cars.
"Assuming people feel more secure with these regulations in place, it might drive consumers toward these ridesharing services," Setar says.
In blog posts, Uber, Lyft, and Sidecar all applauded the PUC’s proposal. Sidecar called it a “milestone for rideshare and transportation innovation,” while Uber and Lyft said they already follow similar safety regulations.
Traditional taxi companies are less pleased. William Rouse, general manager of Yellow Cab of Los Angeles, likes the PUC’s proposed safety regulations, but says, "the ruling now allows a new category to carve off what has historically been taxi-cab trips."
Rouse is also the President of the Taxicab, Limousine, and Paratransit Association. He and the more than 2,300 taxicabs in Los Angeles used to have the city on their side. The L.A. Department of Transportation sent cease-and-desist letters to Uber, Lyft, and Sidecar in June for operating without permits. But that was when Antonio Villaraigosa was mayor.
In a statement, Mayor Eric Garcetti said the PUC's proposed decision allows "new, cost-effective solutions and protects public safety through common-sense regulations. Garcetti added that he looks forward "to working closely with L.A.'s taxi companies to revisit our existing franchise agreements to adopt similar innovations."
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This story has been updated.