How cities are accommodating ridesharing services

Ridesharing apps have caught lawmakers somewhat unawares. While a few cities have banned them outright, Jonathan Andrews highlights how others are taking a novel approach to accommodate innovation.

Gone are the days of fiddling around for loose change at the end of a taxi journey, or even worse, presenting–to the horror of the taxi driver–a crisp, large denomination note. With the arrival of ridesharing apps, like Uber, the dominant player in the market, passengers now have an alternative.

By using an app, passengers can use their smart phone’s geo-location to order a private car and driver, follow the journey’s progression by GPS mapping (helping to avoid the ‘scenic route’) and pay for the journey, with a simple swipe on their phone, using a pre-linked credit card.

While passengers have been quick to sign up to the service, which is often cheaper than a regular taxi, cities have launched legal challenges or been petitioned by the taxi industry to ban or suspend ridesharing. Many cities’ regulations do not cover such new services, something which the ridesharing companies have used to their advantage.

“Prior to launching in a new market, we review local laws and regulations,” explains Justin Kintz, Head of Americas Policy Strategy, Uber. “If there are no laws specifically prohibiting technology services like Uber we move quickly to launch in the city.”

While some cities have banned the services, citing passenger safety and insurance concerns–under pressure from the taxi industry–others have taken a different approach. Washington DC enacted the world’s first temporary rideshare legislation in 2013, which became permanent law in 2014. Since then, more than 40 US cities have followed DC’s example.

Mexico City in July became the first Latin American city to set down regulations. The new laws state that a tax of 1.5 percent of each journey must be paid to the city to help improve transport infrastructure; drivers must be registered and submitted to annual inspections; and there is a ban on cash payments and soliciting passengers from taxi stands.

“Uber has always supported taxi drivers, but there are many taxi medallion [licence] owners who lobby against competition and choice,” says Kintz. “Even the most intensely pressured government leaders have recognised the immense societal benefits that come with Uber and they are finding ways to help industry players co-exist.”

In October, Canberra became the first city in Australia to launch its own laws regulating ridesharing services. Similar to Mexico City, all vehicles and drivers will undergo accreditation and registration, with vehicles checked for safety and drivers must be fully insured.

To placate the taxi industry the government will reduce costs for drivers and owners of taxis, halving the licence lease fees in 2016 and then halving them again in 2017. Taxi drivers will also have access to multiple business modes, from the traditional rank-and-hail to ridesharing and third-party booking apps. The second stage of the reforms will include a customised third party and property insurance regime for rideshare activity and further reductions in regulatory burdens for taxis.

“The ACT Government wanted to avoid the issues experienced by many cities across the world with the introduction of ridesharing services,” says Andrew Barr, Chief Minister in the Australian Capital Territory (ACT). “Our reforms will ensure that services like Uber can operate in the ACT safely and will also deregulate the taxi industry to maintain competition.”

The minister assisting the Chief Minister on Transport Reform, Shane Rattenbury, says that the taxi industry reform is part of a broader reform to public transport that benefits the economy, community and environment.

“Public transport is an integral part of any city,” says Rattenbury. “These reforms are a win for Canberrans and those travelling to the Territory [Australian Capital Territory], improving access to diverse transport options and competitive pricing.”

In Brazil, city rivals São Paulo and Rio de Janeiro have taken different approaches. In September, Eduardo Paes, Mayor of Rio, signed a law banning ridesharing services. Drivers flouting the regulations will face fines of US$490.

São Paulo’s mayor, Fernando Haddad, was faced with a similar dilemma when the city council presented him with a law to ban the service. With only 30 days to either veto or approve the law, the mayor sought compromise and released new regulations that will come into force in December.

The law creates a new category of vehicle transport–‘black taxis’. Five thousand new licences will be offered to drivers with ‘quality vehicles’ that will be able to operate via apps. Taxi drivers may also migrate to the new service. Those purchasing the licences must be pre-approved and pay a local tax per journey. The fares can be flexible but must not exceed a 25 percent price ceiling above ordinary taxis.

“We will not let the clandestine take care of São Paulo,” Haddad said when issuing the decree in early October. “Without the action of government we already know the story. It all starts well but ends badly when the state is not watching private activity.”

To allay taxi drivers’ concerns, the mayor’s office says that there is room for a further 15,000 new licenses beyond the current 33,000.

“These rules make sense,” adds Klintz. “They forego the anticompetitive price and supply controls that have clung to the traditional transportation industry like barnacles, eroding quality and reliability of service.”

The taxi industry is now, however, playing catch up and adapting the services it offers by introducing several of its own apps to meet new customer service demands. Hailo and mytaxi are two such apps that now provide similar GPS ‘pickups’ and ‘swipe to pay’ options.

Attempts by the Licensed Taxi Drivers’ Association in London to have apps like Uber considered as a meter, which are banned in private vehicles, were rejected in October by the High Court.

With both ridesharing and the traditional taxi model improving passenger options, it seems city residents are the real winners, with local governments under pressure to embrace the sharing economy rather than protect vested industry practices.

“Businesses that embrace the ‘sharing economy’ could profoundly change the way in which people work, contributing positively to productivity, economic growth, and the attractiveness of a city in which to live, work, visit and study,” says Barr.