One Question

Three months after the city council's taxi and ridesharing committee made overtures to currently unregulated ridesharing companies like Lyft and UberX—proposing that rideshare drivers should have to get insurance and special licenses, but should not be shut down—the committee backtracked this week, proposing new restrictions that rideshare companies say will put them out of business.

The three biggest changes: Ridesharing companies—which allow users to find a nearby driver and book a ride using a smartphone app—would be limited to 100 licenses each, a restriction Lyft co-founder John Zimmer said would kill his company, which he said has "several hundred" drivers already.

The new rules would be among the strictest regulations on ridesharing services in the nation. In California, for example, which just adopted rules legalizing and regulating ridesharing companies, the services will have to obtain insurance and would require special licenses, but would not be restricted to a specific number of cars or hours of operation. 

If ridesharing services did survive the 100-car restriction, their drivers would have to obtain either a special ridesharing license (a "transportation network company," or TNC, driver's permit, which would require drivers to take a course in defensive driving and driver safety) or a for-hire vehicle license, which requires a more extensive, multi-day training. 

TNC-registered drivers would be restricted to driving just 16 hours a week; those with for-hire vehicle licenses, the same license full-time taxi drivers must get, could drive more. 

Finally, ridesharing companies would be required to maintain million-dollar insurance policies on their drivers—far more than the $300,000 taxi companies are required to provide. (Cab drivers say the smaller policies require them to purchase supplemental insurance out of their own pockets, costing them an average of $8,000 a year.) 

The legislation would also expand the number of licenses for traditional taxis in the city (currently, the city and county together have about 850 licensed taxis, a number far lower than the total number of people who drive them, since multiple drivers typically share a single car) by 50.

While we get the need to regulate a growing industry that is currently entirely unregulated, we were curious about the rationale for so severely regulating a nascent industry before it really has a chance to get off the ground. So our One (multi-part) Question for city council president and taxi committee head Sally Clark is: Why crack down on ridesharing companies while lifting restrictions on cabs? Is the idea to put ridesharing companies out of business, protect the taxi industry, or some other goal? And why not just deregulate the car-for-hire industry completely (besides basic requirements like insurance and a car that's safe to operate)? 

Here's what Clark had to say. 

To some degree, the fact that we are arguing about whether there whould be a cap [of 100] or not is a step forward. It’s a pretty good number of cars out there, given that we don’t have a cap on the number of TNCs. (City council member Bruce Harrell proposed a cap today on TNCs themselves, which could have handed a monopoly over the market to the three companies that are already up and running in Seattle.)

The proposed cap is a way to talk about whether we are trying to meet a peak [that is, rush-hour] demand, which is what our survey said we are having trouble meeting.

If there’s an argument to be made that 100 is an insufficient number of drivers, then great, let’s talk about that. ... I’m honest when I say that I want us to have a healthy range of choices for people and it would be great to know from the companies what that number looks like get some information about how many is the right number."

On the taxi drivers' side, they say. "Look at what you require of us—you require this huge, $300,000 limit," and the manner in which they can go out and shop for insurance makes it more expensive. There are a limited number of insurance companies who will say they want to be involved in taxi insurance.

The world of the personal transportation system isn't that mature yet. Taxi drivers are saying, "Why is it different for them? Why are you making me carry $300,000 in personal insurance as well as buying an umbrella [policy]? If they're both walking and talking like taxicabs, why should you treat them differently?"

But why should taxis receive special protections—in the form of arguably onerous new restrictions on ridesharing companies—when the very reason ridesharing companies are thriving is that taxis are slow, unreliable, and unpredictable? Isn't the taxi companies' job to adapt to a changing marketplace that includes smartphones and apps, as opposed to the city's job to prop up an industry stuck in the last century? 

Clark's response: It's a social-justice issue. 

Taxis are one of the companies that we require to accept cash from people [ridesharing companies only take credit and debit cards] and require to give rides to people in wheelchairs. That's a relatively smaller part of the population that is underserved.

However, she adds that she thinks something needs to change: 

I think that the demand study [commissioned by the council and available here] confirms that [the number of existing taxi licenses] is low for a city of this size. Back in the late '70s, before the city capped it, there was no cap on anything, and it didn’t go well. It definitely is a problem where a previous regime set up this regulatory system and nobody felt like they had to do anything in particular to change the system. Now there’s been a major disruption [in the form of ridesharing services]. 

Clark says the council plans to set up a series of followup meetings to discuss the proposed new regulations next month.

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