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Thursday, September 18, 2014 |  Madison, WI: 51.0° F  Fog/Mist
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Taxi industry mobilizes as Lyft and Uber ride apps launch in Madison
Showdown likely over new services
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As mobile apps for services like Lyft and Uber launch in Madison, local taxi drivers are pushing the city to enforce its transit regulations.
Credit:Uber/Carolyn Fath

Local educator and entrepreneur Erin McWalter is working on her second startup, a project whose goal is to create "resilient communities by facilitating interactive and diverse public spaces."

She speaks of "forward momentum advocates" and an "ecosystem of innovation." And it is in this context of change that she welcomes the recent arrival to Madison of two app-based ride services, Lyft and Uber.

"It is innovating transportation beyond bus service and cabs," she says. "This is a new layer."

Both services offer customers an app that can be downloaded to a smart phone and used to order a ride.

Walter says app-based ride services are to cabs what social network sites are to email.

"You had email, but now you have Facebook and Twitter. All have different niches."

McWalter says cities would ideally allow upstarts such as Lyft and Uber to freely test out their products. She says if Madison wants to promote itself as open to tech innovation, it can't have "old laws preventing people from innovating. Then people are going to leave."

The laws McWalter refers to are city regulations that govern taxicab companies and drivers. City officials maintain Lyft and Uber fall under Section 11.06 of Madison General Ordinances; the companies disagree. It's a fight taking place across the country as these app-based companies move into markets despite regulatory prohibitions.

In recent days, Facebook discussions among local residents are drawing heated comments from those on both sides of the issue. The city's Transit and Parking Commission is holding its first hearing Wednesday, and cab drivers are expected to have a large presence at the meeting.

Ald. Chris Schmidt says while Lyft and Uber might be "new" and "exciting," they still sound like cab companies to him.

"It's contingent upon those organizations to explain to us why they differ from cab companies and would not have to be subject to those same regulations," says Schmidt, who has been on the transit commission for five years.

"Just because it's a new idea doesn't mean it's a good idea," he adds. "Just because it's innovative doesn't mean it's fully cooked."

More, better, faster

Lyft and Uber are both based in San Francisco.

Launched in June 2010, Uber is now in 85 cities around the world, including nearly every major American city, says spokesperson Nairi Hourdajian. Lyft launched in June 2012 and is in 24 cities, says spokesperson Paige Thelen.

In some cities Uber drivers pick up customers in black town cars, but in Madison drivers use their own cars. Lyft taps local residents who use their own vehicles.

Uber charges a base fare, plus time and distance. Customers set up an account and the fare is automatically charged to a credit card they've provided to Uber.

Lyft fares are calculated on time and distance. At the end of the ride, passengers can increase or decrease the suggested "donation," says Thelen.

Both companies, which have offered two weeks of free service in Madison, say the response from drivers and riders has been good. Hourdajian says consumers in Madison were trying to download the Uber app even prior to the company's launch.

"It tells us there is a demand for more, better, faster transportation services," she says.

But cab companies and drivers say it is unfair for these companies to operate outside the regulatory structure. Taxicab companies in Madison must pay $2,200 every two years to renew their license, and pay a $60-per-vehicle-fee annually. They must have consistent markings on their cars, carry insurance, operate 24/7 and provide service to all parts of the city.

Drivers must obtain a $25 provisional permit, get fingerprinted and photographed by the police department, and undergo a background check. Once they complete a sensitivity-training course, focused mostly on serving people with disabilities, they must pay another $25 for a permanent permit.

Keith Pollock of the city's transportation department says taxicabs are regulated to ensure public safety and mobility for people who rely on them as their only mode of transportation -- specifically the disabled, poor and elderly.

Taxi companies "have to be able to transport people to doctor's appointments and not just do the lucrative fares, like football Saturdays," says Pollock.

Cherry-picking fares

Veteran Union Cab driver Mark Adkins says there is a "high level of concern" among the city's taxi drivers about Lyft and Uber. He says the requirement to operate 24/7 means that drivers must be available even in slow times, and those shifts are less lucrative than busy weekend nights.

"These unregulated services are cherry-picking well-to-do communities and reducing the amount of income overall for taxi drivers," says Dave Sutton, spokesperson for the Taxicab, Limousine and Paratransit Association, which has 1,100 members operating more than 100,000 vehicles around the country.

Adkins says drivers are also bothered that much of the money collected by Lyft and Uber drivers will go out of state. "The vast majority of the money we make stays here in Madison," he says.

Thelen disputes this claim. She says Lyft drivers take 80% of the suggested donation and Lyft 20%. "If the passenger adds more tip, 100% goes to the driver," she says.

Perhaps the most controversial part of app-based services, though, involves insurance. "Taxicab companies carry insurance; drivers purchase it as well," says Sutton. "The cost is substantial because it covers a driver through any phase of operation, whether cruising or waiting for a fare."

Critics charge that without the requirement of insurance, riders in app-based services are largely unprotected in the event of an accident or injury. Adding fuel to this argument is the case of a 6-year-old girl killed in December in San Francisco by a driver who worked for Uber. The parents filed a wrongful death suit against Uber after the company denied responsibility because the driver was not providing services at the time of the accident. That is, he did not have a passenger in the car.

Hourdajian says Uber has a commercial liability policy in place that covers up to $1 million per incident on a ride-sharing trip. "That means even if the driver's personal auto insurance is found not to apply, this policy drops down and become primary," she says. But, she concedes, it applies only when drivers are "providing services on the Uber system."

Thelen says Lyft provides $1 million excess liability coverage for each driver as well as "contingent collision" and uninsured driver coverage.

Thelen says critics are "not taking into consideration that we are working with leaders in the insurance industry to come up with solutions to protect everyone involved."

New technologies

Background checks are also a point of contention. The companies say they conduct comprehensive, multi-state background checks on drivers, but Sutton says they are not done by law enforcement staff.

"You can do background checks rigorously or you can do them on the cheap. Uber and Lyft have third-party companies providing them, and stuff has been missed."

Uber acknowledged earlier this month that it had failed to identify the felony conviction of one of its Chicago drivers.

Cities across the country are handling these new ride services in different ways. Some have banned them and some have created two-tier systems. The taxi industry in Chicago filed suit in early February against the city for allowing the unregulated services to operate on city streets.

Ald. Scott Resnick is not on the city's Transit and Parking Commission, but as a local tech entrepreneur he's interested in the issue. As with the issue of AirBnb rentals, new technologies are both disruptive and exciting, he says.

Resnick hopes there is a middle ground: "I would rather take the approach not to ban it, but to look for solutions and be creative with our ordinances."

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