Elected officials in Washington, D.C. are having a tough time trying to regulate an upstart taxi company. The Uber sedan car service escaped the District's first official attempt to bring the internet-based company limiting city rules last week when Council member Mary Cheh dropped a proposal to establish a minimum fare for the luxury alternative to traditional cabs. Still, Uber's independence may not last.
Traditional Washington, D.C taxis are metered and charge a fee based on distance regulated by the local government. Livery limousine services in D.C. must agree on a fixed price before they pick up a passenger. (See regulations here.) Uber cars are in between. They are luxury sedans that charge a fluctuating, and unregulated rate calculated by a GPS meter held by the driver. The rate depends on the time of day and the number of available cars, passengers pay at the end of the ride, so ... is it a taxi or a black car, or something else? And how to regulate it, if at all?
That freedom to charge anything irks some elected officials like Cheh who plans to revive her proposal in the fall. The chairman of the D.C. Taxicab Commission says Uber will not be allowed to operate unregulated in the city, especially after the company introduces a cheaper, hybrid car service at an unknown date. It's a fight the Washington Post characterized as a clash of philosophies between Silicon Valley and Washington.
More broadly, the policy fight is a testing ground that might serve up important data on how much regulation is right for taxis. Will more competition and new tiers of taxis raise or lower the average fare and average customer satisfaction city wide? Will a tech-based upstart shake up the phone and street hail-based system that has reigned for decades? And is it fair for a regulated taxi to compete with an unregulated one if their price scales overlap? All of these questions are compounded because Uber and D.C. government just don't get along.
Commission Chairman Ron Linton says Uber is an "arrogant" company that "believes it should have total freedom from any government interest." Linton previously made statements hinting that he wanted to shut down Uber all together.
Uber is growing in popularity in D.C., as it has in other cities, because it's use of technology makes it easier to reserve or hail a car. Customers use Uber's smartphone app and make payments digitally with a credit card. A receipt is emailed after they reach their destinations.
The sedans are more comfortable and modern than many city taxicabs. They are also significantly more expensive, with fares climbing to $20 or more for short trips, sometimes as much as 6.5 times the metered rate. But enough working professionals are willing to pay.
"When I'm taking Uber, I want to be in comfort or I want to know it will be there when the bars are closing, says Tim Shea, 25, a project manager at George Washington University, who says he uses the car service frequently despite its high price. "They are in a completely different class of vehicle, in my opinion."
A proposal earlier this year to upgrade the District's 6,500 taxis angered taxi drivers.
Council member Cheh's proposal attempted to establish a sedan classification for taxis under would force Uber to offer a minimum $15 fare and a require Uber to provide an estimated total fare before a transaction is completed, she says. A $15 minimum would price out Uber for many short trips, giving a regulated monopoly to metered taxis. A proposal to allow street hails of livery cabs in New York drew intense criticism from existing metered drivers.
Uber did not return multiple emails seeking comment.
"I thought we were all on board," says Cheh. "It would have given Uber its legality, which was crucially important."
Both she and Chairman Linton insist they are attempting to protect consumers, not only the city's regulated taxicab industry.
"It is not necessarily the fare that has to be regulated," Linton says. "What has to be regulated is the protection of all the parties involved. There has to be recourse to resolve disagreements."
Uber is currently relieved of any liability between the driver and the passenger under the contract it signs with drivers, Linton says.
"We find that it is in the best interest of all the parties if the driver is licensed and knows all the rules he or she has to adhere to," he says.
Customers have complained to the Taxicab Commission about exorbitant fares after receiving receipts showing they were charged significantly more than they thought they agreed to pay. The confusion over fares stems from Uber's use of market-demand, or surge, pricing and hand-held meters. The commission was unable to pursue the complaints because Uber was unregulated.
A $5 ride in a traditional metered cab can cost $10 or even $20 or more with Uber depending at bar closing time, or from Union Station on a rainy night.
But Shea says the company has improved its system of notifying customers when fares may double or triple during peak demand.
"When Uber is in surge pricing there is a little logo in the corner that says 'surge' and when you click 'request a car' a big screen pops up to notify of the higher fare," Shea says. "It will show a chart that says if the normal fare is $18, it will be $36."
Uber's flexible pricing policy is considered by regulators to be unfair to the city's taxicab industry, whose fleet charges a set minimum fare plus mileage and time measured by dashboard meters.
"That's why I want to hold a hearing," says Cheh. "What demarcates taxis from the Uber service? Then we shouldn't regulate the taxis, either, and let that be a free-for-all."
While the controversy over Uber's sedan service festers until the D.C. Council returns from recess this fall, Uber is preparing to launch a new product that promises to invite another confrontation with regulators: an inexpensive service using hybrid-electric cars. The service has started in San Francisco and New York.
It's unclear if an opening for such service will be available. Chairman Linton is not granting additional taxicab licenses, and he vows that Uber will not be able to become a "predator" by running unregulated hybrid vehicles in the city that charge very low fares to undermine the city's regulated taxicab fleet. "This is a public policy issue," he says. "The community has to decide through its elected representatives if they want to allow a business operation that can change its prices any time it wants to, and you never know what you are going to pay."
As far as Tim Shea is concerned, the marketplace is working and Uber should be left alone. The more competition with city cabs, the better. "Let Uber bring in the hybrids, and I think you would see very quickly taxicab drivers learning to provide what people want," he says.