Fight over ride sharing comes to Philadelphia

An Uber Black car on Market Street . Ride-share car services such as UberX and Lyft are transforming the business.
An Uber Black car on Market Street . Ride-share car services such as UberX and Lyft are transforming the business. (AKIRA SUWA / Staff Photographer)
Posted: July 24, 2014

"Ride-share" car services such as UberX and Lyft are transforming the taxi business in Philadelphia, and they don't even operate here.

Yet.

The San Francisco-based ride-share companies connect people looking for a ride with private car owners looking for extra money. Their phone apps allow riders to summon a car, pay for the service, and get a receipt, all electronically.

Following a foray into Pittsburgh, where they were welcomed by the mayor and the county executive but banned by state regulators, Philadelphia is a likely target this year, industry insiders say.

Philadelphia is the only major Northeastern city where Lyft and UberX have not brought their "disruptive" business model of launching first and seeking permission later.

In their push to recruit drivers and passengers around the country and abroad, the ride-share operators have sparked an intense debate about competition, driver pay, and safeguards for passengers, including questions about criminal background checks, insurance policies, and driver qualifications.

The Pennsylvania Public Utility Commission - which regulates taxis outside of Philadelphia - shut down Uber and Lyft operations in Pittsburgh this month. Uber and Lyft were ruled to be unlicensed, illegal cabs.

The Philadelphia Parking Authority, which regulates cabs in Philadelphia, did the same to the SideCar ride-sharing service last year when it began operating in Philadelphia. Three local men driving for SideCar, another San Francisco-based company that offers private rides for "suggested donations," were given $1,000 citations, and their cars were impounded.

But the fight to bring ride-sharing to the state, and to Philadelphia, seems just to be beginning.

Ride-share drivers continue to operate in Pittsburgh, in defiance of the ruling, with assurances from Uber and Lyft that their fines will be paid for them.

The regulatory battle has shifted to Harrisburg, where some legislators are proposing new laws to exempt "transportation network companies" from the safety and insurance regulations that govern taxis, and create a set of less-stringent rules for ride-share firms.

If approved as drafted, such a ride-share law would apply to Philadelphia. But the bill's prime sponsor, Sen. Wayne Fontana (D., Allegheny), said Philadelphia probably would be excluded from the bill's provisions, at the request of Philadelphia legislators.

(The Philadelphia Parking Authority has regulated taxis and limos in Philadelphia since 2004, when the legislature transferred that authority from the PUC.)

At the same time, Uber and Lyft are now seeking "experimental" licenses from the PUC to operate statewide. A pre-hearing conference on those applications is scheduled for Thursday.

If the experimental applications are approved, the ride-share services would be able to operate everywhere in the state except Philadelphia.

"It would not apply to Philadelphia," PUC spokeswoman Jennifer Kocher said. "The PUC does not have authority in Philadelphia."

Wheels down in Philly

The ride-share companies have their eyes on Philadelphia.

"We look forward to continuing to work with city and state officials to develop a sensible regulatory framework that allows Philadelphians access to the safest, most reliable and affordable ride on the road," said Uber spokesman Taylor Bennett.

Uber was founded in 2009 as UberCab Inc. and changed its name to Uber Technologies Inc. in October 2010. It operates UberX, the ride-sharing service, as well as Uber Black, a limousine service in which vehicles are summoned by phone app.

Uber Black in Philadelphia operates 399 vehicles authorized by the Parking Authority, doing business as Gegen L.L.C.

Lyft representatives also have met with Parking Authority officials, seeking to bring their ride-share service, with cars sporting distinctive pink mustaches, to the city. For the time being, Lyft spokeswoman Paige Thelen said, "We have no plans to launch in Philadelphia."

Meanwhile, the threat of low-cost competition from private operators in their own cars, who can be summoned by a touch on a smartphone, has galvanized a Philadelphia taxi industry long resistant to change.

Philadelphia's biggest cab company, All City Taxi Co., last month launched a free smartphone app (215GETACAB) to allow riders to hail a ride immediately or make a future reservation.

And an "e-pay" phone app (Way2ride) now allows passengers to pay their cab fares with a tap of their smartphone on a screen in the cab. The new app was approved last month by the Parking Authority, which regulates taxis in the city.

Next month, the same app is supposed to allow riders to "e-hail" 90 percent of Philadelphia's 1,599 taxis.

Those kind of innovations are standard in the ride-share business, but they are futuristic developments in Philadelphia.

"I really want to make these apps available. . . . They will show that we can be as efficient and convenient as those ride-share cars claim to be," said James Ney, director of the PPA's Taxicab & Limousine Division.

Also on the way: Security cameras inside all Philadelphia cabs, to improve safety for passengers and drivers. They are supposed to be installed this fall, if the PPA's requirement is approved on Thursday by the state Independent Regulatory Review Commission.

Taxi turmoil

"Our industry is in incredible turmoil," said Alex Friedman, general manager of the All City and Checker Cab companies, which dispatch about 750 Philadelphia taxis. "But we're not sitting with our hands behind our back."

In Philadelphia, as in New York City, Chicago, Boston, Dallas and other cities, taxi owners and operators are fighting to keep out the ride-share companies.

The battle pits well-financed, tech-savvy new companies that are part of the emerging "peer-to-peer" economy against entrenched monopolies with reputations for poor service, too few vehicles, and antiquated equipment.

A lot of money is at stake.

Last month, five-year-old Uber was valued at $18.2 billion - more than Hertz or Avis. Its investors include Goldman Sachs, Fidelity Investments, investment manager BlackRock, and Google Ventures.

Lyft, newer and smaller than Uber, told TechCrunch, which covers new technologies, last December its revenue was growing about 6 percent every week.

On the other side of the street, traditional taxis can be a gold mine for their owners. A Philadelphia taxi medallion, which is required for a cab in the city, is now worth about $545,000, up from $65,000 in 2005.

There are 1,600 medallion cabs in Philadelphia, and only the Parking Authority can authorize more. Starting this year, 150 new medallions will be sold over the next seven years in sealed bidding, to accommodate 150 new wheelchair-accessible cabs.

The new medallions are expected to sell for $400,000 to $500,000 each.

The drivers of the cabs - or the private cars of ride-share networks - don't see much of the big money.

Cabdrivers in Philadelphia typically pay $95 a day to lease a medallion cab from the medallion's owner and $25 to $150 a month in dispatch fees, and they pay for their gas.

The average annual income for a Philadelphia-area cabdriver is $25,100, according to the U.S. Bureau of Labor Statistics. The PPA says it is higher, about $39,000 a year, after fees.

An Uber or Lyft driver typically works part-time to make extra income, and typically pays a 20 percent commission to the company. Some drivers in San Francisco report making as much as $8,000 a month, while others in Los Angeles say a glut of drivers is driving down incomes.

Even Uber Black limo drivers in Philadelphia worry that UberX private drivers may cut into their incomes.

Arturo Torres, an Uber Black driver, said he pays $498 a week for his car and insurance and then pays Uber a 20 percent commission for each trip.

"I have to gross $2,000 a week to make a living," Torres said. "I have to work double shifts for that."

What's the difference?

"These ride-share companies are in a race to accumulate market share," says Mark Price, a labor economist at the labor-union-funded Keystone Research Center in Harrisburg. "They want to get a competitive advantage . . . and it's quite clear that they're competing directly with the cab companies."

Price said he is unpersuaded by arguments by Uber and Lyft that they are substantially different from taxi operators.

Administrative law judges Mary Long and Jeffrey Watson said much the same thing when they ruled against Uber and Lyft this month.

"Although the digital platform used to connect passengers with transportation is new and innovative, the proscription against using private vehicles for transportation without commission authority is hardly new," the judges said.

Price said: "The pattern is pretty clear: They defy the existing law and enter a market, knowing they can absorb the fines. While they're doing that, they find a lobbyist and move very hard to change the regulatory climate.

"It looks to me like they're having a fair amount of success."

In Pennsylvania, Fontana this month introduced a bill (SB1457) to exempt "transportation network services" from existing taxicab regulation. It would establish less-stringent requirements for PUC regulation of the ride-share cars.

"They didn't fit current PUC regulations," Fontana said. "The public wants the service, but they want some kind of oversight on the background of drivers, insurance coverage, and vehicle requirements."

The bill would require the companies to conduct criminal background checks of all drivers, provide $1 million commercial liability insurance coverage (with the policy to be kept secret from public examination), provide driver training, and require that cars be no older than eight years.

The bill would exempt ride-share companies from any regulation of fares, any municipal licenses or taxes, and the requirement to have a certificate of public convenience.

"We researched other states, especially California, and it made sense to me that there needs to be a different level of regulation, but it also made sense that there needs to be some regulation," Fontana said.

He said all five PUC commissioners had endorsed his bill.

Cab companies from Philadelphia and around the state have protested the "experimental" applications by Uber and Lyft to the PUC.

"Nothing in the application distinguishes the proposed service, in any meaningful way, from the other motor carriers' services," Philadelphia lawyer Michael Henry wrote in protests to the PUC on behalf of taxi companies.

"They are predators and illegal operators," said Friedman, the 60-year-old Ukrainian émigré who runs All City and Checker Cab dispatching companies from his office above a transmission-repair shop in Northeast Philadelphia.

"They're taking money and giving rides. If you give rides and accept payment, you're a common carrier."

He acknowledged that Philadelphia lacks enough cabs to meet demand during peak periods, such as weekends and during foul weather.

"Maybe there is a way to accommodate the public with additional supply," he said, suggesting that ride-sharing services could be permitted during peak periods, if they meet safety and licensing rules.

"Nobody is saying we're perfect, but we are changing," Friedman said. "We are delivering phone apps, criminal checks, friendliness, cleanliness."

"We're open to competition to satisfy the public, but it should be fair competition."


BY THE NUMBERS

399 Uber Black vehicles in Philadelphia authorized by the Parking Authority

1,599 Number of taxis in Philadelphia authorized by the Parking Authority

$545K Approximate value of a Philadelphia taxi medallion


pnussbaum@phillynews.com

215-854-4587

@nussbaumpaul

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