Airports Caught in Crossfire of War Between Taxis & Ride-Share Networks

Kathy Scott
Published in: 

Ride-share services entered the transportation marketplace with barely an introduction, other than superlative promises to potential customers and drivers about revolutionizing the way people get around town. Passengers began using Uber's smartphone app in 2009 to connect with individual drivers willing to use their own cars to give strangers a lift, and buzz about the new concept spiked. When word spread about bargain prices, similar ventures such as Lyft and SideCar soon followed.

Not surprisingly, the taxicab industry answered with its own buzz - complaining vociferously that ride-sharing services presented unfair competition, since they didn't have to follow the same rules as taxis. Without driver required background checks, vehicle inspections, licensing fees and additional insurance, the cost of doing business was lower for Uber and its peers.

Airport executives soon found themselves caught in the crossfire. As hotspots for both taxi services and passengers looking for the lowest "fares" possible, airports have multiple factors to consider. On one hand, taxis provide a vital landside service to passengers, and they often pay airports for access to their properties. On the other hand, some worry about alienating customers by appearing to squeeze out new, competitively priced ground transportation options.

The public safety aspect is no small issue. Who's on the hook if a passenger experiences problems with a driver after being picked up at the airport? Uber asserts that it does nothing more than offer an app that connects drivers and passengers, making it the passenger's responsibility to "vet" the driver. So what happens if an Uber driver rear-ends a shuttle bus at the curb outside the departures area?

San Francisco International Airport (SFO), located in the very city where Uber was launched, is feeling the full effect of the war between taxis and "taxi-like services." Doug Yakel, SFO's public information officer, notes that federal law allows SFO to regulate the use of its roadways in order to obtain federal funds for upkeep and maintenance, but it requires airports to account for all vehicle traffic movement on their properties. "Taxis and limos have a specific section to queue for entry. [A transportation network company] would need to provide a method of tracking the amount of vehicles entering SFO, so we have a clear picture of the amount of volume this represents for space allocation purposes," Yakel elaborates.

Without permission to operate on airport property, multiple ride-share companies began servicing customers as if they were licensed vendors - leaving travelers unaware that drivers were unknown to airport management and had no business licenses, set fees or airport certifications. In 2011, the San Francisco Municipal Transportation Agency and California Public Utilities Commission (CPUC) sent UberCab, SideCar Technologies, InstantCab and Tickengo cease-and-desist letters for operating unlicensed cab services. When the commission subsequently cited UberCab (Uber's original brand) for operating an unlicensed limousine service, the company denied the allegations, dropped the "Cab" portion from its name and filed with the CPUC for an exception. Uber also reached out to tech media to tell its story.

Project: Managing New Ground Transportation Options
Locations Profiled: Denver Int'l; San Francisco Int'l
New Providers: Ride-share services/transportation network companies that use smartphone apps to connect passengers with drivers using private vehicles
Brand Names: Uber; Lyft; SideCar; InstantCab; Tickengo; etc.
Challenges: Unregulated, uncertified providers initiating service at airports
Patchwork Regulations: Colorado legalized transportation network companies in April; Las Vegas & Miami have municipal ordinances blocking ride-share services; CA has regulations that address driver background checks, insurance requirements, vehicle standards, etc. that are being emulated in other markets;
Of Note: In July, San Francisco Int'l was developing airport permit for transportation network companies

When CPUC classified Uber and similar services as "charter-party carriers," the companies balked, insisting that they simply use the Internet to connect private riders and drivers - and therefore shouldn't be subject to charter carrier rules. The city of San Francisco subsequently formed a "collaborative consumption taskforce" to address ride-sharing services and other new businesses like Airbnb, a website that connects people looking for lodging with private owners willing to rent rooms or entire homes - the common denominator being Web-driven industries not covered by existing regulations.

In its website coverage of the Uber issue, Business Insider noted that San Francisco has "generally proven friendlier to its local startups" than to opposing established interests.

CPUC eventually created a new category for Uber, et al. - transportation network companies (TNCs) - and established 28 rules for them. Many of the regulations are similar to those in place for taxicabs, such as required criminal background checks and training for drivers, a zero-tolerance policy on drugs/alcohol and 19-point vehicle inspections.

TNCs must also maintain a minimum of $1 million per-incident coverage for incidents involving TNC vehicles and drivers in transit to or during a TNC trip, regardless of whether personal insurance provides coverage. In July, the CPUC permit process remained in place, with ongoing discussions about insurance coverage. While TNCs have secured $1 million of insurance, the coverage does not apply to all phases of a transaction, and variations are not clearly defined. Limousines, in comparison, are required to have $750,000 of insurance, with provisions that ensure coverage whether or not passengers are on board. Legislators in the California Assembly took up the cause, with a bill that more clearly defines TNC insurance coverage during the various phases of customer transactions. SFO's permit calls for $1 million of insurance for any phase of a TNC transaction, notes Yakel.

The commission defines TNCs as: prearranged transportation services for compensation using an online-enabled application (app) or platform to connect passengers with drivers using their personal vehicles.

"The CPUC is at the forefront of leadership in crafting new safety based regulations for a rapidly emerging industry," said CPUC President Michael R. Peevey, in a statement released by the commission last fall.

Implications Nationwide

In April of this year, the Colorado legislature took CPUC's initiatives one step further and legalized TNCs in the Rocky Mountain State. It is also using some of the California commission's framework to establish regulatory oversight for TNCs operating in Colorado. With the state's taxi industry poised to challenge the new law, Denver International Airport (DEN) remains in wait-and-see mode.

Heath Montgomery, DEN's media director, says the airport is not taking a position on the issue, but has been working with the city and various transportation network companies to understand the customer service implications for the airport. "Any new technology that benefits the traveling public is of interest to us," Montgomery says diplomatically.

SFO's Yakel cites another customer service implication - specifically, an airport's need to protect the safety and wellbeing of its travelers. In late spring and summer, several TNC drivers at SFO were found to be operating without insurance or the proper license, reports Yakel.

"We have been meeting with TNCs to develop what might be the first TNC/airport permit in the U.S.," says Yakel. "We invited the TNCs to sign the airport permit; to date, no permit application has been approved."
The issue is coming to a boil elsewhere in the United States. The Washington Post reports that at least a dozen cab companies in Virginia and Maryland have already filed lawsuits this year against Uber. The cab companies maintain that it is illegal for Uber's driver to ferry passengers because they lack taxi licenses. Several taxi companies in Chicago have taken similar legal action.

When faced with legal and other objections, Uber maintains that it is not a taxi service, it simply offers passengers another way to get from Point A to Point B. Uber's marketing, however, often plays up its similarities with taxicabs. One of the company's numerous service levels is called UberTaxi, and it promotes its no-frills UberX option as "better, faster, and cheaper than a taxi."

Las Vegas and Miami have decided to tackle the issue on a local level by enacting municipal ordinances that block ride-share services from operating within city limits.

For now, though, Uber appears to be picking up speed. In June, it announced a funding infusion of $1.2 billion, bringing the value of the company to more than $18 billion - high even by Silicon Valley standards. In July, Uber was operating in 128 cities throughout 37 countries.

Taxi Drivers Protest  Across the Pond & at Home
As friction between taxis and ride-sharing services continues to increase, news from Europe may serve as a cautionary tale for U.S. airports that consider taxis an important landside service. In June, an estimated 30,000 taxi drivers participated in a coordinated, pan-European strike that disrupted traffic in France, England, Germany, Italy and Spain. Drivers caused gridlock in capital cities and tourist areas by parking their taxis, usually for an hour, to protest a lack of local enforcement against business infringement from Uber.

One French cabbie compared Uber drivers picking up passengers to someone selling bread on the sidewalk outside a bakery without paying taxes or welfare charges. "It's unfair competition," he summarized.

The strike, however, may have actually helped Uber's outreach efforts. Jo Bertram, the company's general manager for the United Kingdom and Ireland, reported that more customers signed up for its services the day of the strike than had signed up since the app launched in London two years ago - an 850% increase compared to the same day the previous week.

In Barcelona, the capital of Spain's Catalonia region, El Prat Airport and the main train station were almost completely void of taxis during a 24-hour strike in July, reported regional daily La Vanguardia. The anti-Uber strike was not Barcelona's first, and it occurred despite a June announcement from Catalonia's Territory and Sustainability Department about plans to fine drivers using Uber up to €6,000 ($8,000) and possibly impound their vehicles. The announcement in Catalonia was made the day after Spain's Public Works and Transport Ministry decided against measures to fine Uber users up to €600 ($800). As an autonomous region, Catalonia sets and maintains its own laws.

To date, U.S. taxi drivers have generally not protested in the same fashion or magnitude as their European peers. But there have been isolated strikes in individual markets.

In June, more than 1,000 taxi drivers shut down Pennsylvania Avenue, NW, in Washington, D.C., with a protest in the middle of a business workday. The drivers were asking that Uber and other transportation network companies adhere to the same rules as cabs. Subsequent social media posts, however, cited numerous reasons why competition is sorely needed in the nation's capital.

In May, a throng of taxis from Boston and nearby cities honked steadily and disrupted traffic while circling the block of Uber headquarters in Boston. An additional 30 drivers were on foot, holding signs and engaging the crowds that gathered about stricter regulations for Uber and other similar services.

Shortly after the strike, a spokeswoman for Boston Mayor Martin Walsh announced that the mayor was assembling a transportation taskforce to address many of the strikers' complaints. She also mentioned a possible partnership with nearby cities to provide oversight of traditional taxi services.

In a prepared statement, Walsh took a decidedly neutral position: "We cannot turn a blind eye to public safety concerns around unregulated modes of transportation, but we also cannot condemn a popular, effective service that takes responsible steps to ensure the safety of their users."


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