The Future isn’t Going Away

thepiratebay.se

The Future of Ridesharing? Image from thepiratebay.se

Two weeks ago STB explained why trying to effectively push out TNCs from the city is a bad idea for the consumer, the environment, the city as a whole.  It will ultimately backfire as well.

In a few short months the majority of Washington citizens will be able to buy legal pot from a WSLCB certified retail outlet.  After half a century of failed prohibition the demand for pot proved too great.  We decided that it was better to legalize marijuana and put it under government control and regulation.  The Market won.

I haven’t bought a physical album in over six years.  It’s not that I stopped spending money on music. Between subscription services and digital albums I probably spent more money in the last year than any other year in my life.  It’s just that the old paradigm didn’t work and the new (digital media) is inexpensive, convenient and easy.  The Technology won.

In Resolution 31174, did not the city council unanimously vote to support marijuana legalization because they wisely recognized that the demand was so high that prohibition clearly couldn’t work? Is Seattle not one of the largest tech hubs in the world?  Then how can the city council not see the inevitable results of pushing TNCs out of Seattle?

The Market is here.  TNCs have exploded for a reason.  People are VERY happy with the services, and unhappy with Taxis.

According to a recent city survey, nearly half of respondents ranked taxi response times as “very poor,” “poor,” or “neutral.” In contrast, nearly 95 percent of ridesharing clients ranked drivers’ response times as “very good” or “good.” Overall, the study concluded, “For an industry catering to the general public, these responses signify an inability of the service provider to attract and maintain their institutional market.”

The Technology is here.  Combine location based classifieds like Antengo, with ranking and review tech like Yelp, and with mobile payment options like Square or even Paypal, and you have all the tools you need to find a ride, check out the driver and passenger, and pay quickly, conveniently and easily.  In a city like Seattle, swarming with programmers who like to create apps just for fun, it’s only a matter of time before a completely decentralized system arises, with no company behind it for the city to sue or regulate.  This is even more obvious when you consider the popularity of these services among the techies of Seattle.

Currently, because TNC are large corporations, there are enforceable standards.  Drive these corporations out of the marketplace, and ridesharing will become peer-to-peer, diffuse, less transparent, and less safe. Both drivers and consumers get a worse deal (less efficient market, fewer protections), and regulators lose all practical possibility of control.

I realize elected officials aren’t particularly fond of being told they can’t do something.  No one works for election to office to not do things.  However, now that Seattleites have witnessed first hand how quick, convenient, safe, and hassle free getting a ride can be, they simply aren’t going to accept the horrible taxi service forced on them before.  The genie is not going back in the bottle.  In the end, pushing the TNCs out of the marketplace in order to protect the entrenched taxi model will be as effective as shutting down Napster to protect the entrenched music distribution model.  Good luck with that, Seattle!

About Matthew Johnson

Matthew Johnson grew up in rural South Alabama. He has lived off and on in the Seattle area since early 2007, finally settling down in Columbia City in April of 2012.  Active in transportation issues, he is a cofounder of Seattle Subway. Since December 2013 he works at Sound Transit. All opinions expressed are solely those of the author. They do not represent the position of his employer, any group he is affiliated with, or even the blog as a whole.




Comments

  1. Growing up in El Paso, I was quite aware of what happened when housing sold at the rate most El Pasoans could afford was legislated to death: colonias, all over the outskirts of El Paso, and some pockets inside as well — slip-shod wooden and cardboard structures mostly without water and electricity.

    King County is somewhat different in that housing is still allowed to be built beyond the urban growth boundary, while new housing construction has been nearly legislated out of existence inside the city. Affordable housing is really stomped down when neighbors catch wind of it. Balloon-squeezing exercises don’t tend to come out well. Ours results in people sleeping in their cars, until the government tries to outlaw that. So, they sleep on the street somewhere not too far from their cars. Or they take up space in shelters and push the carless out. Then the carless become a proliferation of tent cities. The snob zoners stopped housing from being built, but they didn’t stop people from moving here or being born here.

    So I have to ask the city council: If you take the Sidran approach to ridesharing, trying to outlaw it or severely restrict it in whatever ways you think you can, do you really think that will stop people from ridesharing? So far, it hasn’t. People know most of the existing services are “extra-legal”, and they use them anyway. In droves. So instead of trying to limit supply, squeezing the balloon, and ending up with poor results, why not embrace the basic principles that those who accept payment for providing transportation must have commercial insurance on their vehicle, have a certain level of training and certification, and any other basic safety regulations that need to apply to paid transportation providers, and I am not talking about number of vehicles. That standard-based approach would come out a lot better and SAFER than what the city council is proposing.

    Cabs are a dead industry, just like the horse and buggy. Anyone wanting a cab doesn’t stand out on the street and try to catch one. They call one. (This is partially a result of severely restricting supply, btw.) Yes, I know that’s technically called a “for-hire driver”, but most people don’t know the technical difference, and the companies they call call themselves “cab” companies.

    So, enough with the farce. Legalize ridesharing, regulate it with standards (not quotas), and make it safer.

    • I would go further and say…subsidize it.

      That is, it’s time for the public transportation agencies (or transit as it’s become known) integrate shared automobiles into their networks and plan accordingly.

      These services, if available during off hours and remote locations, potentially solve last mile problems for rail and BRT where there is no justification for a regular local bus route.

      Subsidized taxis, vetted and organized by Metro and Sound Transit, make it possible to focus on trunk lines like LINK and Sounder and have more all day service to centralized destinations.

      • Mark Dublin says:

        Better idea, John: make these drivers transit agency employees, with cars maintained in agency shops and under agency insurance. Problem with contracting out public necessities best seen in number of sandwich sign apologies in front of LINK station elevators and escalators.

        Mark Dublin

      • I’m excited to completely, 100%, agree with you, John! Of course, the subsidies should only be available to trips that can’t be taken on buses (or can’t be taken without some huge amount of out-of-direction transferring), and they should be monitored to see when it’d be better to upgrade a certain region to a standard bus route. But those things should be so obvious even the existing government can do them.

      • What JB suggests sounds like extending Metro’s a href=”http://metro.kingcounty.gov/tops/accessible/programs/taxi-scrip.html”>taxiscrip program to everyone.

      • John Bailo says:

        Yes, exactly. Let Car Share services use ORCA cards, and for a journey from a bus stop or in place of a route that shuts down at night they get some sort of transit-style transfer fare instead of full cost.

      • The cost of installing ORCA readers in every cab, with a much-enlarged public cab fleet to make point-to-point DART-style service available all over the county would be huge. There is a reason they haven’t been installed in Access vans.

        But then, the cost of the ORCA readers pales in comparison to the cost of a much-enlarged public cab fleet to make point-to-point DART-style service availalable all over the county.

      • John Bailo says:

        Nonsense. All it would take is a USB dongle for a smartphone.

        It doesn’t have to be industrial strength or have its own networking and storage like on a bus.

      • John Bailo says:

        the cost of a much-enlarged public cab fleet to make point-to-point DART-style service

        The point being that the fleet would in part be subsidized UBER and Lyft drivers.

        So this would be a quasi-public private partnership that takes advantage of their services, maybe makes some adjustments to insure availability and offers subsidies in return.

      • My biggest concern with the idea of subsidizing taxi-like services in lieu of low-ridership coverage routes is how to prevent the cost of the subsidy from ballooning out of control. While the cost-per-rider of a near empty bus may be high, at least the cost is capped and if a surge of people suddenly decide to start riding it, the cost of service does not increase unless the agency makes a conscious decision to add more trips and allocate money for those trips accordingly.

        By contrast, I don’t see a good way of subsidizing taxi-like services in a way that caps the cost. Do you only subsidize x trips per month and everyone has to pay the full price once the subsidy budget has been exhausted? Do you limit the subsidy to low-income people? If so, how do you verify income? Also, remember, that when a service is more convenient than an hourly bus, more people will use it, so the cost might be greater than one might think?

    • “while new housing construction has been nearly legislated out of existence inside the city”

      Where the eff do you live? I’ve got new housing going up all around me (Queen Anne).

    • ClaimsAdjuster says:

      Fortunately the Seattle City Council is not following your advice. They carved out a place for the TNCs and they will just see how they do when they have to actually carry insurance and operate legally. I doubt that they can make it without their advantage of insurance fraud.

  2. After Napster went down the consequences for sharing music (and, later, TV shows and movies) illegally were pretty minimal. Everyone was doing it, and even though it was pretty easy to catch file sharers there weren’t enough lawyers in the world to sue a significant number of them. Still, people were afraid enough of being caught that they left systems where they could be tracked and created new ones like bittorrent where they were harder to catch.

    When it comes to ride sharing, without enough drivers to be abundantly available an app is useless. Without enough visibility to provide riders there’s no impact. And without taking the risk of being publicly accessible you have no visibility. As file sharing proved, it doesn’t take too many prosecutions to drive people to safer services. But there’s no way to split up a physical ride like bittorrent. You have to show up physically in your car to provide the ride. A totally peer-to-peer app, where the developer doesn’t take a cut in order to provide appropriate insurance, inspections, and payment processing, could plausibly insulate the developer (if they’re careful) but provides no security for drivers. That’s the leverage regulators have, and it’s probably strong enough to keep decentralized ride-sharing from taking root.

    • Alex Bailey says:

      I think Al’s argument is much closer to the truth than the comparison to marijuana or music file sharing. While many economies can’t be effectively banned through reasonable government legislation, I don’t think this a universal truth, but rather a reflection of the incentives and risks created by the legislation in a given market.

      For example, in the case of criminalized marijuana, producers have large financial incentives to grow and/or sell marijuana because production costs are far lower than what many consumers are willing to pay. Thus, their are huge profit margins (it is one America’s biggest cash crops) that mitigate the risks imposed by criminalization. As for consumers, the risk of purchasing and consuming marijuana is relatively low because of constitutional prohibitions on unwarranted search and seizure, the robustness of underground marijauna distribution networks, and the fact that in many (but by no mean all) communities, the cops don’t really care about low-level marijuana use.

      Ride sharing has the exact opposite situation. Producers cannot sell their service at a price far cheaper than alternatives to mitigate the risk of offering the service and consumers could face huge risks if legislation made it such that insurance policies for underground ride sharing were unenforceable. For these reasons, especially the supply side ones, I don’t think a substantial underground ride share economy will develop if TNCs are capped.

    • Al, you’re wrong about filesharing — nobody was scared off. What happened was that finally a convenient legal option became available.

      The drop in illegal filesharing of movies and songs is *entirely* due to Apple (and then Amazon) offering *cheap*, relatively *easy* legal downloading. For songs and movies, and more importantly books, which aren’t readily available to download commercially at low prices, they are *still* downloaded from sites like Megaupload (and its infinitely many clones) in large numbers. Frankly, the supposedly “easy to take down” centralized services are STILL going strong and will continue to go strong, because the demand is there.

      Taxis will behave exactly like marijuana or data or prostitution: if you ban or overprice the services people want, people will buy those services illegally. Banning the services *hurts the service providers* — they end up in a more dangerous situation because they’re operating illegally, with more expenses and less protection — but it doesn’t stop the customer demand, and people will find a profit in supplying the demand.

      If TNCs are capped too low, a substantial underground “rideshare” economy WILL develop. We actually know this from cities around the world which have ridiculously small fleets of legal taxis and large fleets of illegal taxis. We know this because in cities with tight taxi limits, for-hire cars frequently accept street hails illegally. We know this because in cities withg legally-induced taxi and bus shortages, strange “jitney van” services pop up. This happens *over and over again*.

      You have to have a set of regulations which meets demand, or the regulations will be disregarded.

      “Producers cannot sell their service at a price far cheaper than alternatives to mitigate the risk of offering the service”
      Can’t they? When the alternative is “no car for hours after you call”, producers can easily sell their service (car showing up quickly, on time) at a high price and the customers will consider it cheaper!

  3. RapidRider says:

    For those of us too lazy to click through the links to find out what a TNC is: it’s a transportation network company.

  4. Adam Bejan Parast says:

    There will be a rally in support of Lyft, Sidecar, Uberx, etc. at City Hall on Wednesday at noon.

    http://action.peers.org/page/s/seattle-rally?sp_ref=29099153.84.2612.f.0.2&source=fb_sp

  5. Mark in Kenmore says:

    This is bordering on off-topic, but [ot]

  6. One thing that could work without a highly capitalized, commercial service is actual ridesharing. Large, loose networks of people in groups that make common but not totally consistent trips, where maybe a group has some kind of reimbursement policy for drivers but it’s only to cover specific costs like gas, tolls, and parking, not the drivers’ time (so it wouldn’t be considered commercial driving, just the sort of compensation you get for a normal carpool). One group might be Seattle residents that are Microsoft contractors (and can’t use the Connector) or work in Redmond but not for Microsoft. Another might be Boeing employees that live in north Seattle and Shoreline. Groups of retail workers in places with parking constraints (downtown Kirkland comes to mind). People attending large group meetings, churches, conventions.

    If you’re picking up random people for rides on trips you otherwise wouldn’t make… congratulations, you’re a for-hire driver.

    • I fail to see the distinction between what you’ve described and a carpool.

      • William C. says:

        He’s proposing a more organized service to coordinate it on a last-minute basis?

      • Yes, what I’m saying is that a social app to manage on-demand carpools would be useful for certain groups of people, and is something that could be implemented entirely in software by volunteers with very little capital.

        And that would be legal. It’s not that legality under the current regime is necessarily germane when discussing potential policy changes. But anything resembling a for-hire service implemented entirely in software by volunteers with very little capital would encourage drivers to run afoul of very important laws regarding a driver’s fundamental financial responsibility for liability incurred while driving (not just taxi medallion caps). Laws that aren’t that hard to enforce, and carry significant penalties.

        I’m writing this to show what the difference is between a ridesharing app that you can write and distribute for free (which is cool!) and a for-hire service that may have some nice features but necessarily requires some capital.

      • “I fail to see the distinction between what you’ve described and a carpool.”

        A carpool is a heated sauna in a stretch limo. We’ve just been abusing the terminology for a few decades.

      • Office of the President of the United States of Internets says:

        Thread over, Brent wins.

        Congratulations, Brent, you win five (5) Internets! Please send to Internet Prize Distribution Center, 1011101 Longcat Way, GIF-pronounced-like-GIF City, The Internet to claim your prize of Internets.

    • I’ve thought about the problem of peer-to-peer dynamic carpools for some time. The real problem boils down to the fact that, like it or not, it takes the driver a certain amount of time to sign up for the service, let the service know where he/she is going on each trip, in order to potentially pick up riders, then make the stop to actually pick up and drop someone off.

      In other words, If the driver can only be compensated for gas, it is simply not worth the driver’s time and effort to sign up and use such services, unless making an extremely long trip (e.g. Seattle to Spokane, Portland to San Francisco, etc.) A few drivers might offer their services anywhere for purely altruistic reasons, but unless the driver is allowed to receive compensation for his/her time, in excess of the cost of gas, the number of participating drivers will be too small to make a difference. Without enough drivers signing up to drive, riders won’t bother participating either, and the service will collapse.

      The shorter the trip, the more important compensation for time becomes. There is a good reason why UberX has a $5 minimum fare. Nobody is going to go through the time and trouble to drive a stranger half a mile in exchange for 5 cents to cover the gas, even if the driver is going right by the passenger’s origin and destination anyway.

  7. Mark Dublin says:

    “…why not embrace the basic principles that those who accept payment for providing transportation must have commercial insurance on their vehicle, have a certain level of training and certification, and any other basic safety regulations that need to apply to paid transportation providers…?”

    Exactly my question, Brent. And also a realistic statement of the limits of what Seattle has any hope of enforcing with resources available. Let alone finding a jury that will convict a violator. But from my own experience driving cabs, I would add these:

    1. Strict limits on the number of hours any individual driver can be required to work.

    2. A decent number of paid time off for illness and family emergencies.

    3. Ditto for paid vacation.

    4. Legally enforceable break time, for sanitary needs and general recovery.

    5. Either union representation or structured as a worker-owned cooperative.

    Re: point 5, like transit driving, taxi and TNC driving can both give their workers a good living and a dignified and satisfying life. Or complete opposite. Protection of passengers’ rights should go without saying. But some focus on workers themselves is forty years overdue economy wide.

    It could also be an age thing, but less comfortable with current generation of brilliant workaholic corporate management than with the mugs that shot Lefty Costello in the Clifford Odets play. Seems to go with proliferation of acronyms beyond either human or electronic memory.

    Thanks for definition, Rapid. Age discrimination, dammit!

    Mark Dublin

    • Great points Mark.

      6. Insurance is much cheaper by the dozen. A group rate for commercial insurance is the only realistic option for drivers-for-hire.

      • Commercial insurance, as currently implemented, doesn’t work well for TNC’s because it’s priced by the vehicle/driver, not the trip. The TNC model is based on a bunch of drivers working a few hours a week. If each driver had to pay an insurance premium priced for taxi drivers working 12 hours a day, 7 days a week, it would be impossible for drivers to make enough money to cover the insurance. The result would be no drivers willing to participate.

  8. BigDonLives says:

    Let’s hear it for part-time gypsy cabs ( this term somehow offended people last time ) with drivers paid as 1099 contractors or better yet… DONATIONS!

    Are they tax-exempt? Will it feed the children?

    I personally want a free-for all South African taxi stand style and oh let’s break up the monopoly at Sea-Tac

    • Mark Dublin says:

      Careful about business models from other continents, Big Don. There are places where the good qualities of widespread shared taxi and small bus services are spoiled by widespread gangland ownership, notoriously including elected politicians.

      But I agree with you that it’s long past time for some citizen attention to the Port of Seattle’s handling of taxi service at Sea-Tac. Personally, Exhibit A is replacement a year or two back of a cab company with a long record of excellence with the one company in Seattle I’d sooner walk Downtown via Pac Highway in a blizzard than ride with.

      Would also like to see operating cost comparison between present fleet of buses and possible moving walkway between the impressive new rental car facility and Tukwila Station.

      Wonder if anybody has trademarked “Romany Cabs?” But before making light of sensitivity, might be good to read some World War II history. It wasn’t only Jews that Hitler read out of the human race. Also, mention the Romany to Europeans over fifty and watch the reaction. BTW, great pic, but which one of you is Don? Would definitely sooner get into a cab with a face at the wheel like the one on the left.

      Mark

      Mark

    • Cascadia Bryan says:

      Don:

      If from your vulgar bigotry I am to infer that you are asking whether the TNC driver’s “donations” are taxable, then the answer is yes. They do pay their share of taxes on the income they earn, in the same way that a taxicab driver or any other self-employed person would. They are not, under current IRS regulations, tax-exempt.

      As to your other question, there are many of the TNC drivers who are supporting their families on the income they earn from this endeavor. They are doing it in the same way as I support myself and my own family on the income I earn as a traditional taxicab driver. They are making their own business and taking themselves off the list of the unemployed and underemployed.

      And, ironically, I have had my best year ever this year as a traditional taxicab driver, even with the new “competition” out there on the streets. (Of course, I attribute that to being friendly to customers, not chatting on the phone with them in the car, cheerfully accepting credit cards, and so forth. I have met some of my fellow drivers — I know that is not universal in the industry.)

      Consider that, in many cases, the rideshares are often taking passengers that might have used something other than a traditional cab as an alternative.

      • Whoever you are, you are awesome, and the proof that my argument is valid.

        By providing more accessible transportation, we as rideshare drivers are increasing the overall business because people are getting used to be able to actually get a car and get to where they want to go in a reasonable time.

        By providing a higher level of customer care and service than most taxi drivers, we will push the taxi industry to improve to meet these standards. Taxi drivers who do will be well sought out and highly profitable, those who don’t will not last any longer because there are other options.

        And yes, we are feeding our families. Ridesharing has proven to be very profitable for me, and a godsend for my family. For the first time ever I am able to structure my time to be available for my family, and still be able to make the money needed to pay bills. It has taken many people off of unemployment and off of government assistance. And yes, we pay taxes just like the rest of society. We run a business, and we work hard to provide the best business possible, and Seattle is a better city because of the existence of all of us being out there serving the community.

        Cheers to a taxi driver who sees this and isn’t afraid to admit that it’s not hurting his business, it’s even helping it.

      • ClaimsAdjuster says:

        @jennifer, so you make all this money and you can’t afford to insure your TNC vehicle? And Lyft/Sidecar/UberX have low overhead operations with no one answering the phones but they can’t can’t make any money if the city makes their vehicles carry commercial insurance.

        The TNCs are not the first businesses to plead poverty to justify cutting corners.

  9. “In a few short months the majority of Washington citizens will be able to buy legal pot from a WSLCB certified retail outlet. After half a century of failed prohibition the demand for pot proved too great. We decided that it was better to legalize marijuana and put it under government control and regulation. The Market won.”

    And there are limits to the numbers of stores that can be operated.

  10. Regarding TNC: I’ve written in about this before. I check out the STB (Seattle Transit Blog) ED (Every day). Throwing acronyms around may make the writer seem cool and (PI) plugged in, but is not clear writing for those passing through. Even the hyperlink from TNC to the SMA (Seattle Met article) didn’t give a definition until the 8P (Eighth Paragraph). This is not only sloppy writing, it distances the informed writer from the more casual reader who wants to understand the story but is given the impression that because they don’t know the SH (Secret Handshake), they can’t fully understand the issue.

    Please STB, try to write for a broader public. It may make you feel like you are condescending to the GU (Great Unwashed) but your writing will be MMP (Much more powerful)

    PSN

  11. Meanwhile the CA Dept of Insurance has pointed out that:

    “Potential Coverage Gaps Under the TNC Policy
    While TNCs approved by the California Public Utilities Commission are required to maintain $1 million in liability insurance, TNCs are not required to have medical payments coverage, comprehensive, collision, uninsured/underinsured motorist (UM/UIM) coverage or other optional coverages. This means that the TNC’s liability policy does not have to provide coverage for: 1) bodily injury to the TNC driver; 2) damages to the TNC driver’s car, or 3) bodily injury or physical damage caused by an uninsured or underinsured motorist.1

    Potential Coverage Gaps in your own Personal Auto Policy
    Most standard personal auto policies contain exclusions for livery – which essentially means driving for hire. A typical exclusion is set forth below (but your exclusion may be different – read your policy):
    We do not provide coverage … arising out of the ownership or operation of a vehicle while it is being used as a public or livery conveyance. This exclusion does not apply to a share-the-expense car pool.”

    • Every state’s rules are different. I find a lot of these low insurance requirement states really weird: New York is a no-fault state which requires that every insurance policy include uninsured-underinsured-motorist coverage.

  12. Wasn’t the Segway once hyped as being the future? Not only did its future go away, it never came.

    • By whom? Its proprietor, who rode it off a cliff?

      And wasn’t Sam once hyped as being an international award-winning journalist?

      • Dean Kamen is still alive.

      • Oh, that too? Wow! I am impressed; he’s truly a Renaissance Man: one of the worlds leading transit intellecturals AND an award winning journalist! What a guy! And to think he deigns to spread his pearls of wisdom among such unworthy swine as we.

        My heart flutters in gratitude.

  13. Concerning the public safety aspects of taxi companies, both traditional and high-tech, I believe there ought to be on a level playing field. The City should require the same driver’s license, the same insurance (to protect both passengers and the public at large), and vehicle safety inspection. If the current taxi company regulations are too onerous for the high-tech guys, then change them for all service providers, not just the newcomers.

  14. Another important issue not being heard enough is the reduction in drunk driving by the inclusion of TNCs to the transportation mix. Studies show that the longer people wait at the end of the night with out knowing when or if a taxi is coming, they are much more likely to make a bad choice and drive under the influence. With the new apps that allow for the customer to track the oncoming TNC’s, the likelihood of someone driving instead is much lower. I support the council in evening out the playing field when it comes to insurance, training for all for hire cars, but I do not believe it should put an arbitrary cap on TNC’s.

  15. ClaimsAdjuster says:

    Johnson’s inane argument boils down to “the TNCs are illegal now but if the city clamps down on the big corporations that are thumbing their noses at local regulations then we will have even more law breaking.”

    So apparently we should just let UberX/Lyft/Sidecar continue to dump uninsured cars on the street because it is so damn hard, dude.. And they are the future. When the trickle of lawsuits from people injured by TNCs turns into a flood, we should just tell them: welcome to the new Ubertarian future, which you cannot fight.

    • The gist of the argument is: If you make your laws stupid, most people will break them.

      Mr. Johnson’s argument is 100% correct. Until you understand why, please stop voting, because you aren’t sufficiently informed to be a useful citizen.

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