Uber Will Test Regulators' Ability To Be Fair To Limo Industry

Posted on August 8, 2013 by - Also by this author

COMMENTARY: If you want to utter the most inflammatory word in a room full of limousine operators, just say “Uber.” The Uber mobile application-based, on-demand transportation business, along with other competitors, is changing the chauffeured transportation industry in ways unforeseen and in ways yet to be seen.

From an operational standpoint, the key issue is: Should you join it? Beat it? Take a piece of it and run? Those are the basic questions limousine operators are openly debating. Uber was Topic A on June 10 at the Big Picture technology panel during the LCT Leadership Summit in Miami Beach.
From a regulatory standpoint, we know what it means to stand along the street and hail a cab. And we know that ordering a service in advance on a website is a reservation. But what about the client who stands in a hotel lobby and orders up a black vehicle via a mobile app? How much lead time qualifies as a “reservation” versus a “hail” in the age of instant mobile technology? And who will decide?

Those are among the more complex questions coming to a head here in California, where the California Public Utilities Commission (CPUC), which regulates the limousine industry and all charter party carriers statewide, has been holding comprehensive and inclusive workshops with all interested parties to determine how to best regulate app-based, on-demand transportation services, such as Uber, Sidecar and Lyft. The latest word is the CPUC proposes creating a new category of transportation, somewhere between a limo and a cab. That may work, but only if regulators reconcile two fundamental principles that speak to the heart of American business: Fair competition and innovation.

Fair competition
As of this writing, the competitive situation between on-demand, app-based services and the state-regulated chauffeured transportation industry is unbalanced. I have received complaints from local limousine operators who are being undercut by app-based car services doing business at Los Angeles International Airport without following many of the requirements for charter-party carriers in California and at LAX: Trip waybills, workers’ comp insurance, car insurance, fees, vehicle lists/inspections, drivers’ list, drug and alcohol testing, current state licenses, insurance verifications and airport transponders — all of which are required for legal chauffeured vehicles.

The CPUC signed a temporary Order Instituting Rulemaking (OIR) with Uber that requires it to follow existing rules for its TCP (state licensed) vehicles until the workshop yields permanent regulations. But that agreement and temporary ones for the other app-based car services also allow non-TCP (commercial) vehicles to continue doing business as long as they follow the same rules as other non-TCP holders, such as taxicabs, which in California are regulated at the city level.

Needless to say, there is chaos, conflict and confusion. The app-based services are a new business model of ground transportation, one here to stay. While policy makers and regulators sort out the definitions, details and rules, the framework of fair competition must be established.

The CPUC has a basic choice: Either the new app-based vehicle services follow the exact same rules as charter-party carriers, or the regulations do not apply to either business model. If the aforementioned rules for charter party carriers cannot be consistently applied to on-demand app-based services such as Uber, Sidecar and Lyft, then the CPUC should pick those rules it can enforce consistently and those it can’t and deregulate accordingly. In situations where a government agency cannot referee a fair playing field, then it is better for an unrestricted private market to regulate itself.

All regulations aside, on-demand, app-based services such as Uber are brilliant innovations. A growing number of free citizens and consumers of America like them and want them, and per a market economy, deserve to have them. We’ve tried out Uber a few times at LCT with results better than a taxi but below a luxury service. Uber embodies the best of American entrepreneurial principles: Voluntary, contractual arrangements based on supply and demand connected via advanced technology that provides convenient, efficient, and desirable consumer choices.

Some limousine companies already are allowing fleet vehicles to serve Uber during down times. I’ve seen financial proof that it can be profitable when done right. Each company should decide for itself how to create, compete with, coordinate with, or incorporate app-based, on-demand service.
The wider luxury vehicle choices in the wake of the retired Lincoln Town Car sedan and the advent of mobile apps make possible a chauffeured business model best compared to the tiered service on an intercontinental airline flight: First Class, Business Class, Economy Plus, and Economy/Coach. Limousine companies will always have the high-end, reservation-based First Class/Business Class VIP/exec segment of the ground transportation market. The opportunity lies in creating a quality-driven “Economy Plus” tier (on-demand Toyota Avalons/Camrys and/or Chrysler 300s, for example) with dynamic pricing in real time that pulls “upgraders” from the “Economy/Coach” of commercial transportation services.

A fairly regulated, or partially deregulated, ground transportation market coupled with smart use of app technology and fleet logistics could yield new opportunities for limo operators, while offering higher quality rides to the American traveling public.

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