The business of transportation is changing.
The long-outdated ritual of hailing a cab is going by the wayside as new companies offer faster, cheaper and more high-tech ways to travel.
However, regulating new transportation companies has been challenging.
Uber — the Silicon Valley ridesharing company, valued at more than $40 billion and operating in more than 250 cities worldwide — is the global leader in ridesharing. The company launched uberX in Eugene in July 2014, which allows citizen drivers to use their vehicles to transport passengers who request and pay for rides via the company’s app.
Eugene may be the tip of the iceberg for companies like Uber, looking to test the regulatory flexibility of city officials.
The regulatory conflict begins in the Eugene City Code, deepening with semantic disagreements and the game of who will buckle first — the City or the company.
The City wants to license Uber as a Public Passenger Vehicle (PPV) company, like taxis. Uber has displayed “some unwillingness” to compromise, according to Assistant City Manager Sarah Medary.
In a Jan. 20 statement to the Mayor and City Council, which was given during a hearing to change the City Code, Uber disputed that it operates PPVs at all, instead saying it’s a “Transportation Network Company” (TNC), which are “technology companies that provide a platform” for ridesharing.
Uber’s argument is that “transportation network companies are fundamentally different from existing taxi companies” because they use an app to pay for rides and don’t own cars, so the City’s regulations don’t apply.
Uber said the City Code, like hailing a cab, is outdated. Surprisingly, the City Council mostly agreed. The City Code hadn’t been amended since 1992 until Uber arrived.
“We had, early on, the very first time we met with Uber, said: ‘We’re happy to dive in and work on these rules to make it easy for you to operate in Eugene,’” Medary said. The City has safety rules for all PPV companies that are not negotiable.
Those include the state-mandated $1.3 million commercial auto insurance policy, driver background checks by the Eugene Police Department and vehicle inspections, Eugene Community Outreach Coordinator Laura Hammond said via email.
According to Uber’s Pacific Northwest Manager, Brooke Steger, because Uber cars aren’t 24/7 commercial vehicles, they shouldn’t be subject to the same commercial vehicle insurance policies. She said Uber feels “very strongly” its own three-step background check and vehicle requirements are sufficient to provide safe drivers and cars for Eugene.
The company has its own $1 million insurance policy, which covers riders during their use of Uber services. Also, driver vehicles are regularly inspected by certified third-party mechanics.
“To be crystal clear: there is no gap in coverage,” Uber said in its statement.
Eugene’s City Council heard testimony and debated changing section 3.345 of the Eugene Code, which regulates PPV licenses. Uber gave the Council “model code” that recognizes TNCs, like regulations successfully implemented in Washington, Virginia and Illinois.
The Council was not convinced, and voted 8-0 to alter the existing regulations, rejecting Uber’s model code.
The Council said the updated regulations “clearly require” Uber to obtain a license and that “Uber is asserting that the City’s license requirement does not apply to it.” The updated code specifies companies connecting passengers to vehicles via a “digital or software application scheduling platform or service” must obtain PPV licenses.
“The way that our PPV code is written would include a Transportation Network Company even before we added that section. We felt very certain of that,” Medary said. “We added that piece in to just clarify it completely.
Steger criticized the changes in a letter saying, “The only people to benefit will be those who own the taxi companies.”
Uber still wants its unique business model recognized.
“Uber is actually a technology company that connects riders to providers. So we do not own vehicles and we don’t operate those vehicles,” Steger said.
According to City Administrative Rules, PPV companies are companies operating or connecting people to vehicles for hire “regardless of who owns the vehicles operated.”
Uber still contends it doesn’t technically operate vehicles.
Medary says the City offered Uber a PPV license application, but the company has yet to file it.
The City fined Uber $2,000 per day beginning in November, totaling $116,000. Fines are halted pending Uber’s appeal. A date has not yet been set for the hearing.
The company filed a petition with more than 1,800 signatures asking the City to “create regulations that include the unique nature of ridesharing.”
Uber and the City of Eugene then had a Twitter exchange:
— Uber Oregon (@Uber_OR) February 11, 2015
— City of Eugene (@cityofeugene) February 11, 2015
Services offered by Uber are attractive to students. For those without vehicles or looking to return home from a party, requesting an Uber can be the quickest, cheapest and safest way to travel.
Uber boasts low wait times, cashless transactions, the convenience of its app and driver reviews as some of its benefits. The company also reports its services reduced DUIs “by more than 10% in Seattle.”
For anyone meeting Uber’s criteria, there are opportunities to make money as a driver. Drivers set their own hours, and work on their own time.
Uber driver Brenda Laird, who has earned more than $12,000 driving for the company, said students appreciate the service. “They can’t say thank you enough — especially the girls. They feel safer.”
The question remains for the City of whether it would be wrong to allow Uber to operate unlicensed if Eugene’s cab market is underserved. It appears, however, that Eugene’s cab market may be saturated.
In Salem, Oregon, a similarly sized city, there’s a licensed cab driver for every 2,769 residents. In Portland, that number drops to one for every 762. In Eugene, it’s one for every 569. Still, Steger said, uberX has seen high demand in Eugene.
When asked whether the company plans to pay the fines should it lose the appeal, Steger said the decision has yet to be made by its legal department.
Medary is hopeful that the City can amicably regulate Uber in Eugene, but said “it’s becoming apparent” that may not happen.
The City Council has asked for increased enforcement against Uber. Its next options are fining drivers or considering removing Uber from Eugene.
“It would be unfortunate for them to up and go,” Medary said. “I assumed we actually would set the standard for how this could happen across the rest of the country.”
“We are more than willing to resolve these problems, but we do ask them to create a definition within their code for TNCs,” Steger said.
Medary said the City made its stance clear: “They can either participate and make it work for them or not.”
Follow Gordon Friedman @gordonrfriedman