Uber Technologies and Lyft, both San Francisco-based giants in the ride-sharing industry, have expanded to Colorado Springs over the past several months.
Ride-share businesses allow consumers to hail rides from everyday people who use their personal vehicles in exchange for fares. The connection is made via a smartphone app and the costs rival, and often beat, those associated with a cab ride.
The growing popularity of these services has the attention of Gov. John Hickenlooper, who on June 5 signed into law Senate Bill 125, which allows the Colorado Public Utilities Commission to “regulate transportation network companies, which are companies that match drivers and passengers through a digital network, such as a mobile phone application, for transportation from an agreed-upon point of origin to an agreed-upon destination.”
The bill, however, exempts transportation network companies from some regulations that apply to taxi companies, providing them with an unfair advantage, according to Springs Cab General Manager Anthony Vashone-Caruso.
“We oppose freelance transportation enterprises,” he said of ride-share companies. “The reason there are regulations for taxi cab companies is for customer service and safety. If a car isn’t inspected, if you have tires that are defective, if you don’t have drivers certified by the state and licensed by the city, you have major safety issues.”
Vashone-Caruso explained, for instance, if a Springs Cab driver works a second job, those hours count against the 80 hours per every eight days that driver can work for Springs Cab. Lyft, on its website, does promote employment as an option to supplement another job.
Vashone-Caruso also explained that spot and annual maintenance throughout the year are required for common carrier companies. SB 125 requires a certified mechanic inspect a personal car at least once a year.
The state bill does require a transportation network company to obtain a PUC permit, and it authorizes the PUC to take action against a transportation network company for violation, including civil suits.
Both common carrier regulations and SB 125 take into account driver background checks, including barring from employment recent felons, applicants with records of driving under the influence of drugs or alcohol, and those with excessive points for infractions against their driver’s license.
Forward thinking or shortsighted?
According to PUC spokesperson Terry Bote, SB 125 helps address transportation network safety issues, but it does not regulate the market — and the market is huge. The Wall Street Journal reported Lyft’s value in March at $700 million. Forbes recently reported Uber’s value at an estimated $18 billion.
“[Ride-share companies] are generally regulated within the same category as limited-regulation carriers, which include luxury limousines,” Bote said.
Those regulations differ from common carrier regulations, by which Colorado cab companies must abide.
“It is an unfair playing field,” according to Colleen Knapp, vice president of the locally based high-end transport service A Ride in Luxury. “If we tried as a registered limousine company in the state to operate under the same regulations [as ride-share companies], they would shut us down. It’s a way to skirt the laws at the consumer’s expense.”
Bote said due to SB 125, the industry is now somewhat regulated, where in other states, little to no state oversight exists.
“[Ride-share] companies have to register with the Public Utilities Commission and provide proof of insurance and they are subject to many of the same safety rules,” Bote said. “What we don’t regulate is market entry, who can serve what territory, and we don’t regulate rates or quality of service. Those are the biggest differences.”
The Colorado Department of Regulatory Agencies website states: “By law, any credible applicant must be approved by the PUC, provided that the applicant can meet regulatory standards. The PUC can only reject a conforming application if objectors can prove that allowing a new entrant into the market would degrade, rather than improve local service.”
That interpretation has provided a much more welcoming response toward the industry in Colorado compared to the Pennsylvania PUC, which has fined ride-sharing companies tens of thousands of dollars since June and filed civil complaints against dozens of ride-share drivers for violating state regulations.
Knapp said the regulations are moving in the wrong direction.
“The legislation that allows them to operate is nearsighted on the legislatures’ part,” she said. “I know [ride-sharing] is popular with consumers right now, but consumers don’t understand the underlying issues.”
Trying to get along
Katie Dally, a spokesperson with Lyft, acknowledged a “competitive factor” between conventional taxi services and ride-share companies, but added it’s “beneficial to everyone to have more options.”
She said the company’s intent is to provide the consumer with more choices, not to put anyone out of business.
“Our goal is to make it easier for residents to get around their city,” she said. “Sometimes it’s hard to find a cab or other public transportation options. We seek to fill those gaps and make it easier to leave your car at home.”
As for protecting the consumer, Lyft states on its website that it carries excess liability insurance of $1 million covering “driver liability for bodily injury and/or property damage of passengers and/or third parties,” and conducts driving record checks to ensure drivers are 21 or older with an active U.S. driver’s license for more than one year. Drivers must have valid personal auto insurance that meets or exceeds state requirements and can’t have more than two moving violations in the past three years, no major violations in the past three years and no DUIs or other drug-related driving violations.
Drivers also mustn’t have been convicted of any felonies or violent or sexual crimes.
Vashone-Caruso said he will not hire drivers who have had four points against their license in a year or six points in three years. Drivers cannot have had an accident in the past three years.
“We have to pass the scrutiny of insurance underwriters,” he said. “With Springs Cab, you know the driver has met the expectations and qualifications of a professional driver.”
Taxi companies aren’t only competing with ride-sharing for customers, but for drivers as well. Cabbies, unless they own their cab, lease their vehicle from their employer on a weekly basis.
Former cabbie Ali Vazir wrote a guest column for the Denver Post in February, a snippet of which was published by Uber on its website. The excerpt states:
“With a $672 weekly cab lease, I paid $34,000 a year to lease a Metro Taxi. First I had to make enough money to pay off my cab lease, then work many more hours to generate income. There were weeks and months I made well below minimum wage. With [Uber], I can have a living wage, more family time and drive fewer hours. I call it emancipation.”
Vashone-Caruso would not disclose Springs Cab’s lease agreements, but the result of drivers using their own vehicles means a significant undercutting of the cost of a cab ride and higher profits for the driver.
Calculating earnings for a 40-hour week on Lyft’s website nets a user $1,400, or $35 per hour, but does not specify whether that is before or after the associated costs with maintenance and fuel. Uber’s website states drivers pay a 20 percent commission to the company and the rest, in taxable income, is the driver’s. In addition, with app accessible ride-sharing, there are no dispatchers or mechanics as overhead.
Dally would not divulge Lyft’s ridership numbers in Colorado Springs or its associated revenues, but she did say this service area has been “a great market overall,” adding a lack of public transportation options in the city will only improve its ridership.
Vashone-Caruso said “gypsy companies” are not a threat and Springs Cab has, in fact, rapid expansion plans.
“We have 15 cabs right now. … By the end of July hope to have 25 cars, and by the end of December we hope to have 50,” he said.
“[Ride-sharing companies] haven’t proven to be a threat here yet. I’m not saying they’re going away, but I think freelance drivers will diminish. It may just take awhile for the public to become educated and aware of the circumstances and what they’re getting for the dollar.”