Uber, Lyft Threaten to Leave SA if Regulations Approved

A Lyft vehicle featuring its signature moustache - COURTESY
A Lyft vehicle featuring its signature moustache

Less than a decade ago, YouTube was a new company. The video-sharing website revolutionized the internet and the way Americans and the rest of the world consume and produce information online. YouTube also gave small-time musicians and film producers a way around the mega-conglomerates that had a monopolistic stranglehold on the industry.

To the list of pre-teen online startups, you can add Facebook, PayPal, Amazon and a host of other revolutionary initiatives. These innovative companies have changed the ways we read, watch, shop and exchange money. The world has changed and adapted to the worldwide web, and it's affected all aspects of life.

Likewise, Lyft, which was founded in 2012, and Uber, founded in 2009, have innovated yet another use for the internet and social networking, providing smart-phone applications that facilitate peer-to-peer ride-sharing for a fee. In the short time these companies have operated, they've experienced massive growth. Uber is available in 45 countries and more than 200 cities worldwide and Lyft operates in 65 U.S. cities, with plans to expand internationally.

But if San Antonio City Council approves proposed rules to regulate the industry this week, the Alamo City will likely lose Lyft and Uber's business. According to an email obtained by the Current, Uber will ask City Council to postpone action on the rules until next year.

"I want to see what happens, but if this, as written, passes, it's going to be very hard for us to operate," Uber General Manager Chris Nakutis said. "This is much more stringent, more hoops for drivers to go through and insurance [requirements] so outside the norm. To put it in perspective, Lyft left Houston for something that was way better than this."

Lyft ceased operating in Houston November 20 after the city enacted regulations that include stringent background checks, licensing processing, drug tests, $62 permits and medical-examination policies.

"This is not really an ordinance we can support and we really can't continue operating if those regulations are to pass [in SA]," Lyft spokeswoman Katie Dally said.

Dally and Nakutis honed in on two specific parts of San Antonio's proposed regulations that they said could push the ride-sharing businesses out of the Alamo City: the permitting process and insurance requirements.

"We are not against permitting, insurance or regulations. We are for smart regulations," Nakutis said. "We look at this ordinance, and from what I've seen, specifically, insurance and driver requirements are outside the norm of precedents set in Houston, Austin and in an upcoming Dallas ordinance."

For insurance purposes, ride-share operators have three different needs: the ride-share application is turned off and their personal insurance coverage is in effect; in phase two, the application is on and operators are waiting for passengers; in the third phase, drivers are ferrying passengers.

In most cities, according to Nakutis, Uber drivers are required to have contingent insurance while logged into the platform, but the City of San Antonio struck that from its proposed regulations and changed the requirement to primary insurance, in the amount of approximately $300,000 in coverage. In Austin, the requirement is roughly $150,000 in contingent insurance for this phase. The personal insurance requirement minimum for taxicab operators in San Antonio scales from $30,000 to $50,000.

Contingent insurance would be secondary to primary insurance in this phase and coverage would be capped at a set amount. If an injury accident were to happen, and a passenger was injured beyond what the contingent insurance would pay, they might very well sue the driver and the ride-share company to recover the costs of medical bills. And primary insurance, or a personal policy, won't cover vehicle-for-hire driving in most cases, which according to the Insurance Journal, is a stance the industry won't budge from.

The proposed permitting requirements require ride-share operators to pay a $160 permit fee, undergo a drug test and 10-point fingerprint background, a physical, an eye exam, a city knowledge test, a defensive driving course and a test to see whether operators can read and speak English.

"These aren't professional taxi drivers. These are part-time jobs," Nakutis said, explaining that Uber engages many retirees and people looking to make a little extra cash in addition to their other employment. "These are all hoops people have to go through, and while each city is different, we have never seen requirements that operators take an eye test, provide proof they read and speak English, take a city knowledge test and get a physical."

During a council work session in early December, nearly the entire City Council appeared to be supportive of the proposed regulations. And San Antonio Police Department Chief William McManus—who headed the task force charged with creating the regulations—voiced his displeasure with Uber and Lyft, but defended the regulations as fair.

"Because the [transportation network companies] have not done what we've asked them to do in the past, and because they've not done what they've been asked to do, I don't know why we would trust that they would do anything we asked them to do in the future," McManus said.

But he said the regulations weren't an effort to protect a threatened taxicab industry or to punish Uber and Lyft.

"Our goal here was not to regulate the industry any more than it already is. It was to develop as even a playing field as we could for both industries. And lastly, it was to make sure public safety was ensured," McManus said.

We have to ask: Since when is it the police department's responsibility to level playing fields for local business?

"The first goal for us and for City Council and for the Chief of Police should be public safety," Nakutis said. "We've only heard 'leveling the playing field' from one entity, the president of Yellow Cab. That's not the goal of anyone other than that monopoly."

Despite seemingly widespread support for the regulations among City Council members, District 8 Councilman Ron Nirenberg and District 4 Councilman Rey Saldaña both objected to the regulations during the work session, saying the regulations try to fit a square peg in a round hole.

"I think it would be a mistake to put things in [the] ordinance if the objective, implicitly, is to punish the ride shares. I know there are feelings on that, but let's deal with that separately," Nirenberg said. "The ordinance is for the benefit of the public.

"A legitimate industry such as ride-share pulling out of San Antonio because we have passed regulations that present obstacles while not advancing public safety is not an outcome I can live with."

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