TNCs: Disrupted Market, Disrupted Council
Council continues debate
By Chase Hoffberger, Fri., Oct. 10, 2014
City Council deliberations over the uncertain legal fate of transportation network companies will last another week. At last Thursday's Council session, Council Members Laura Morrison and Kathie Tovo successfully amended the language of CM Chris Riley's ordinance designed to legalize TNCs such as Uber and Lyft, to the point that representatives for both companies expressed "very considerable concern" (in Uber's words) about their willingness to sign a city contract.
Much of the companies' reluctance stems from Tovo's repeated insistence that TNC drivers have Uber and Lyft's highly publicized commercial insurance policies as commercial insurance any time they have the apps up and running, not only during periods when they are actively engaged in commercial activity (as is company policy). Lyft Public Policy Manager April Mims said the company has "never entered into an operating agreement" with another city that included this stipulation, and expressed concern over the company's ability to maintain its business model with the added insurance cost.
Ultimately, the hesitation from both companies was enough to encourage Riley to withdraw his motion to pass the ordinance on an emergency basis – a move that would have allowed all parties to bypass the mandatory 10-day waiting period before an ordinance goes into effect and placed the companies under contract as early as that Friday morning, not coincidentally the same day thousands would descend upon Austin for the Austin City Limits Music Festival (Uber is an official sponsor, offering festival-specific promotions). Instead, Riley successfully moved to pass only on second reading. Council next convenes Oct. 16, aiming at approving a third reading with presumably additional amendments.
Even without an approved ordinance, it's safe to assume both Uber and Lyft spent Monday morning celebrating a successful weekend. Both companies were ubiquitous in ACL conversation, as thousands of out-of-towners and plenty of locals who didn't want to deal with driving booked Uber and Lyft to get around the city. I talked with people, throughout the weekend, who used the ride-booking services as their sole means of transportation. Their wait times, they said, proved significantly shorter than the anecdotal wait times for taxi cabs during previous ACLs – but the newer option didn't prove entirely ideal. In particular, Uber's "dynamic pricing" led to a number of costly trips: One friend traveling at midnight from my house north of the UT campus to another house in Rosewood – a distance of 2.8 miles – ended up paying $50.44. Uber's fare calculator quotes that ride as typically costing $10-14.
During Thursday's Council discussions, Tovo attempted to limit surge pricing by suggesting a hard cap at 2.5 times the standard rate, and a 100% ceiling on the option during times of "abnormal market disruptions" like natural disasters. CM Mike Martinez quickly suggested a complete moratorium on surge pricing during times of emergencies, which Riley passed as friendly, but Tovo's plan to cap surge pricing was voted down.
The early returns: The services are fine for a festivalgoer in town for a weekend vacation, but if an Austinite actually needs to get somewhere, these "market disruptors" are creating an expensive trip.
This story has been revised to clarify details concerning Uber and Lyft’s insurance coverage. Previously, it noted that the companies only provide primary coverage to drivers when they are actively providing someone with transportation. In fact, the companies extend primary coverage whenever drivers are engaged in commercial activity.
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