Rideshare 101: What’s at stake in battle between taxis and new services

An estimated 100 people turned out for a rally outside Seattle City Hall Wednesday in support of ridesharing services as the battle between taxi drivers and app-based ridesharing companies like Uber and Lyft reaches a boiling point this week.

The Seattle City Council committee is poised to pass a new set of rules regulating the upstart car services.

Read the draft ridesharing ordinance.

It’s been a contentious issue for the last year or so as the companies have gained popularity, especially with the Seattle area’s ever growing technology community. The services allow people to request a ride and pay for the service via an app, see where the nearest cars are operating and communicate with their drivers directly.

The services have been operating without any regulations, prompting widespread complaints and protests from traditional taxi and for-hire car services who argue they are bound by strict rules and regulations including high licensing fees, insurance, and other restrictions.

The Seattle City Council’s Taxi, For-Hire and Limousine Regulations Committee is slated to vote Friday on a new ordinance regulating the industry for the first time.

An estimated 100 people turned out for a rally outside city hall in support of the ridesharing services Wednesday featuring the CEO of Lyft, John Zimmer.

The ordinance would cap the number of drivers to 300 for Lyft, Sidecar and UberX in Seattle, and limit drivers to just 16 hours per week. None of the companies will divulge the number of drivers or cars currently operating in Seattle.

The new rules would also require drivers obtain special city-issued permits, and carry a minimum of $1,000,000 per accident insurance coverage for drivers and cars, and undergo regular vehicle inspections.

The regulations have drawn significant opposition from the companies and customers, who say the restrictions would drive them out of business, unfairly protect taxi companies, and unfairly limit options for thousands of riders clamoring for the alternative service.

The companies argue they already require insurance for their drivers and minimal vehicle standards, and the marketplace has clearly shown many passengers prefer the services to existing taxi companies.

It’s too soon to say how the new regulations would impact customers. Cabs are generally more expensive than the rideshare companies – although UberX uses a sliding scale based on demand that can make rates higher at peak times. And with no concrete data from rideshare companies, it’s impossible at this point to say how many passengers would actually be forced to use cabs.

The City Council has held a number of public meetings leading to the development of the two-year pilot program. City Council President Sally Clark, who chairs the committee, has said the new ordinance is just a starting point and the Council will continue to work on refining regulations and studying the issue to maintain a fair balance.

But no one seems satisfied with the proposal. Thousands have signed petitions or spoken out at the meetings in opposition to the regulations. The Washington Technology Industry Association (WTIA) and the Seattle Metropolitan Chamber of Commerce have written a letter to the committee in opposition of the proposed regulations, arguing they stifle innovation and choice.

“Instead of implementing onerous restrictions, the City Council should embrace the broadening landscape of transportation options and support legislation that promotes greater competition, increases transportation choices, and encourages innovative technology companies to locate and thrive here,” the letter reads.

The recently formed Washington Taxicab Operators Association also criticizes the proposed regulations, arguing they unfairly favor the rideshare companies and continue hampering the industry with unfair restrictions that make it impossible to compete.

The taxi industry complains cab drivers would still have to pay more for insurance than rideshare companies. And drivers complain the draft ordinance would allow the rideshare companies to hire third party vehicle inspectors, which cabbies compare to allowing restaurants to hire their own health inspectors.

The revised draft ordinance would add 75 taxicab licenses in 2014, and 75 more in 2015.

The committee is scheduled to meet Friday morning at 9:30 a.m. to vote on the ordinance. If approved as expected, the full council would vote next week and take effect 30 days after the Mayor signs the measure into law.