D.C. Leads the Way with New Ridesharing Bill
The Washington, D.C. City Council made history on Tuesday by making D.C. the first jurisdiction in the country to pass a bill explicitly legalizing popular ridesharing services such as Uber, Lyft, and Sidecar. The Vehicle-for-Hire Innovation Act, which passed the Council by a margin of 12 to 1, is an example of smart regulation that is not beholden to the special interests of the existing taxi industry.
The bill’s sponsors, Councilmembers Mary Cheh and David Grosso, have long been proponents of recognizing ridesharing companies for what they are—technology companies that work to connect drivers and riders. Uber and other ridesharing services do not own the cars their drivers use. Rather, they provide the technological platform and support to connect drivers and riders. It is no surprise that attempting to regulate these rapidly-changing technology companies in the same way as slow-to-adapt taxi companies has proven ineffective.
When I spoke to Cheh’s office about the bill, her staffers told me that they hoped it would serve as model legislation for other jurisdictions across the country.
Mayor Vincent Gray now has 10 days to sign the bill, which he is expected to do. After that, the bill will sit for 30 days during a passive Congressional review. The bill will become law if Congress does not reject it, something it has only done three times since 1979.
D.C. has come a long way. In April the D.C. Taxicab Commission held a hearing on proposed regulations to cripple ridesharing companies by treating them as taxicab companies (see my critique of the proposed regulations here). By taking action to pass the bill, the D.C. City Council has taken back some authority and accountability from the unelected members of the Commission.
The least-defensible part of the Commission’s proposed regulations was the requirement that any rideshare driver working for over 20 hours a week would need to obtain an expensive taxi license. This would have served as a high barrier to entry and severely limited competition. Drivers would have been artificially relegated to part-time status unless they paid $555 to the government backers of the taxi industry. Or, some might have attempted to work two part-time jobs under two identities, eroding respect for the law.
The Vehicle-for-Hire Innovation Act ensures this requirement will not be applied by exempting rideshare drivers from licensing requirements. Since D.C. has the highest-in-the-nation licensing fees for taxi drivers, eliminating the possibility that rideshare drivers would have to obtain expensive licenses is a major accomplishment.
The bill also codifies safety requirements (such as background checks, insurance requirements, vehicle inspections, and zero-tolerance policies on driving while impaired) with which the three main ridesharing companies already voluntarily comply.
The minimum ridesharing liability insurance is $1 million when customers are in the car, far above the requirement for taxis, and insurance coverage between trips exceeds those required of D.C. taxis as well (see Uber’s graphic below). The justification for requiring more stringent insurance and background checks for ridesharing drivers is that they are not licensed, and could be less experienced than taxi drivers. Taxi companies are against increasing safety standards for themselves, even as they accuse ridesharing companies of posing dangers to consumers.
Additionally, the bill charges rideshare companies a fee of one percent of gross receipts, which will go to fund the DCTC. The justification for this charge is that taxi riders are already charged a $0.25 fee for each ride. The question remains, why should ridesharing companies be forced to fund a Commission that actively works to undermine them and protect existing taxis? The DCTC even has a statutory responsibility to “preserve the economic viability of the District’s public vehicle for hire industry.” Considering consumers are paying these fees, it seems reasonable that the DCTC should have to work to protect their interests instead of the taxis’ interests.
One aspect of the bill that will help taxi drivers compete is the deregulation of fares that originate from remote dispatch. This means that if consumers use a service to book a taxi, instead of hailing one on the side of the road, the fares are not set to the predetermined metered rates. Taxis will be free to compete on price or experiment with alternative fare models, as long as the fare structure is clear beforehand. This, too, is a welcome step towards modernizing the transportation industry.
The bill’s passage coincides with Hailo ending its operations in the United States. Hailo is a smartphone app for remotely hailing licensed taxis. The company is now going to focus its operations in Europe and Asia, where countries are not as tolerant of entrepreneurship and innovation. For example, Uber was banned in Germany last month. The reason Hailo was thoroughly outdone by ridesharing companies was that it did nothing to address the underlying problem with taxis—unaccountable taxi drivers (see my full critique of Hailo here).
All ridesharing companies go to great lengths to ensure their customers’ experiences are enjoyable. Leaving a negative review after a rideshare trip will usually result in a personalized email from the company asking what went wrong and how they can make it better. On the other hand, taxis have been insulated from competition for so long that their customer service is noticeably lacking. As anyone who has ridden in a taxi can attest, “enjoyable” is the last word that would be used to describe most experiences.
Regulators and lawmakers across the country, and especially those across the Potomac in Virginia, should learn from the D.C. Council’s bill and update their policies to reflect advances in technology. The influence of established taxi drivers is strong, but the public’s devotion to ridesharing is stronger. As more people become familiar with the benefits of ridesharing, it is only a matter of time before the taxi industry will compete based on service and costs—not political pull.
Jared Meyer is a policy analyst at Economics21 at the Manhattan Institute for Policy Research. You can follow him on Twitter here.
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