May 10, 2015 - In his April – May 2015 message to constituents, Commissioner Chip LaMarca opens by reporting his receipt of an elusive federal permit for the long-awaited Galt Mile beach renourishment, envisioning a project start immediately after the Sea Turtle nesting season. He also updates the local version of a worldwide simmering conflict between unregulated transportation network companies such as Uber and Lyft and their taxi and limousine industry counterparts. After applauding county measures to conserve water, LaMarca strolls through his adopted political wheelhouse, infrastructure improvements. In short, while citing fiscal hallmarks achieved by two of the County’s lucrative enterprise funds - Port Everglades and Fort Lauderdale-Hollywood International Airport - LaMarca heralds recently launched Paratransit and Express buses by Broward County Transit and construction of a Biogas Cogeneration Electric facility that will morph organic waste such as Fats, Oils, and Grease (FOG) into electrical power for the Wastewater Treatment Plant in Pompano Beach.
|LAMARCA PLANS MAYORS SUMMIT|
County Commission vs. Cash Cow Cabbies
A transportation network company (TNC) uses an online-enabled platform (typically accessed via a free mobile app on a smart phone) to connect passengers with drivers who use their personal vehicles (i.e. the family car). First conceived in 2009 as “UberCab” by co-founders Travis Kalanick and Garrett Camp, over its brief 5-year lifespan this San Francisco-based TNC raised $2.8 billion to explode into 57 countries and more than 280 cities worldwide.
|TRAVIS KALANICK AND GARRETT CAMP|
While TNCs often refer to their service as “ridesharing”, it isn’t. By reducing the total number of vehicle trips, ridesharing thins traffic congestion, reduces emissions and conserves energy. Since TNC drivers do not share a destination with their passengers, the service doesn’t improve an area’s carbon footprint. The relatively transparent business model that fuels this juicy new cash cow attracted a slew of competitors almost overnight, including Lyft, Haxi, Sidecar, Summon, Wingz, and others. With the exception of London-based Haxi, they are all headquartered in San Francisco.
In most cases, company overhead is limited to the cost of maintaining the online site, verifying that drivers meet standards unilaterally determined by the company (if any), and handling the financial transactions. Unlike regulated taxi and limousine companies that buy and maintain insured & licensed vehicles and hire qualified drivers, TNCs own no vehicles and employ no drivers. With few exceptions, participating drivers and their vehicles are not subject to credible background checks, minimum insurance requirements, driver training, regulated fare schedules, drug testing, vehicular safety standards, etc. Usually, they respond more quickly and charge less than traditional taxis.
To use the service, you download the free app and register with your credit card number. When you need a ride, you enter the relevant pick-up and drop-off data in your smart phone app which spits back a price; then pray that the driver isn’t named in a bench warrant and the car has at least one functioning seat belt. For making the connection and handling the payment, the company splits the fare with the driver. Depending on the city, fares are ordinarily based on time or distance.
However, when demand heats up (during holidays, storms, popular local events, etc.), although some TNCs maintain the regular fare while others allow the driver to make the call, Uber applies an algorithm to hike fares correlative to the increased demand. This tactic, which the company is seeking to patent as “Surge Pricing”, usually precipitates a flood of angry public blowback (In 2011, during New Year’s Eve in New York, Uber passengers were charged 7 times the legal fare). However, if you plan your excursions during off hours, you can save a bundle on dirt cheap rides. Since the company assumes no liability for participating drivers or vehicles, if picked up by a wired meth-head driving an eight-battery lowrider with no bumpers and “touchy” brakes, reasonably predictable orthopedic procedures, hospital stays and monthly convalescent expenses could also wind up on your credit card.
Uber admonishes elected officials in new markets that consumer protections ordinarily mandated for taxis and limousines are toxic to its operations and threaten the savings realized by customers - as well as Uber’s healthy 20% profit margin on an expected $10 billion in revenues. When public officials in jurisdictions across the globe finally wrap their heads around this unsettling aspect of the TNC business model, drivers are ticketed and the company ordered to cease operations. Ignoring local ordinances and livery licensing requirements, Uber officials have responded by paying the fines and tickets while scrambling to negotiate a regulatory compromise with local officials.
In Broward County, Uber has already racked up roughly $35,000 in fines by March while unsuccessfully trying to convince County Commissioners that they are simply a matchmaking tech company, and shouldn’t be subject to regulatory oversight. Broward’s 31 municipalities - including Fort Lauderdale – have been patiently waiting for the County to adopt an ordinance to legalize TNC services while preserving basic consumer safety standards. County officials have shrugged off threats by Uber to leave the County if forced to comply with local regulations.
|BROWARD TAXI LINE|
Like insurance companies that throw money at blatantly fraudulent slip and fall cases because it’s less costly than going to court, Uber has discovered that it’s less expensive to pay fines and reimburse ticketed drivers than to buy insurance, maintain a license or otherwise open a liability “Pandora’s box.” With negligible overhead and reliable 24/7 revenue streams, unless a jurisdiction exacts outrageous penalties for traffic infractions and licensing violations, Uber can afford to pay the freight while its lobbyists work to change the local law or statute, even if it takes years. On November 4, 2014, Uber Miami sent an email coaching drivers how to “make the pickup and drop off experience more enjoyable” by dodging law enforcement while cruising illegal fares in South Florida airports. They were instructed to hide their Uber cell phone in the cupholder, ask passengers to ride in the front seat and use the lane farthest from the Terminal’s curbside pickup, closing the message with assurances that tickets will be reimbursed and legal support provided by Uber.
In 2011, TNCs in California were buried under an avalanche of tickets and “desist” notices from the California Public Utilities Commission (CPUC), which fined each company $20,000 for operating an unlicensed limousine dispatch. In crafting an interim agreement in 2013 that was later made permanent, CPUC mandated driver background checks, driver training, drug and alcohol policies, minimum insurance coverage of $1 million, and company licensing through the Public Utilities Commission. Despite persistent protests by TNCs, which relentlessly claim they are simply providing a marketplace, not transporting passengers, newly penetrated jurisdictions have used the CPUC agreement as a template for legalizing the service without adulterating existing regulatory standards.
Legislation regulating TNCs has already been enacted in 8 States, while under consideration in 4 others. To protect the value of their medallions, taxi and limousine industry proponents in every jurisdiction have pressured public officials to either block TNCs or “level the playing field” by imposing a comparable regulatory framework, citing the need to “promote public safety.” Bills filed during the 2015 legislative session in Tallahassee (HB 817 by Fort Walton Beach Statehouse Representative Matt Gaetz) would have precluded local jurisdictions from requiring a TNC to comply with regulations governing taxi and limousine companies. Despite a team of 23 registered lobbyists headed by Uber Policy V.P. David Plouffe – former Senior Advisor to President Barack Obama – the bills tanked, clearing the way for Broward County to drop the hammer. The new Broward law requires a company license, a local business office, driver chauffeur registrations, national and state background checks with fingerprinting, annual or semiannual inspections of vehicles by a licensed mechanic and flexible fares except for pickups at Port Everglades and the Fort Lauderdale Hollywood International Airport.
|UBER POLICY V.P. DAVID PLOUFFE|
In addition to hiring regiments of lobbyists in hundreds of markets to fight these battles, Uber recruits riders and drivers to lobby public officials with blitz email petitions (more than 450,000 have signed such petitions) in newly breached markets – such as Broward County – upon receiving an “alert” from the company. While disparaging Broward’s new TNC law, Uber official Bill Gibbons acknowledged that thousands of Uber minions responded to Uber alerts by swamping the Commission with “countless calls and emails,” before he loosed an ultimatum, “We cannot operate in Broward County if such onerous regulations are enforced.”
|BROWARD BOARD APPROVES UBER ORDINANCE|
Openly resentful of Uber attempts to “manage” the Commission by manipulating the public and claiming that basic consumer protections will drive them out of business, Commissioners marginalized the Uber threat. Commissioner Stacy Ritter commented that if a $40 billion corporate juggernaut “can’t pony up a few dollars for insurance, background checks and permits, then shame on them.”
Bad Press and Dirty Tricks
This strategy is rubber-stamped in hundreds of jurisdictions across the planet, as Uber aggressively actualizes the competitive advantages of being the first TNC in new markets. As a consequence, they are besieged by an onslaught of legal actions worldwide while networking or arm wrestling with dozens of national and local foreign governments to circumvent regulatory obstacles. Uber officials and lobbyists crisscross the globe bartering political capital – and investment opportunities – in exchange for access. While some of the countries wherein Uber cherry picked which laws it would obey seemed to interpret this as an invitation to negotiate, others were less accommodating, issuing indictments, impounding vehicles and/or threatening the hoosegow. Uber often pushed the envelope to the breaking point. When the Seoul City Government objected to their flouting regulations, Uber warned the government that it risked being “trapped in the past.” Unimpressed, the Seoul Central District Prosecutor’s Office (comparable to the FBI in the U.S.) issued an indictment against both Uber and Kalanick. Three months later (in March 2015), Uber agreed to comply with the law.
|SEOUL CENTRAL DISTRICT PROSECUTOR KIM JIN-TAE|
Uber’s corporate reputation is less than Sterling. Lawsuits dogging the company include an action by the National Federation of the Blind for denial of service to 30 blind plaintiffs and another by a plaintiff who was raped by a New Delhi Uber driver. On August 4, 2014, a 56-year old epileptic Uber driver hit three parked cars and a man on the sidewalk in San Francisco. Repeatedly nailed for dirty tricks against competitors Lyft and Gett, Uber had its employees order and cancel thousands of rides using fake accounts, as reported in CNN Money last September. While social media feedback cuts both ways, a litany of horror stories prompted a solid “F” from the Better Business Bureau.
|PANDODAILY EDITOR SARAH LACY|
On November 19, 2014, Senator Al Franken, Chairman of the United States Senate Judiciary Subcommittee on Privacy, Technology and the Law, sent a letter to Kalanick stating “It appears that on prior occasions your company [Uber] has condoned use of customers’ data for questionable purposes.” Franken disparaged the Uber staff for using a tool called “God Mode” to track the movements of its customers, specifically journalists and politicians. Also in November, Uber Senior Vice President Emil Michael proposed equipping a team of researchers with a $million budget and charge them with investigating the personal lives and backgrounds of media figures who reported negatively about Uber. Michaels targeted Sarah Lacy, editor of the technology website PandoDaily, who had accused Uber of sexism and misogyny. In protest, hundreds of journalists purged the Uber App from their cell phones.
|UBER SENIOR VICE PRESIDENT EMIL MICHAEL|
Tweaking the Money Magnet
Despite the livery industry’s thin margins, investors are jumping through hoops for a piece of the action. For Google Ventures $258 million investment in 2013, Google Chief Legal Officer David Drummond was seated on Uber’s board of directors. On December 4, 2014, the Wall Street Journal reported that Uber had just raised $1.2 billion via a competitive bidding process that drove the company’s valuation to $41 billion over several weeks – the highest for any private startup backed by venture capitalists – as hedge funds Valiant Capital Partners and Lone Pine Capital joined the Qatar Investment Authority and New Enterprise Associates in buying places at the table. While exploiting the proven success of its business model in its “meat and potatoes” livery arena, the company is initiating a variety of services layered on the same basic formula.
|GOOGLE CHIEF LEGAL OFFICER DAVID DRUMMOND|
In late August 2014, the company began pilot testing UberFRESH, an experiment with online fast food orders in Santa Monica, California. In April 2014, they announced a courier package delivery service called UberRUSH, offering pickup from anywhere in Manhattan. In August they began testing their UberESSENTIALS or Corner Store service in Washington D.C., enabling online purchasing from a list of roughly 100 items that you can have in a matter of minutes. Tweaking their software, they introduced UberPool to the San Francisco Bay Area in August. This carpooling service matches riders who are traveling in the same direction. A rider’s app displays the first name of the other rider and indicates who will be picked up first. If no match is available, riders are consoled with a discounted regular fare. Launche last month in New York, UberEATS offers lunch choices prepared by “iconic restaurants” (i.e. StatSocial, American Cut Steakhouse, Num Pang, Mighty Quinn’s Barbecue, etc.) and delivered on foot or bike within 10 minutes of placing the order. Using their smart phones, diners can watch their lunch travel from the restaurant to their desk.
If successful, fast food restaurants, neighborhood drug stores and other Mom and Pop retail outlets will suddenly be able to provide delivery service without burdening their payrolls. UberPool, which does qualify as a ridesharing service, will help Uber undercut other TNCs and Uber Essentials emulates a virtual 7-11 within spitting distance of your smart phone. While frontloading its corporate armory with lobbyists to help smooth their entry into new markets, Uber is tailoring its Chinese menu of related services to those that flourish below any regulatory radar. Wherever a pool of drivers with jalopies is looking for a few bucks anywhere on earth, investors are convinced that these guys can print money. For the rest of Commissioner LaMarca’s early spring 2015 message to constituents, read on... – [editor]