UberX, Lyft reject latest California regulation push

June 18--Some cabbies roam the streets in search of a hail. UberX drivers don't even have to leave their bedrooms.

The part-time citizen chauffeurs who drive UberX's sedans or Lyft's pink-mustached cars instead sign onto a smartphone app, which logs their location and matches them with prospective riders nearby.

For passengers who request a car through the ride-sharing apps, the service is hip, efficient and cheap. UberX advertises a flat rate of $35 for Sacramento International Airport service from the grid, shaving about $5 off the estimated taxi fare.

The result: a service in high demand.

Yet as the Bay Area startups grow in popularity and presence, with operations from Orange County to San Francisco, state officials find themselves playing a regulatory game of catch-up.

Lawmakers and the California Public Utilities Commission, citing a general safety concern, are seizing upon what they view as a gap in regulation for the fledgling industry. In recent weeks, the Legislature and commission have pushed several proposals that are attracting support from a litany of interested stakeholders -- insurance companies, taxicabs and limousines -- whose own interests hinge on the outcome.

But ride-sharing firms, the primary targets of new regulations, reject nearly all of the proposed rules. While companies like UberX and Lyft say they are willing to compromise, they view the current push as an unnecessary threat to their popular business model, one intended to leave them at a competitive disadvantage.

"The sharing economy and those who are disrupting established business models are definitely drawing the ire of traditional special interest groups, in this case in the transportation sector," said Robert Callahan, California executive director of The Internet Association, which represents Lyft and Uber.

A three-hour Senate hearing Tuesday demonstrated just how many interests are at play. Representatives across multiple industries weighed in on one proposal to increase insurance coverage and another legislative plan to establish standard requirements for all ride-to-hire vehicles. Outside the Capitol, hundreds of ride-sharing drivers and passengers -- some holding giant pink mustaches -- rallied in support of the companies.

Shouting from a podium in front of the Capitol, Lyft driver Wanda Crane urged supporters to "oppose any attempts" to restrict ride sharing.

"As I saw with the transition from the typewriter to the PC, new technologies bring new opportunities and benefits," Crane said. "And our laws must adapt to embrace these changes."

At the end of last year, the PUC, which regulates UberX and Lyft, established regulations and a new commercial category for ride-sharing firms: "transportation network companies," or TNCs. Last week, the commission took action to enforce its existing rules, sending warning letters to five ride-sharing companies -- Lyft, SideCar, Summons, UberX and Wingz. The letters argue that the companies violated regulations that ban TNCs from servicing airports without a permit.

"It's important that these companies have permits," Eva Cheong, associate deputy airport director at San Francisco International, said during Tuesday's hearing. "We don't allow an airline to come in and land at SFO without a permit, so it's the same for any ground transportation provider. And these companies have flagrantly right now violated the rules."

UberX and Lyft said they plan to continue working with California airports to receive permits, although the letters threaten to shut down the companies if they don't comply by June 24.

In Sacramento, for example, the airport has no permits with Uber and Lyft. In May, three Uber drivers were fined $100 each for operating without permission, according to Laurie Slothower, a spokeswoman for Sacramento County's airports.

She said the airport is open to commercial ride sharing, but that UberX and Lyft drivers must follow the same permitting procedure as their cabbie counterparts, raising an unsettled question at the root of any ride-sharing debate: Are UberX and Lyft taxis?

It's a question that ride-sharing loyalists and opponents constantly try to answer, albeit in different ways, as regulators attempt to stake out a position on several issues, including background checks for drivers and insurance responsibility for ride-sharing companies.

The PUC's current rule requires the companies to provide $1 million in commercial liability coverage for providing "services."

But determining the definition of services is problematic. The companies agree that their drivers are clearly working from the time they are matched with a rider to when the passenger is dropped off. During that time, most ride-sharing companies provide $1 million in commercial coverage.

But they should not have to provide that level of coverage for times when drivers simply have the app on, said David Estrada, Lyft's vice president for government affairs. During such periods, Lyft and UberX provide $100,000 in coverage in addition to the driver's personal insurance policy.

Estrada said the drivers could, for example, have the app on while sitting at home or driving to the grocery store. "The driving behavior is categorically different from taxis," he said.

In a move to clarify its rules, the PUC proposed last week that companies be required to provide $1 million in commercial liability coverage whenever the app is on or the driver is available to accept rides. It also said the companies should offer primary coverage, rather than first relying on a driver's personal policies.

Those rules would be made law in Assembly Bill 2293, sponsored by Assemblywoman Susan Bonilla, D-Concord. Insurance companies cast the legislation as a policy that ensures public safety and stressed the importance of mandating primary coverage, since most personal policies held by drivers have commercial exceptions. The Senate Energy, Utilities and Communications Committee approved the measure Tuesday.

Ride-sharing companies, however, have attacked the bill as serving to benefit insurance companies, citing concern that $1 million is an arbitrary number. Bonilla said during the hearing that she is willing to continue discussing the amount required when the app is on.

"Today's hearing demonstrated that there is no clear consensus about how to best determine appropriate levels of insurance for ride sharing, and we will continue working with legislators to ensure that consumers, drivers and passengers have the ability to access safe rides from the Lyft community," Kate Dally, a spokeswoman for the company, said in a statement.

Taxi drivers like San Francisco cabbie Beth Powder would like to see any new regulations more closely resemble requirements for taxis. "They should be insured all the time," she said.

That approach was rejected in Tuesday's hearing.

A bill spearheaded by Assemblyman Adrin Nazarian, D-Burbank, was changed to eliminate a controversial provision requiring the companies to carry around-the-clock commercial insurance, as is required for taxis and limousines. AB 612 continues to have provisions that would require Department of Justice background checks and drug testing for ride-to-hire drivers.

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