Los Angeles declared war on ride-sharing on June 24, with a letter from City Hall ordering three companies — Uber, Lyft and Sidecar — to shut down or face criminal charges. On the same day, Yellow Cab and the other established taxi companies launched their own attack, declaring the startups to be “high-tech bandits” and announcing a taxi drivers' rally at City Hall.
One of the advantages of being an entrenched oligopoly is that your lobbyists can coordinate closely with regulators. The next day, the taxi industry packed the room at a City Council committee hearing. The ride-share companies were caught flat-footed. The lone Lyft supporter at the meeting — a driver with no official position with the company — was cross-examined and then dismissed as the council members vowed to press ahead with the crackdown.
Fortunately for Uber & co., however, often there is a wide gap between what the city says it is doing and what it does. The city's medical marijuana dispensaries, for example, have been subjected to repeated “crackdowns,” which tend to evaporate like so much bong smoke. And so the ride-share companies have continued to operate as before, blithely ignoring the decree from City Hall. Thus far, they have been unimpeded.
At the same time, they have begun to organize their supporters. Helped by the July 1 handover of power to a tech-friendly mayor and City Council, the ride-share providers now seem to have the upper hand. In an interview with Huffington Post, Mayor Eric Garcetti came out strongly in favor of smartphone-based ride-sharing, saying that the startups were “disrupting the status quo,” and the taxi companies would simply have to “adapt and adopt.”
There is more at stake than a fight over market share. Ride-sharing represents a real advance in transportation technology. For passengers, tapping a few buttons on an app is much easier than calling a cab or, God forbid, trying to find one on the street. It's also cheaper, unless you ask for a limo. For Garcetti, who has vowed to bring government “into the smartphone era,” it's almost a no-brainer.
Two weeks after City Hall's decree, Lyft hosted a mixer for its drivers. Many of the cars outside were adorned with Lyft's distinctive pink mustaches. The guest list was strictly enforced. Inside, a couple hundred stylish 20-somethings drank Heineken and POP Water, a flavored beverage marketed by Lady Gaga's management firm.
Lyft drivers tend to be young, personable and underemployed. Hiring out their car is an easy source of side income. But at the mixer, titled “Save the 'Stache,” they also talked up Lyft's unique ability to build community and foster relationships in ways that would otherwise be impossible in car-dependent L.A. “We are not bandit cabs,” one driver said. “We are your friend with a car.”
After a while, Lyft's 29-year-old co-founder took the floor. John Zimmer had just flown in from San Francisco. A Zuckerberg in the making, he wore jeans and a button-down shirt, and spoke the language of revolution.
“We can change transportation,” he said. “We can build a new form of transportation that's more efficient, more affordable, more social. We can change the way people think about Los Angeles. … And if we can change L.A., we can change the rest of this country and then, y'know, we're gonna march on and try to change the world.” Big applause.
One of the young people in the crowd was Adam Englander, son of lobbyist Harvey Englander and a vice president at his father's firm, Englander Knabe & Allen. Zimmer seemed to recognize that he would need someone who understood City Hall if he was going to take on the taxi lobby; the following week, Harvey Englander would confirm that he had been retained to fight the entrenched taxi franchises.
“It's sad that that's what we're talking about now, but it's the truth, I know that,” Zimmer told the Weekly. “But it's frustrating that that's what we're talking about, rather than, 'What do the people of L.A. want?' ”
“These services come along because existing services aren't meeting demand,” Englander said. “The taxi industry has become a dinosaur.”
Uber launched in L.A. in early 2012. Lyft got started this past January and already has several hundred drivers. Sidecar launched in February and says it also is growing fast. Collectively, their entry into the market poses an obvious threat to the nine franchised taxi companies, which are capped by law at 2,300 cars.
The taxi cab companies' lobbyist, Rick Taylor, argues that the industry is fighting “sophisticated bandits with funding from Wall Street.”
“Innovation exists today in the taxi industry,” Taylor says. “We have an exciting app that does everything and more than the apps do from these illegal operators.”
But the taxi franchises' app, Taxi Magic, does not measure up. First off, it does not work in every city — since cabs are governed by a confusing hodgepodge of regulations, passengers have to call a different cab company depending upon whether they're in Culver City or Beverly Hills or Venice. The app works only in L.A., Long Beach, Santa Monica and Pomona.
Even for riders there, functionality has its limits. On a recent test run booked by the Weekly, the app got confused and reported — wrongly — that the taxi dispatched for pickup had picked up another passenger. It offered to rebook or cancel the ride, though it warned that cancellation might incur a fee. When the driver arrived, he had never heard of the app and did not trust it to take the payment correctly.
Once at the destination, the app required the fare to be entered manually, and then added a $1.50 “convenience charge” for using a credit card. To his credit, the driver agreed to accept payment through the app — not all of them do — and then handed over a paper receipt.
The apps for Uber, Sidecar and Lyft are all far more intuitive and hassle-free. You get in the car. When you arrive at the destination, you get out. Your phone handles everything else. And with the exception of Uber's town car and SUV service, they are all cheaper than taxis.
The taxi companies are thus in the position of offering an inferior service at a premium price. No wonder they need friends at City Hall.
But the change of administration there has created a lot of uncertainty. All department heads have been asked to reapply for their jobs, and until they know that their positions are secure, they're not making waves.
The Department of Transportation, which handles taxi regulations, has backed off its threat to arrest ride-share drivers. So far, LAPD is not enforcing the cease-and-desist order, and — despite rumors to the contrary — the L.A. Airport Police says its officers are not pulling over cars with pink mustaches. (In the last two months, the airport police ticketed two Uber drivers.)
In a terse statement, a department spokesman said, “We are working with Mayor Garcetti's office to determine ways to address ride-sharing companies in the city.”
The ride-share companies argue that they should be regulated at the state level. They are not taxis, they argue, and do not compete with taxis.
“We believe we can compete with the idea of owning your own vehicle,” Sidecar co-founder/CEO Sunil Paul says. “I know that's audacious in a place like Los Angeles … (but) our goal is to replace your car with your phone.”
Yet by virtue of their popularity, the alternative services threaten to effectively deregulate the entire taxi industry in Los Angeles. On the ride the Weekly booked using the Taxi Magic app, the cabbie complained that Lyft and Sidecar drivers could make the lucrative run to LAX anytime they wanted, while he's restricted to certain days.
Such regulations exist for a reason: They guarantee that cabs are safe and fuel-efficient, and that they serve poor neighborhoods and disabled passengers. By limiting the number of cabs, they also make it possible for taxi drivers to earn something resembling a living wage. Should the city just dismantle those regulations in the name of progress?
Lobbyist Rick Taylor, naturally, thinks not. Bandit cabs — those operating without a taxi license — have always been illegal. Ventures like Uber and Lyft, he believes, are just a more sophisticated version of an old problem.
“If it walks like a taxi and drives like a taxi, it's a taxi,” he says.