Racing to rideshare

Posted by David Plouffe, Chief Advisor and Board Member, Uber

Each city’s transportation system has its distinctions. We have yellow taxis in New York and red ones in Hong Kong; a subway in Beijing and a metro in Paris; double decker buses in London and single-story ones in most other cities. But there’s increasing agreement in one area: smartphone apps that connect riders and drivers at the push of a button can improve everyone’s quality of life.

• Riders: Apps like Uber make it more affordable and easier to get around—especially in places where there is little public transport and taxis are nonexistent today. These neighborhoods have become transportation deserts. For example, a recent study found that in less well-off neighborhoods of Los Angeles a ride with Uber cost half as much and arrived twice as quickly as a taxi.
• Drivers: According to the U.S. government over 20 million Americans want to work longer hours but cannot for “non-economic reasons” such as caring for a family member. Ridesharing services like Uber fit around people’s existing commitments: drivers — and no one else — determine their own work schedule. In the U.S. half of drivers using Uber do so for less than 10 hours a week. And two-thirds vary their own hours by more than 25 percent week to week.
• Cities: In an increasing number of cities many passengers want to get to the same place at the same time. uberPOOL, an efficient carpooling product, enables them to share the ride — reducing congestion. And the ability to push a button and get a ride in minutes can reduce drunk driving. California experienced a six percent decline in alcohol­-related crashes involving under­-30 year olds following the launch of uberX.

It’s for these reasons that nearly 70 states and cities in the United States have passed modern ridesharing regulations in the last two years. The Philippines, Mexico City, the surrounding State of Mexico and the State of Puebla have now all followed suit. Vilnius, the capital of Lithuania, recently became the first city in the European Union to embrace the idea. And just last Friday the Australian Capital Territory introduced new ridesharing regulations — the first state or territory to update its laws in Australia. As Andrew Barr, the Chief Minister, said:

“The Australian Capital Territory Government supports the introduction of ridesharing in Canberra to improve transport in our city. Services such as Uber offer a new way of getting around — using new technologies to provide more choice for consumers and to boost the productivity of our economy. I’m pleased we were able to work with Uber to design and implement a clear…set of regulations for ridesharing services.”

At the heart of these new rules is the belief that one citizen should be free to give another citizen a ride across town. The purest form of ridesharing would of course be a peer-to-peer model, where people wanting to drive simply connect with people needing a ride. But almost every government so far has opted for a regulated approach, where ridesharing companies are licensed and required to meet certain standards, including around safety.

Licensing regime

• Ridesharing companies must have a license before they can operate. To obtain a license, these companies must provide proof of insurance. Drivers do not need be individually licensed.
• To get started drivers must submit an application to the licensed ridesharing company. This enables the company to check a driver’s age, driving license, driving history, vehicle registration, auto insurance and criminal record. It’s important to note that the ability to do background checks — and the depth of those checks — varies widely from country to country.
• Ridesharing companies cannot accept drivers whose records show that they do not meet the required standards (e.g. because they are too young, their vehicle is too old or they have an issue with their criminal record).

Safety requirements

• As per the above, drivers must undergo a rigorous pre-screening process.
• The ridesharing company must retain driver trip records for a minimum period, to ensure that law enforcement can access information when necessary to ensure public safety.

Consumer protection and competition requirements

• Drivers are not allowed to solicit or accept street hails.
• Ridesharing companies must be transparent about how fares are calculated. Customers must be able to get an accurate fare estimate before booking a trip and a receipt when the trip ends.
• Ridesharing companies must adopt a policy of nondiscrimination for drivers and riders.
• Drivers should be free to use multiple different ridesharing platforms.

The key change in most places is the move from dual licensing — with companies and drivers both needing a license — to a unified regime, where only companies are licensed and there are no restrictions on the number of people who can drive. Separate requirements on drivers have two negative consequences.

The first is obvious: they act as a real deterrent to people who want to drive for just a few hours each week — perhaps when the kids are at school, if they’ve had some hours cut in their job or because they need the money to pay off a loan. There’s tremendous demand for this kind of flexible work because it can meaningfully improve people’s quality of life. According to the European Union there are nearly 10 million part-time workers in Europe who wish they had more work. And again there are 20 million Americans who work fewer hours than they would like for “non-economic reasons” such as child care or the need to study.

The second negative consequence of licensing requirements for drivers is less intuitive: the opportunities to reduce car ownership and therefore congestion over time become fewer. This is because as services like Uber take off — in London, for example, 30,000 new riders sign-up each week — the supply of car hours needs to keep pace with that demand. If it doesn’t, waiting times or prices or both will increase, especially in the outskirts of cities. And people will only give up their cars or reduce personal car usage over time if they are certain to get a ride within minutes when they need one. It has to be as easy and quick as picking up your own keys, walking outside and pushing the ignition button. In addition, if governments want to encourage people who drive regularly — for example because there’s no public transport available — to share the trip (thereby reducing congestion) then it needs to be efficient for those drivers to sign-up.

In the early 1900s, London taxicabs had to be tall enough to accommodate a man in a top hat. But the world moved on, and the regulations changed. Today, the smartphone has made it possible to push a button and get a ride in minutes. There’s no need for people to call in advance, or stand on a street corner waiting for a taxi to come along. Cities around the world are embracing modern ridesharing regulations that reflect this new reality — and which increase choice for both riders and drivers while also protecting consumers.