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Uber and Lyft are getting pushback from municipalities all over the US

A man leaves the headquarters of Uber in San Francisco.
Eric Risberg | AP
A man leaves the headquarters of Uber in San Francisco.

Uber and Lyft, and others, want hailing a ride to be as common as catching the bus. But their aggressive expansion plans are being stymied in many places in the U.S. by lawmakers because of safety concerns, pressure from taxi companies or a desire to level the playing field for incumbents.

Some methods lawmakers are using to thwart their expansion include introducing requirements on driver fingerprinting, vehicle inspection, insurance, fees, and limits on where drivers can pick up and drop off passengers.

Much to the chagrin of taxi and limousine companies, ride-hailing services — whose popularity has irrecoverably slashed the value of a once-prized taxi medallion in places like New York City — have proven addictive to America's urban population, particularly at the often heavily subsidized prices they offer riders.

Fingerprint background check
George Frey | Getty Images

Today, 34 U.S. states and more than 69 cities have passed legislation governing ride-hailing companies, also known as transportation network companies (TNCs). Another six states have enacted legislation mandating minimum insurance requirements.

Even still, some lawmakers and taxi and limo companies are pushing for more stringent regulation on things like driver fingerprinting, pick-up locations and fees. Future regulatory battles around worker classification and autonomous vehicles promise to keep things interesting.

The two private companies are spending millions to lobby politicians, reach voters with ads and lure riders with promotions. At the same time, competition in the already aggressive ride-hailing business keeps getting tougher. Alphabet's Google is jumping into the market with a service built on its popular Waze app. (Details of the new carpooling service — which aims to undercut Uber and Lyft and will launch in San Francisco in the fall — were reported by The Wall Street Journal's Jack Nicas on Wednesday.)


Travis Kalanick
David Paul Morris | Bloomberg | Getty Images
Travis Kalanick

To streamline the hurdles ahead, both Uber and Lyft would like to see more states enact TNC-friendly legislation governing key markets. Fingerprint-based driver background checks — which some lawmakers believe are vital safety measures and taxi and limousine owners want to level the playing field — remain a big sticking point.

Uber and Lyft have argued that fingerprint-based background checks do nothing to improve safety and act as a disincentive for drivers to sign up, reducing the quality of their services. Both prefer their own self-administered background checks, which they say draw on more up-to-date information and are less onerous for drivers.

Here are some places in the U.S. where friction between the companies and government is particularly acute.


Texas

Lyft Application on cell phone
Source: Lyft
Lyft Application on cell phone

A number of cities in the Lone Star State — which has not adopted statewide TNC legislation — are currently weighing fingerprint requirements.

Uber says it will leave Houston — the fourth-biggest market in the U.S. — if the city does not suspend a driver fingerprinting requirement enacted in August 2014. The company has been wrangling with lawmakers over the issue ever since the legislation was passed.

"Houston has some of the most burdensome regulations for ridesharing in the country, and it is only one of two cities in the U.S. to require drivers to be fingerprinted in addition to completing Uber's background screening process," Uber said in a report published in April. "It can take up to four months for a Houston driver to go from signing up with Uber to being granted a two-year license by the City."

Since passing the legislation requiring driver fingerprinting, more than 20,000 people in Houston completed Uber's screening process but failed to complete the city's licensing process, according to an Uber survey detailed in the report. Almost two-thirds of the respondents — mainly minorities and low-income people — said the regulations were too complex, time-consuming and costly.

"These regulations have prevented thousands of safe, qualified drivers — especially part-time drivers — from getting on the road," the company said in its report.

But so far the city is not backing down and, instead, working on new ideas — to be presented at a City Council meeting on Sept. 12 — to open up the market to Uber's competitors. Lyft does not operate in Houston because of the fingerprinting requirement, but two other ride-hailing rivals — Wingz and Get Me — are there, support fingerprinting and are ready to soak up Uber's business should the ride-hailing giant say goodbye to the Bayou City.

Pulling the plug on Houston might seem like a risky move, but it would not be unprecedented. Both Uber and Lyft left Austin in May after voters rejected their plan for self-administered background checks in favor of imposing a fingerprint requirement. A number of start-ups are now vying for their stranded customers, while Uber and Lyft engage in ongoing talks with city officials.

Thirteen cities in Texas have adopted the TNC regulation that Uber approves of, but Galveston and Corpus Christi remain notable holdouts. The companies likely hope that Texas Gov. Greg Abbott will enact statewide legislation that is friendly to ride-hailing services, in keeping with the state's pro-business "Wide Open for Business" slogan.

Illinois

Of course, statewide legislation does not always fix the problem. Illinois has enacted laws governing TNCs but Chicago — the third-largest market in the U.S. — governs transportation locally and remains a "problem" city for Uber and Lyft.

In June, after a major public relations campaign the two companies waged on social media, TV and in newspapers, Mayor Rahm Emanuel signed a controversial bill which did not include driver fingerprinting. Uber and Lyft approved of the new law, but the taxi industry largely did not.

Chicago's taxi companies and their allies on the City Council have accused the mayor — who's brother, Hollywood agent Ari Emanuel, is an Uber investor — of favoring Uber with light regulation. Despite the recent passage of the new TNC regulation, a Chicago licensing and fingerprinting task force is about half way through a six -month study into whether fingerprinting drivers would improve safety.

Uber and Lyft have threatened to leave the Windy City if fingerprinting is required. Emanuel's former chief of staff, Lisa Schrader, became Uber's director of public affairs for the central U.S. region in August.


New York

Uber drivers hold up protest signs outside the ride sharing company's offices in demonstration against the recent decision to cut fares, in the New York City borough of Queens, NY
Behar Anthony | SIPA | AP
Uber drivers hold up protest signs outside the ride sharing company's offices in demonstration against the recent decision to cut fares, in the New York City borough of Queens, NY

The one place where the two companies have accepted driver fingerprinting is New York City, a market that is too big to ignore. There, the companies operate as black car services — since ride-hailing services are illegal — and are regulated under the same laws as taxis and limousines by the Taxi and Limousine Commission (TLC).

The two companies have had an uneasy relationship with Mayor Bill de Blasio, who has been sympathetic to taxi companies.

The City Council has sought to cap ride-hailing companies' growth and to level the playing field for the city's iconic yellow cab drivers. For example, as of Aug. 19 taxi drivers, like their ride-hailing counterparts, are no longer required to pass an English proficiency test and last year the TLC eliminated most geography questions from its licensing exam.

In NYC, it can take up to three months, 60 hours of personal time and $3,000 in fees for drivers to obtain a TLC license, Uber has said. By comparison, in Orange County, California — where drivers are only required to pass Uber's background check — it takes less than two hours and costs about $10, according to the company.

New York state has not adopted statewide legislation and ride-hailing services are not permitted there. The state's insurance law does not recognize Uber's commercial insurance policy — something Uber hopes will change with the passage of a bill in 2017. Uber says that if the state adopts ride-hailing rules that require driver fingerprinting, it will not operate there.


Massachusetts

Massachusetts became the most recent state to pass statewide legislation, with Gov. Charlie Baker signing the bill into law on Aug. 5. The new law has, rather unusually, drawn broad support from both the taxi industry and Uber and Lyft. It requires TNC drivers to submit to a double background check, but does not require fingerprinting, something Uber's opponents say may come later in a separate bill.

"We believe fingerprinting is going to be a fait accompli in Massachusetts," said Scott Solombrino, a board member of the National Limousine Association and president and CEO of Dav El, which operates a chauffeur transportation business in 600 cities globally.

"You are seeing a trend where people are no longer going to let safety be sacrificed for corporate profits," said Solombrino.


Uber driver Dean Johnson poses for a portrait while working outside South Station in Boston on April 22, 2016.
Craig F. Walker | The Boston Globe | Getty Images
Uber driver Dean Johnson poses for a portrait while working outside South Station in Boston on April 22, 2016.

The Massachusetts law also imposes a 20-cent-per-ride fee on TNCs, with 5 cents going to subsidize taxis, and allows drivers to pick up rides at Boston's convention center and airport. The taxi subsidy naturally has some irked.

"We should not be in the business of subsidizing outdated approaches and their business models," said Kirill Evdakov, CEO of ride-hailing start-up Fasten, which operates in Boston and Austin. "It benefits medallions and hurts drivers and riders."

The law prohibits cities and towns from setting their own regulations for ride-hailing services, a measure which should help shield Boston and Cambridge, Massachusetts, from federal lawsuits brought by taxi groups demanding that the cities hold Uber and Lyft to the same regulations as taxis companies. Similar suits have been filed by taxi firms against a number of cities including New York City, Chicago, Miami and most recently Newark, New Jersey.

Florida

Florida is among the 16 states which have not yet adopted statewide regulation governing ride-hailing companies. The House and Senate closed the last session locked at an impasse over who should govern TNCs; the local governments which regulate taxi firms, or state regulators which Uber and Lyft prefer.

Miami-Dade, Florida's most populous county, has passed legislation legalizing Uber and Lyft, and loosening taxi regulation.

Uber Technologies app
Victor J. Blue | Bloomberg | Getty Images
Uber Technologies app

Other counties are not necessarily following its lead. For example, Hillsborough County, Florida, which encompasses Tampa Bay, is moving forward with new rules which include requiring driver fingerprinting. Both Uber and Lyft have opposed these rules and their fate in the county looks to be uncertain.

"The proposed regulations — ­­which closely track regulations proposed by the taxicab industry in 2015 ­­ — would protect the incumbent industry by imposing anti­-competitive and antiquated regulations on the TNC industry," wrote Kate Wooler, an attorney representing Uber, in a letter to Public Transportation Commission Executive Director Kyle Cockream obtained by Florida Politics and published Aug. 1. "These regulations are an attempt to force TNCs to pack up and leave the county."

Two ride-hailing start-ups looking to take advantage of an exit by Uber and Lyft are San Francisco-based Wingz and local competitor DriveSociety, which is planning to launch on Sept. 18, roll out statewide by the end of the month, and enter the NYC, Chicago, Austin and Phoenix markets at a later stage. Going up against such deep-pocketed and well-established rivals as Uber and Lyft is obviously an audacious plan.

"I'm betting we take the entire market in Tampa Bay on Day One of our operations," said DriveSociety CEO Marcus Carter. "Might sound crazy to some, but this was carefully calculated and executed."


New Jersey

New Jersey is another key state working its way toward statewide ride-hailing legislation — lawmakers are currently weighing whether TNC drivers should undergo fingerprint-based background checks.

In August, Newark cab and limo companies filed a federal lawsuit against the city of Newark, the largest New Jersey city, arguing that a $10 million deal it struck with Uber violates their constitutional rights.

The plaintiffs, which include Newark Cab Association and Newark Taxi Owner Association, allege that Newark is violating their rights under the Takings and Equal Protection Clauses of the U.S. Constitution by heavily regulating taxis and requiring them to buy $500,000 licenses while imposing few regulations on Uber. Minimal regulation has allowed Uber and other TNCs to flourish at their expense, the suit claims.

Generally, the U.S. makes it easy on Uber compared with Europe and parts of Asia, but to maintain its meteoric growth rate Uber needs a steady supply of drivers — until it introduces autonomous cars.