San Francisco's car-sharing services flourish despite regulators

By Gerry Shih

SAN FRANCISCO, Oct 8 (Reuters) - Two San Francisco-basedcar-sharing services, including one founded by Zynga Inc

director Sunil Paul, are operating in defiance ofCalifornia authorities, highlighting how regulators arestruggling with a wave of start-ups that encourage people toshare everything from cars to their homes.

SideCar and Lyft, which offer rides by ordinary car ownersmoonlighting as taxis drivers, have continued to operate in thecity despite receiving cease-and-desist letters in August, saidFrank Lindh, general counsel for the California Public UtilitiesCommission, which regulates livery services.

Framing it as a consumer safety issue, the state has beenunsuccessfully pushing the car services to register as "charterparty carriers," which would require them to scrutinize drivers'backgrounds and hold insurance policies that cover their fleets.

The two companies, which have smartphone apps that helpusers hail rides, are following in the footsteps of Uber, theunregulated limousine service that received a similar noticefrom the state in 2010 but has flourished and expanded to nearlya dozen cities.

Start-ups like AirBnB allow residents to list rooms forshort-term rentals, a lucrative practice that is technicallyillegal but has flourished and has more than 5,000 listingsavailable in San Francisco.

State regulators have held "productive conversations" withthe car companies but have been reluctant to enforce thecease-and-desist orders through fines, resulting in a sort ofdeadlock.

"It's in the benefit of everybody to have thiscertification," Lindh said. "It's basic. It's not rocketscience."

John Zimmer, co-founder of Lyft, argued that thecertification would not apply to his company because it is anetwork of "community members" driving their own vehicles, notprofessionals.

Zimmer said his company purchased $1 million in excessliability insurance in September. He said Lyft scrutinizes itsdrivers' backgrounds and driving records more closely than sometaxi companies. "We're doing this right, and we're doing this ina very thoughtful way," he said.

"Especially in a tough economy, these things help peoplesave a lot of money," Zimmer said, referring to the income carowners can make by working for Lyft.

Lyft has enlisted more than 200 drivers ranging in age fromthe minimum 23 to over 70. They circulate in San Francisco incars with pink, furry moustaches affixed to their grilles.

In a blog post on Monday, SideCar's Paul drew a distinctionbetween regulated livery companies and SideCar by calling hiscompany a "donation-based rideshare platform" run by volunteerdrivers. He argued that regulations were outdated and impededtechnological innovation.

"We can now trust one another, through online reputationsand the social graph, enough to share resources, to provide forone another, and to give rides to each other withoutinstitutions created during the industrial age having to stepin," Paul said.

Transportation upstarts are taking root in other U.S. citiesdespite opposition from regulators and traditional taxicompanies.

San Francisco-based Uber has been locked in awell-publicized battle against the Washington D.C. taxicommission, while in Chicago a coalition of taxi companies suedUber last Thursday for trademark violations and consumer fraud.

In San Francisco, a city with a taxi system so frequentlycriticized that it surfaces as a local campaign issue, theseunlicensed car services have built up a fan base.

Tami Twarog, a graphic designer who lives in San Francisco'sRussian Hill neighborhood, said in a telephone interview onMonday that although she worried about services like SideCar andLyft carrying adequate insurance, she enjoyed using them as away of "high-tech hitchhiking".

She said she hoped they would become a licensed andlegitimate part of city life.

"I can't tell you how many times I'm way down in the Missionwaiting for a bus, and I think, 'Why can't I just jump in one ofthose cars?" Twarog said. "It's about the better use ofresources."

(Reporting By Gerry Shih)

((Gerry.Shih@thomsonreuters.com)(+1 415 515 1698))