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Originally published March 2, 2014 at 8:01 PM | Page modified March 3, 2014 at 7:48 AM

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City oversight won’t kill ride-service innovators

The Seattle City Council’s proposed regulations for UberX, Lyft and Sidecar aren’t unreasonable, and the companies should stop insisting the debate is over embracing the new technology of mobile-app ride services, writes Brier Dudley.


Seattle Times technology columnist

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Seattle is doing the right thing by extending its taxi-licensing regime to new taxi-like services run by California tech entrepreneurs.

New transportation ventures such as uberX, Lyft and Sidecar should survive and continue to grow, despite the licensing requirements. If not, they have a bigger problem.

The city’s rule-making is tortured and painful to watch. But in this case, at least, it’s not killing innovation and sending its residents back into the dark ages.

Seattle is trying to figure out how its current regulations should apply to a few new companies that are competing with existing taxi services.

If these startups failed to research taxi regulations and anticipate being affected by them as they rolled out a virtual fleet of smartphone-dispatched quasi-taxis, they aren’t half as smart as they think they are and should give investors their money back.

On Thursday, the Seattle City Council decided that drivers for these companies must be licensed and insured, just like other taxi drivers. It also capped the number of vehicles they can operate at a given time, similar to the way the city limits the number of other taxis.

The rules are expected to be finalized later this month. Until then, you’ll be hearing from tech types who see the sky falling. Celebrities are also weighing in, though the high-end towncar services they probably use aren’t affected by the city’s new taxi rules.

These companies and their fans are trying to make this a debate about embracing new technology, which it’s not.

The bottom line is that uberX, Lyft and Sidecar are throwing a hissy fit about having to play by the same rules as companies they’re competing with and hoping to displace.

They’re overplaying their “innovation” hand.

I also think their demands for special treatment — and their slick and aggressive lobbying tactics — could backfire and create resentment against other tech startups that aren’t trying to bend the rules.

It’s like watching a rich kid show up at the ballfield with a $300 high-tech baseball bat, then demand an unlimited number of strikes before he’s called out.

Yes, government taxi rules can be heavy-handed and favor fat and happy incumbents. But licensing taxis enables oversight to ensure decent and safe service.

The limited supply of permits does create a shady secondary market in which drivers borrow a small fortune to obtain a permit and start their rolling small business. It’s so expensive, drivers often just rent cars run by a few powerful operators that amass the permits and run dispatch centers.

Maybe the city should be updating its overall approach before creating special new rules.

Taxi customer service could be better, and established operators have been slow to take advantage of new tools like mobile apps, location services and online payment systems. UberX, Lyft and Sidecar used these tools to build more nimble taxi and towncar companies.

Every established business should pay attention to how these modern ventures are using common devices and services to make it easier for customers to connect and buy their products.

It used to be a novelty when companies set up a website. Then they had to figure out how to make that site visible on search engines. Now they should be thinking about apps, if they want to raise their profile on mobile devices, where people spend more of their time.

Some — but not all — mobile users have come to expect instant gratification and one-stop shopping via apps. They are happy to share their location, personal information and credit cards with business apps, so it’s easy to order products and services and receive them on the spot.

Apps, though, aren’t the be all and end all. People still find and buy more stuff from websites, accessed through plain old browsers.

Even more people, including the roughly 40 percent of the population who don’t own a smartphone, still order a pizza or call a taxi by dialing a phone number.

This is the area where uberX, Lyft and Sidecar are trying to figure out new and better ways to get things done. They’re applying a layer of modern services to the age-old business of collecting money to drive people around.

They’re also giving regulators a jolt, forcing cities across the country to update their rules to accommodate their arrival.

But in this area the newcomers aren’t being innovative or creative at all. They’re just trying to sidestep the rules and avoid paying costs borne by their competitors.

I keep thinking of the fishing industry, where operators may invest $100,000 or more in a license, betting and praying they can catch enough fish to make it worthwhile. Imagine what it would be like if a bunch of well-financed newcomers showed up on the fishing grounds, expecting to fish without licenses or limits, because they have newer fish-finding technology.

My sympathy for the new taxi ventures is also limited by their refusal to share much information about the size of their operations and their policies.

There have been scattered reports of sketchy practices, such as a story last week in The Verge about Uber’s manipulating the number of drivers available on Valentine’s Day to drive up its pricing. That story emerged only because a customer overheard a message to an Uber driver. Perhaps that’s also why the company is fighting regulation, which brings more transparency and better-informed consumers.

Another thing missing in the debate over these new taxi ventures is a discussion of their longevity. In demanding policy changes, these companies position themselves as the future of transportation services. But there’s a good chance they’ll be sold — or fold — before they become widely used.

Remember, Seattle and King County bent over backward in 2000 to help Flexcar, one of the first “ride-sharing” companies. Flexcar later was sold to a competitor, Zipcar, which in turn was acquired by rental giant Avis, which still benefits from the primo parking spots and city policies secured by Flexcar.

Seattle actually is doing these new taxi ventures a favor by giving them a chance to test their new technologies and business models in a real-world setting.

After their honeymoon in an alternate universe where nobody tells them what to do, they now have a chance to prove that they can operate in a city that engages with companies building businesses on its streets, and requires insurance and licensing to protect people riding in and alongside those new vehicles.

Despite its onerous regulations, entrenched special interests and harebrained policies, Seattle has been the proving ground for all sorts of innovative technologies and companies that went on to change the world.

To uberX, Lyft and Sidecar, I say best of luck with your road test.

Brier Dudley’s column appears Mondays. Reach him at 206-515-5687 or bdudley@seattletimes.com.



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About Brier Dudley

Brier Dudley offers a critical look at technology and business issues affecting the Northwest.
bdudley@seattletimes.com | 206-515-5687

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