Next Four Years: Ridesharing, Uber, and Taxi Licensing

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An interesting challenge for the incoming Council is one facing cities across North America – how to respond to ridesharing services such as Uber and Lyft.

Uber serves as an online taxi broker connecting potential riders with private drivers.

It exists outside of current municipal regulations. Anyone with a vehicle can sign up to be a driver, and after a quick background check, Uber provides them an iPhone for receiving ride requests.

Passengers use the Uber app to request a drive, much as one currently calls a cab.

UberToronto
Uber has been operating in Toronto since 2012, and have rapidly expanded their operations in the region in the past year.

On Facebook, Uber is advertising for drivers in Hamilton.

They have not announced a date for launching in Hamilton. Traditionally, Uber launches without notice.

Toronto Latest to Try Shutting Down Uber

Hamilton Driver Recruitment Sign-up

Hamilton Driver Recruitment Sign-up

Today, November 18 2014, the City of Toronto announced its filed for a court injection to shut down Uber’s operations in Toronto arguing that Uber is operating an “unlicensed, unregulated” taxi operations.

Toronto states it regulates the taxi industry for public safety and consumer protection reasons.

Uber is presenting involved in a legal battle with the City of Ottawa as well.

Uber has defied municipal bylaws in most City’s its launched, and is in similar court battles across North America. The Wikipedia page related to Uber catalogues many of these battles.

Uber is currently engulfed in a major public relations fiasco after Senior Vice-President Emil Michael of the company suggested they would dig-up dirt on journalists critical of the company.

He specifically focused on Sarah Lacy, PandoDaily’s editor, who is critical of the company’s culture of “sexism and misogyny”.

Despite Uber’s legal and public relations problems, it is a Silicon Valley darling valued at over $18-billion with some estimates of $30-billion.

Uber’s investors are a who who of Silicon Valley, including Google Ventures.

Uber and Hamilton

I submitted the following questions to Director of Licensing Ken Leendertse:

With Toronto taking legal action against Uber, I have a couple of Hamilton questions as Uber is planning to launch in Hamilton shortly:

What is the City of Hamilton’s position on services such as Lyft and Uber – are they allowed in the City of Hamilton?

The City of Hamilton encourages innovation and welcomes new business across many industries. We are aware of newer services like Uber and Lyft that leverage technology to transform a traditional business model. That said, any business operating in Hamilton is expected to follow municipal by-laws.

We share the opinion of other municipalities that these are businesses primarily operating as a taxicab service. As such, they are subject to the same provincial and municipal regulations (e.g. Business Licencing By-law 07-170 – Taxicab Schedule 25 [stats on page 215 of pdf] and the Highway Traffic Act) to ensure consumer protection of residents and visitors, and to ensure the health and safety of passengers and drivers.

To date, Lyft and Uber have not contacted the City of Hamilton to inquire on local business licensing requirements nor have they submitted an application for a licence. We are open to explaining municipal by-laws and requirements; however, without the proper licensing they would be in violation of city by-laws and would not be allowed to operate.

Is Hamilton looking at intervenor status in the Toronto case?

Not at this time, but we will be monitoring the case.

Are you aware of any Uber drop offs in Hamilton which be in violation of municipal regulations or bylaws?

The City clarified they only regulate pickups

No, we have not been made aware of any pick-ups in Hamilton utilizing the Uber service. But we will be watching very closely what transpires over the coming weeks.

How will the City of Hamilton response if these services launch in Hamilton as Uber states they intent to? (bold emphasis from the City)

Firstly, we would strongly encourage Uber to contact the City of Hamilton to discuss our business licensing requirements, particularly for taxicabs prior to setting up business. There are separate requirements for owners, brokers, drivers and vehiclesagain, the emphasis is on public safety, privacy and consumer protection. Some of these requirements include:

  • Drivers must complete a mandatory training program
  • Drivers must provide a Police Record Check and a Ministry of Transportation driver’s abstract (less than 36 days old).
  • Vehicles must undergo regular inspections, including proof of required insurance, and shall not be more than six years old (excluding the manufactured year)
  • From December 15 – March 15, 4 snow tires are required on all taxis as approved by Hamilton City Council
  • All taxicabs must now have cameras installed in their vehicles as of May 01, 2010
  • All taxicabs must be equipped with an emergency lighting warning system mounted on the exterior of the vehicle to provide safety for the taxicab driver

The City will gladly walk Uber through all the necessary steps in order to comply and operate as a legal taxicab service.

Without this facilitation and Uber being properly licensed, the City of Hamilton is prepared to take legal action in the interest of public safety. Convictions and fines under these laws may affect the ability of the drivers or owners to maintain or obtain municipal licences or renew Highway Traffic Act required permits.

Does the City take a position as it relates to Uber drivers who have signed up to be drivers in Hamilton?

We would caution anyone considering signing up to be aware that this is currently an unlicensed business in Hamilton.  Drivers must have a City of Hamilton taxicab license that requires a police record check and safety training (among other requirements as mentioned above). They also must drive for an owner and broker who are licensed by Hamilton. Driving without a taxicab licence is an offence under the Highway Traffic Act and the City of Hamilton Business Licensing By-law.

More importantly, the critical message in all of this is public safety: travelling in a taxicab that is properly licensed by the City of Hamilton means there is a trained driver, insurance coverage and a vehicle inspected for mechanical fitness.

Public Safety

One of the advantages of taxi licensing is public safety. The City of Hamilton inspects all taxis to ensure they meet minimum mechanical standards.

It also ensures the taxi operators have commercial insurance with liability protection of $2,000,000 for passengers.

Background checks are conducted by police on all drivers.

Drivers are tested on local knowledge, customer service, and must submit driver abstracts to ensure they are operating safely.

The Licensing Tribunal regularly revokes the ability of drivers to operate taxis for violations, one of the most common reason being demerit points.

For the drivers, the City ensures they have cameras and the emergency lights in their vehicles to protect against crime.

Economic Disruption

Uber is a disruptive innovation in taxi dispatch and ridesharing. It serves as the taxi broker, without the overhead of traditional brokers.

It does not limit the number of drivers by taxi plate licensing, and its commissions can be less for a driver than the traditional cuts given to broker and plate holder.

It implements so-called “surge pricing” during events such as snowstorms, rain floods, or other times when demand for taxis is increased.

For example, a ride home from Hess Village at closing time will be much higher than the ride to Hess Village in the afternoon.

Taxi Plates Limitation of Supply

The biggest disruption is the lack of taxi plates control.

In Hamilton, there are only allowed to be a set number of taxi plates, calculated as 1 license per 1,170 population in Hamilton. (I could not find the current number of plates issued)

Council must vote to issue new licenses based upon population increases, and faces strong political pressure from existing plate holders against issuing new licenses.

In 2013, the City issued 13 new plates on the condition the plate holders would operate fully accessible taxi vehicles and prioritize those with disabilities in their service.

This came after over five years of debate and intense lobbying on both sides of the issue.

Every new plate both increases competition and could potentially decrease the value of the plate. Officially plates are owned by the City of Hamilton and can be revoked, in practice, plates are worth tens of thousands of dollars, up to $200,000 according to some in the industry.

The sale of taxi plates is not regulated and it is a private market.

In effect, the City – by creating new licenses – is printing money to whomever is given ownership of the plate. There is a waiting list for future new plates. The new plate owner only pays a nominal fee to the City for the new license.

If Uber and similar services take root, the plates become as valuable as Bre-X stock: worthless with investors holding plates out significant amounts of money.

Many taxi plates are held, not by drivers, but by investors who then “rent” the right to drive taxis by leasing their plates to drivers.

By the time the plate holder, taxi owner, and broker are paid; a driver who doesn’t have any ownership is lucky to make minimum wage.

What’s Next

The Toronto case will proceed with an eventual court decision to be made.

Uber has very deep pockets from venture capital, and the ability to fund a legal fight all the way to the Supreme Court.

Uber’s strategy in the United States has been to pay fines as a ‘cost of doing business’, build a large customer base, and leverage this customer base of support to force political change to regulations.

Hamilton’s going to be in the passenger seat as Uber and the City of Toronto battle in court.

Ultimately, if Uber does continue to expand without concern for local bylaws, there’s little the City of Hamilton can do but issue fines that Uber will pay.

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