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As Uber and its ilk expand, cities like Anchorage struggle to regulate the 'sharing economy'

  • Author: Sean Doogan
  • Updated: May 31, 2016
  • Published October 19, 2014

Like many of the 200 cities throughout the world where Uber's ride-sharing service has arrived, Anchorage is struggling to decide how, or even if, to regulate the company, as it does more than 100 local taxicabs.

Uber rolled out its Anchorage service Sept. 17 despite warnings from the municipality that it could be violating local tax ordinances. Ever since, the company and its supporters and detractors have been embroiled in the same debate that has played out across the U.S. and around the world -- how to reconcile local laws with ride-sharing services, a relatively new business model Uber has used since launching about five years ago in San Francisco.

The company is awaiting the results of three competing Anchorage Assembly ordinances about ride sharing and how it fits into the Anchorage transportation industry.

One, from the municipality's legal department, would legally define ride-sharing companies as taxicab operators. Another, from Assembly member Bill Evans, would impose a specific set of regulations on ride-sharing services different from what the law requires of taxis. A third, from Assembly vice chair Dick Traini and Assembly member Amy Demboski, would temporarily, at least, exempt ride-sharing services from most municipal regulations altogether. That ordinance, modeled on a Detroit law, would require the municipality to enter into a memorandum of understanding with Uber to begin a pilot program allowing the company to charge for its services in Anchorage.

All will be heard by the Anchorage Assembly on Tuesday.

"Alaskans are already turning to Uber to connect with a safe, reliable and convenient ride, and we will continue to work with city officials to create a permanent home for ride sharing in Anchorage," Uber spokesperson Michael Amodeo wrote in an email to Alaska Dispatch News.

But Traini and Demboski's ride-sharing ordinance -- which Traini said would be up for public comment, but likely not a vote, at the Tuesday Assembly meeting -- is not being well-received by the local taxi industry.

"They are going to be let off scot-free with an MOU that we haven't seen yet, one that was based on a model by the city of Detroit? Are you kidding me? The city of Detroit?" said Jim Brennan, attorney for the Anchorage Taxicab Permit Owners Association.

Square peg, round hole?

Uber, and other ride-sharing services like Lyft and Sidecar, have frequently run into local opposition from taxi companies and governments. Uber's foray into the Anchorage market was a contentious one, with municipal officials issuing $100 fines to two Uber drivers and sending the company two cease-and-desist orders before taking it to court and getting a temporary restraining order prohibiting Uber from charging for rides. Uber has said it would comply with the judge's ruling and is currently offering only free rides in Anchorage.

Like many cities, Anchorage has a set of strict regulations for all providers of local commercial transportation. Here, Title 11 rules determine everything from taxi rates and permit and license requirements to vehicle inspections, and even mandate that video cameras be installed in all local taxicabs.

But ride-sharing services don't consider themselves to be taxi companies. Uber does not own any of the cars used in its network, and it simply calls itself a technology service connecting willing drivers and riders. As such, Uber believes that it, and other ride-sharing services, or transportation network companies, should be allowed to operate outside of municipal taxi regulations.

"It's a square-peg, round-hole problem," Uber attorney Doug Cole said in his opposition to the city's request for a temporary restraining order in early October. "And we are doing our best to work with the city to address that problem."

'Sharing economy' changing business

Ride-sharing services like Uber are just a small part of a larger, global movement toward a technology-driven sharing economy. Going on vacation and want to find a cheaper and more personal alternative to a hotel? Airbnb will connect you with someone who wants to rent out their home or apartment. Want to go to a dinner party but don't want a restaurant experience? Use Eat With Me to get an invitation to dinner at the home of complete strangers. Have a busy week and don't want to cook? Mealku will hook you up with a meal trade partner: You cook for them one day, they cook for you the next.

As technology continues to weave more and more connections between ordinary people, many of them are deciding they would rather exchange services with one another than use existing commercial options.

And like it or fear it, with Uber's roll-out, the sharing economy has come to Anchorage.

"The sharing economy will make business evolve," said Anchorage Chamber of Commerce president and former Alaska lawmaker Andrew Halcro.

Halcro supports Uber's Anchorage operation and believes the municipality needs to find a way to work with the company to offer its residents more choices for getting around. But Halcro acknowledged that sharing services need some form of regulation.

"There needs to be steps taken to limit liability on consumers," Halcro said.

Halcro said he believes that bad politics, not good policy, is holding up Uber's Anchorage operations.

"The taxicabs have an absolute, unequivocal cartel in this town," Halcro said. "They have failed to innovate and compete."

But sharing services are in their infancy, and their quick growth has caused some stumbling along the way. New York City is suing to stop some Airbnb users because they are renting out too many rooms -- essentially acting as unregulated and untaxed hotels.

Uber, and other ride-sharing services, have also experienced growing pains.

Bumps in the road

Uber is now in more than 216 cities around the globe. It has seen meteoric growth and its worth continues to climb, attracting powerful investors who gave the company more than $250 million last year.

But Uber's business model has come under fire in many cities. In Los Angeles, authorities have ticketed Uber drivers who are caught picking up airport passengers without proper permitting. In New York City, the company has faced off against its own drivers who are angry at Uber's decision to reduce fares. That follows an outcry last year, when Uber was accused of price-gouging during Hurricane Sandy after its "surge pricing" system automatically raised rates by more than 400 percent as the storm raged and demand for rides spiked. Uber has since reached an agreement with the New York attorney general to abandon its pricing algorithm during a natural disaster.

This month, a Los Angeles Uber passenger reported that she was abducted by her driver and taken to an abandoned parking lot, 20 miles from her destination, before her screams finally convinced the male driver to take her home.

Those incidents have been seized upon by Uber's main U.S. opponents: taxi companies and transportation industry groups, who claim that Uber is being allowed to compete against them without having to play by the same rules.

"It takes a little time before issues arise, and we are seeing that throughout the country," said Susan Smith, whose company, Taylor Taxi, operates 30 cabs in Anchorage. "I don't think Anchorage needs to be a guinea pig."

Insurance and background checks

Several high-profile wrecks involving Uber drivers -- one of which killed a 6-year-old San Francisco girl -- have brought frequent questions about the insurance covering the company and its drivers.

Unlike with taxicabs, which have mandated insurance coverage levels as long as they are on the road, the coverage offered by Uber varies depending on the circumstances.

Uber offers a $1 million policy on the driver and passengers from the time the driver picks up a fare to the time the rider is dropped off. During the time between when the Uber driver accepts the ride and the time the rider is picked up, Uber offers an umbrella policy that is used as the primary insurance -- and in addition to the driver's own policy -- in the event of a wreck. When an Uber driver is connected to the Uber app but hasn't yet accepted a fare, Uber offers a third insurance policy that works as a secondary policy to the driver's personal insurance.

But personal insurance policies don't cover commercial uses, and the Alaska Division of Insurance believes that could mean gaps in coverage in the event of a wreck involving a ride-sharing or transportation network company driver. It has twice issued consumer warnings to any potential Alaska ride-sharing drivers and passengers. The state warned that if a ride-sharing driver were involved in a wreck, an insurance company might not cover the incident.

Uber believes its drivers are safe and that its insurance policies fit the ride-sharing business model.

"It's not like traditional insurance a lot of people are used to," Bryce Bennett, Uber's senior operations manager, told Anchorage Assembly members at a Friday ride-sharing work session.

Another concern for ride-sharing services is how they hire drivers. Uber claims that its driver background checks are among the most stringent in the industry. Potential drivers are checked for criminal backgrounds in state, local and federal courts, and their driving history is checked as well. But taxi drivers have to go through a municipally mandated background check by law enforcement officers. Those checks go through court records and driving history but also require drug screening and fingerprinting.

"The thing that Uber does is, it offers cheaper service, and people love cheaper service," said Dave Sutton, spokesperson for Who is Driving You, a public safety initiative of the Taxicab, Limousine and Paratransit Association, a trade group. "But it does so because it is avoiding key business costs related to public safety."

Uber claims its background checks, along with the service's ability to monitor driver and passenger behavior through its ride rating system, help make its rides among the safest in the country.

"Our ultimate goal is to provide the safest and most reliable service," Bennett said.

Demand for an alternative

According to the Anchorage transportation inspector's office, there are 188 taxicab permits currently operating in Anchorage. They are required for all cabs. But only 30 of those have been issued since the city made them non-transferrable in 1994. And the 158 permits that were issued before 1994 are very valuable; the most recent one sold, in August, went for $140,000. That puts the total value of Anchorage's taxicab permits at more than $22 million -- a lot of money that's now potentially threatened by Uber's arrival. Permit holders want Uber to have to buy into the Anchorage market, as they did, if the company is to be allowed to operate in Anchorage.

"(Anchorage should) put out new permits out for bid, and then Uber would have to bid on those taxi permits, like anybody else," Smith said.

But much of Uber's popularity is due to the fact that its drivers and passengers see ride sharing as different from a taxicab service, an industry that isn't generally thought to be forward-thinking.

"(The local taxi industry) has increasing prices, deteriorating service and some of the worst equipment in the country," Halcro said. "This is really purely an issue of choice for the people of Anchorage. Their only choice now is a taxi industry that has not had any incentive to offer better service."

Halcro believes municipal regulations and political alliances with the taxicab industry have unfairly limited the number of permits issued in Anchorage.

But Anchorage permit owner Smith said she believes that Anchorage cabs are safe, reliable and economical.

"There are a few bad apples in every group, but I think our industry is a good one," Smith said.

Juan Cartes, an Anchorage cab driver since 1982, is now his own boss. Cartes, 54, quit driving a cab and began driving for Uber on Sept. 16. Cartes said he loves driving for Uber, makes more money than he did as a cab driver, and believes the service's popularity is due, in large part, to the failures of the Anchorage taxi industry.

"They don't care about customer service," Cartes said. "They buy cheap cars. Their maintenance is not very good. It's a low-end job."

Cartes said Uber is better for drivers. The app allows him to track his trips, profits, costs and driver rating, which he says will make it much easier for him to do his taxes at the end of the year.

Cartes said that he is giving about 20 Uber rides per day and now relies on his Uber driving as his sole source of income. He dresses up to drive for Uber, opens the doors for people, and thinks of himself in a different way.

"I feel like a professional -- a professional driver now," Cartes said.

However they are eventually regulated in Anchorage, Uber and other sharing-economy companies are likely to continue growing. Anchorage is just one of hundreds of cities that have struggled to figure out how to address the changing nature of the businesses. And Uber has been successful in eventually getting permission to operate in almost every city it has entered.

"We are meeting a demand that has existed for a long time," Uber manager Bennett said.

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