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Uber is on a collision course with New York City's mayor again

Let the debunking begin

Later this month, New York City Mayor Bill de Blasio is expected to unveil a hotly anticipated report he commissioned about the for-hire vehicle industry — but mostly about Uber, which has been a thorn in his side for the last year.

The report is important for many reasons, most notably because de Blasio's position on how best to regulate the fast-growing service could have a profound impact on how Uber operates in its largest and most lucrative market in the world — 26,000 uberX drivers and 2.5 million customers, with 100,000 rides completed everyday. It may serve as a model for other cities that are still grappling with how to respond to Uber's growth. Or it could signal how Uber has been successful in riding roughshod over city officials who stand in its way.

"The current distinction ... will gradually be erased."

There is a lot of money at stake, both for Uber and the traditional, medallion-based taxi industry, which has donated heavily to de Blasio. Medallion owners have seen the value of their licenses drop steadily since Uber's arrival. And after an embarrassing defeat earlier this year, in which he was forced to retract his plan to prevent Uber from adding more vehicles to its fleet after a blistering ad campaign against him, de Blasio is determined not to squander this second chance.

But the report also has the potential to be completely pointless, because New York's pugnacious governor, Andrew Cuomo, has indicated he is interested in a statewide policy regulating ride-hailing businesses, which would likely annul anything proposed by de Blasio. But before the political slapfest begins, it's worth examining who is involved in crafting the city's Uber report. Mayor de Blasio hired consulting firm McKinsey & Company for $2 million to run the four-month study that, on the surface, is about the effects car service companies like Uber have on congestion in Manhattan. McKinsey is using the city's traffic data, as well as data provided by Uber, to assess whether Uber's growth is causing a slowdown in traffic speeds.

This week it was reported that the city also tapped Bruce Schaller, a transportation expert and consultant, to help review and shape McKinsey's findings. Schaller has studied Uber's effects on the taxi industry before. In a report he produced in January 2015 called "The Coming Convergence," Schaller predicted a future where many of these categories of ride-hailing services cease to matter.

Travis Kalanick for mayor?

"The current distinctions between taxis, sedan services and TNCs such as Uber and Lyft will gradually be erased as these services compete for customers," he wrote. "We are seeing this already. The end result will be various ‘grades' of service, from basic cab service as currently seen around the country to premium sedan services."

States like California, which has a fragmented regulatory system, will need to update their policies. But places like New York City, which consolidates enforcement under the Taxi and Limousine Commission, are better prepared for this future, he argued. Schaller declined to discuss the forthcoming report with The Verge, saying he preferred to let it speak for itself when it is released.

Uber has questioned McKinsey's independence, as well as whether a four-month study can be comprehensive enough to draw any meaningful conclusions. In response, Uber has hired its own consultants, Steer Davies Gleave, to produce a study with which to counter the McKinsey study. Uber claims it has no inside knowledge of the mayor's report, but nonetheless is prepared to debunk. (A quick digression: this is one of the problems municipal governments face when trying to take on regulation-averse, cash-rich companies like Uber that try to write their own laws, shape their own image, and can drop a multi-million-dollar negative ad campaign on an opponent like a bag of hammers without even blinking an eye.)

Uber says its main opponent is the politically connected, unethical taxi cartel, and points to the fact that it appears to be winning the war without even having to line any politicians' pockets. But this ignores the other ways in which Uber shapes the fight by dipping into its bottomless cash reserves, and raises questions about the company's endgame. Is it to have every taxi driver on its platform? To have its app on every smartphone, and even have its name branded on all the other apps, too? Travis Kalanick for mayor?

Some experts argue Uber's business model is shaky and ephemeral. "Instead of displacing competitors through actual efficiencies, or by creating entirely new markets, [Uber's] model is entirely based on getting the world to believe that it will inevitably dominate the entire industry," wrote national transportation expert Hubert Horan in a letter in response to a post on Pando about Convoy, the "Uber for trucking." This week, it was reported that Uber was seeking another round of financing that would increase its valuation to a record $62.5 billion.

"That would literally be crazy."

These larger questions about Uber are unlikely to be addressed in the McKinsey report, or in de Blasio's recommendations based on the firm's findings. The mayor is reportedly uninterested trying to cap Uber's growth again — he already fought and lost that battle — and instead is exploring the possibility of a tax on Uber to benefit public transit or requiring the company to do more for the disabled. Meanwhile, the city council is exploring its own options: a new licensing structure, caps on surge pricing, and maybe something around labor practices in the for-hire vehicle industry.

No one in New York City expects either the mayor or governor to go along with Uber's pie-in-the-sky wish to abolish the current structure in favor of a peer-to-peer model, which would allow amateur drivers to pick up riders on Uber's platform. "That would literally be crazy," said one lobbyist.

Some assume de Blasio will try to bury the report, or downplay its importance, in an effort to avoid the public relations disaster of the last go-around. But the mayor's office says it still views this as an opportunity to rein in an industry that has been allowed to grow unchecked for several years.

A spokesman for the mayor said, "We've been clear about our priorities: expanding accessibility for the disabled, securing support for public transit, protecting drivers and passengers, and managing congestion. We will put forward a framework this month that addresses those objectives."