New York City is right to put the brakes on Uber's rampant growth

Uber is at war with New York City government. The City Council is expected to vote tomorrow on a new proposal that would impose a one-year slowdown in the number of new vehicles it can license for its fleet. The city says it needs time to study a rapid increase in congestion happening in its crowded urban core. Uber says the cap would eliminate 10,000 new jobs it had planned to create. And because the taxi industry was a donor to the mayor, Uber painted the the effort to slow down the addition of new vehicles as an act of corrupt protectionism for the ailing incumbents.

“Three months ago, the taxi industry put forward a proposal to protect the status quo, and limit competition and innovation. Today, the de Blasio administration and City Council members revived a nearly identical proposal,” said David Plouffe, Uber's chief strategist and a former Obama campaign manager. “Unfortunately, this would reverse improvements made by Uber and others to our transportation system and most notably stand between New Yorkers looking for work and their opportunity to make a better living."

But New York City's plan to put a cap on the growth in new cars operating for ride hailing services won't "reverse" improvements, and in fact makes a lot of sense. Over the last three years, Uber has added roughly 20,000 new cars to its fleet here, with competing services like Lyft and Gett adding about 5,000 more. This flood of cars battling for business in the Big Apple appear to be having a direct impact on traffic conditions, creating congestion that ripples across the city's economy and environment. Stepping in to understand the industry's explosive growth — and if necessary regulate it — is exactly what smart government should do.

City Hall has some hard data to back up its argument about the impact of this new industry. In 2009 and 2010 the average speed of traffic in Manhattan, based on GPS data from thousands of taxi cabs, stayed roughly the same or even increased. Following Uber's launch in 2011, however, the overall speed has fallen by a little more than a mile per hour, a decline that has a huge impact when spread over the millions of cars that move through NYC each day.

Nobody debates the increase in congestion, but there is debate over the cause. Uber argued in a statement to The Verge that it represented a minuscule part of the total flow of traffic. "Over 2.7 million cars use the toll-free bridges leading into New York every day, excluding cars using tolled bridges and tunnels. The total number of for-hire vehicle (FHVs) affiliated with bases using Uber make up less than one percent (1%) of the total and those vehicles are never on the road at the same time, yet they are being targeted as the only cause of congestion."

Again, however, hard data helps the city to make its case. For decades city government has been studying the flow of traffic across its borders that Uber mentions. And the 10-year trend for both 2012 and 2013, the latest available data, shows that the volume of vehicles moving through New York City every day is declining.

The normal causes of traffic congestion are in decline

"For half century the biggest driver of traffic was inbound from other places. But over the last five years that number of inbound vehicles has fallen and yet congestion has risen," says Wiley Norvel, the mayor's deputy press secretary. "This is completely outside the historic norms and our hypothesis is that rapid growth of for-hire-vehicle is driving that."

All of this brings us back to the idea of a temporary slowdown while the city studies the problem. There are a complex web of factors at work here, so let's determine the cause. In the meantime, the limits on the for-hire vehicle industry are flexible enough to allow for job growth and continued expansion of transportation options in underserved areas outside Manhattan.

Uber says the slowdown would "break" it

Uber, of course, has framed things in a more dramatic light. Its general manager in New York City, Josh Mohrer, told Crain's the slowdown would not just hurt Uber, "It's going to break it."

Don't buy that hype. Let's dig into the details. New York City currently does not allow just anyone to become a driver for UberX or Lyft and then use their own personal car. Every for-hire car has to belong to a base station and be issued its own license, as well as be operated by a licensed for-hire driver. Uber has opened its own bases and also relies on drivers from other bases who operate on the Uber platform and take ride requests through its app.

The proposed slow down would mean bases with over 500 cars can grow at one percent over the next year, those with 20 or more can grow at five percent, and bases with less than 20 cars can grow at 15 percent. Uber would be restricted to a tough one percent growth in adding vehicles to its own fleet at the six bases it currently operates, or roughly 200 new cars during the one-year pause. Each of those would allow for hiring multiple drivers to fill all shifts.

But regardless of the number of new cars, there is no limit to the number of drivers Uber can sign up to use their app. The whole premise of the company is that it’s really a tech platform, a marketplace matching supply and demand. It currently has around 20,000 cars affiliated with its bases, but roughly 26,000 drivers using its service. So it can continue adding new jobs even if it can't add many new cars to its own bases.

Adding jobs through other fleets is natural for Uber, and if the demand is there, those other fleets — including many smaller car services — should continue to add new vehicles. Uber also works with taxis, and the proposed cap would allow for new outer borough green taxis, providing more options for underserved areas that Uber dramatizes in its attack ads. The claim that 10,000 new jobs would disappear if Uber can’t license an unlimited supply of new cars is pretty hard to swallow.

New York City's number two politico, deputy mayor Anthony Shorris, sat down recently with David Plouffe, Uber's chief strategist. The city wanted to discuss a number of issues, including possible contributions to the MTA budget from Uber fares and a plan to ensure Uber cars are accessible to riders with disabilities. Shorris argued Uber should be contributing to the MTA budget. But according to people present, the meeting between Shorris and Plouffe did not go well. Uber refused to discuss any of these issues so long as the hiring slowdown was still a possibility.

"The takeaway from the meeting was that this isn’t about congestion," said Mohrer, general manager of Uber New York City, who was present at the meeting. "It is about the mayor being able to say that he stopped Uber." In the aftermath Uber went on the offensive with attack ads and press releases. This is now a public and very nasty feud.

Uber’s response is troubling, and par for the course. Whenever governments want to regulate, Uber goes on the offensive. Take the question of accessibility. This is not a petty grievance isolated to New York City. In California, the company was recently slapped with a multi-million dollar fine and potential suspension of its operating license for its failure to share data around accessibility. Attorneys general in other states are investigating. Given that Uber's avowed aim is to replace the taxi industry, it makes sense that government would hold this new mode of transportation accountable when it comes to universal access. Instead of working on this problem, Uber is battling the requirements in court.

Uber is no longer an underdog

Uber is no longer an underdog. The disruptive innovation it wanted to bring to New York is here. Its fleet of cars outnumbers traditional taxis, and it's estimated to have 90 percent of the market when compared with rivals like Lyft and Gett. It has a massive war chest of cash and an army of lobbyists. Its valuation has eclipsed 70 percent of the Fortune 500, and it should be treated accordingly. A city is a living organism, and its health requires care and defense. As de Blasio smartly wrote in a recent op-ed, "We wouldn’t let ExxonMobil or Wal-Mart or any other corporate giant operate in New York City without basic rules in place to protect the public." Uber may be a new kind of company and a great job creator, but that does not mean it has carte blanche to grow as much or as fast as it wants.

Vov Video: The economics of being a for-hire driver