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Uber thinks it’s a ‘good thing’ for cities, but cities are having second thoughts

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The blueprint for cities that want to crack down on the worst excesses of ride-hailing

NYC First Major City To Attempt To Cap Number Of Ride-Hailing Services Photo by Spencer Platt / Getty Images

In a recent call with investors, Uber CEO Dara Khosrowshahi offered what could be considered a mea culpa to the cities the company ran roughshod over in its early days as a brash, rule-breaking tech startup.

“Listen, we’re just this company that grew very fast,” he said on Monday. “And in the early years, the most important factor [was] speed-to-market, who got there earliest and scaled the fastest.”

But cities that were initially caught flat-footed by Uber aren’t sweating it. If anything, it’s the company that may be sweating as cities have become more adept at making Uber pay for its past and present transgressions. A report released this week helps bring into sharp focus how cities around the world are cracking down on Uber, Lyft, and their competitors and what it will mean for the future of the ride-hailing industry.

Uber and Lyft barged into the public’s consciousness on a promise to end personal car ownership and improve urban transportation, while marketing themselves to drivers as a fun and easy side hustle. A decade later, these companies are being blamed for rising traffic congestion, increased tailpipe emissions, and a growing wealth gap between the rich and poor. Tens of thousands of drivers are clamoring for better working conditions, while Uber and Lyft argue what they really want is flexibility.

Researchers from New York University’s Rudin Center for Transportation Policy and Management profiled 13 major markets, including London, San Francisco, Los Angeles, New York City, and Sao Paulo, to get a sense of how cities are rewriting the rules for ride-hailing. They found that cities are regulating — or planning to regulate — these companies around four main areas: trip data, revenue generation from trips (e.g., congestion tax) environmental rules (e.g., strict emissions standards and restrictions in congestion zones), and driver pay. Each newly passed and upcoming regulation will require Uber and its competitors to make significant changes to their business practices — changes that will likely affect consumer pricing.

“Cities are waking up,” said Meera Joshi, the lead author of the report and the outgoing commissioner of the New York City Taxi and Limousine Commission. “They’re realizing they need to have a handle on this industry.”

For years, Uber and Lyft have relied on states to pass legislation that’s favorable to ride-hailing and preempts cities from passing their own restrictions. But that has shifted in recent years and ride-hailing companies now found themselves subject to more rules than ever. And it’s clearly chafing under the pressure.

After dodging a recent congressional hearing on ride-hailing, Uber provided written responses to committee members. According to Politico, the company said it couldn’t “categorically list the types of regulations” it opposes or account for how much it spends on lobbying. “Uber said it prefers statewide regulations to municipal ones, as drivers frequently cross city and county boundaries,” Politico said.

With millions of drivers on the streets in cities around the globe, ride-hailing companies have quickly become the preeminent source of data about how city residents are getting around. And cities want that data so they can make more informed decisions about access, equity, congestion, and infrastructure. Most of the 13 cities profiled by the Rudin Center require ride-hailing companies to submit trip data as a condition of operating their businesses. Companies that defy these orders risk losing business.

Take Uber in Los Angeles, for example. The company’s permit to operate bikes and scooters was recently temporarily suspended because of its refusal to comply with the city’s order to hand over real-time location data. Uber’s bike and scooter subsidiary, Jump, has until Friday, November 8th, to appeal or get out of town. Uber has threatened to sue the city over its “patently unfair and improper” suspension.

Squeezing ride-hailing companies for taxes and fees is another way that cities can pay for road improvements. New York City, for example, imposes a $2.75 per-trip fee for all Uber and Lyft trips that occur within or pass through the city’s congestion zone, which is below 96th Street in Manhattan. New York City recently became the first city in the US to authorize a congestion pricing scheme that applies to all vehicles driving in the busiest parts of Manhattan.

For years, Uber and Lyft have talked a big game about ending personal car ownership. “People will not own cars,” Uber’s former CEO Travis Kalanick said in 2016. “They’ll have a service that takes them where they want to go.” Lyft president John Zimmer predicted personal car ownership in major cities will be extinct by 2025.

But on their way to ending car ownership, Uber and Lyft got sidetracked and ended up clogging cities with more traffic. Between 2010 and 2016, traffic congestion in San Francisco increased by about 60 percent, and Uber and Lyft were responsible for more than half of that increase, according to a study published this year. Another study found that Uber and Lyft have added 5.7 billion miles of driving annually in cities like Boston, Chicago, Los Angeles, Miami, New York City, Philadelphia, San Francisco, Seattle, and Washington, DC.

Cities are becoming more adept at extracting a toll for all that congestion and pollution, the Rudin Center notes. Most of the cities profiled have set strict rules on vehicle emissions and enacted policies aimed at reducing the allure of single-occupancy trips in their most congested areas. In 2015, Mexico City passed a 1.5 percent per-trip tax on ride-hail trips, the funds from which help subsidize drivers who want to switch to hybrid or electric vehicles. Sao Paulo has a dynamic road use fee that charges companies higher prices for trips during peak hours with only one passenger. Ride-hail companies that were originally exempt from London’s daily congestion pricing fee of £11.50 now have to pay it like most other drivers.

Drivers are emerging as a flashpoint between cities and ride-hailing companies. Drivers’ pay is being cut in cities around the world, while their expenses are growing. Cities are increasingly under pressure to enact pay protections for drivers, but those efforts haven’t gone mainstream, the Rudin Center team found. New York City is ahead of the pack. In February, the city enacted new rules requiring ride-hailing companies to pay drivers at least $17.22 an hour after expenses.

Uber responded to the Rudin Center report by touting its efforts to integrate public transit into its app as well as increase the use of electric vehicles and divert customers to emissions-free modes like bikes and scooters. “We work collaboratively with cities across the globe, leveraging our technology and resources to help solve their most pressing issues,” a spokesperson said.

Lyft said it was committed to expanding access and opportunity in most cities. “We are always eager to work collaboratively with all stakeholders to ensure riders can access affordable and reliable transportation and drivers can earn on their own schedules,” a spokesperson said.

But ride-hailing companies fundamentally reject the idea that their industry is harmful to cities. “I think more and more cities and countries around the world are coming to the conclusion that Uber is a good thing for the country and Uber is a good thing for their city as well,” Khosrowshahi said this week.

Whether you agree with that statement or not is beside the point. Uber and Lyft, and their competitors like Didi, Ola, and Grab, have established themselves as a fundamental part of urban life. For better or worse, they’re here until they go out of business — which, depending on your point of view, could be sooner rather than later — and it’s up to cities to figure out how to keep their worst effects in check.