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By Douglas Shinkle

With the advent of UberX and Lyft, hailing a ride has never been easier. On the regulatory side, however, things are increasingly hazy as these services disrupt the transportation status quo in the U.S. and around the world.

Photo by Evelyn Hockstein/For The Washington PostAlso referred to as Transportation Network Companies (TNCs), these services are capturing the imagination and scrutiny of state legislatures. UberX, the low-cost Uber option, consists of individuals using their own cars to give people rides and make some extra cash, as does Lyft, whose vehicle’s front grills sport a ubiquitous pink moustache. Both now operate in more than 60 U.S. markets.

From a passenger perspective, catching a ride with a TNC is the peak of convenience: Summon a car from your Smartphone app, watch the vehicle head to your location in real-time on your phone, climb in the car and relay your destination, get out, and don’t worry about paying, because your credit card is already on-file. You’ll get a receipt texted to you, too. Voila!

From a regulatory standpoint, one question dominates: How can states and municipalities ensure safety for passengers and fair rules for all transportation providers while not stemming the remarkable growth and convenience of TNCs? That is the million dollar question state lawmakers are beginning to grapple with. In early June, Colorado became the first state to legalize the operation and regulatory structure for TNCs. California has similar provisions in regulations that were adopted last year, while the legislature continues to work on refining the insurance requirements in 2014. Many political and business leaders are eager to embrace TNCs, and the requisite cachet they carry with sought-after “creative-class” of young professionals and milennials that prefer multiple transportation options.

TNCs argue that they do not hire drivers or purchase vehicles, and their service merely facilitates transactions between individuals. TNCs have become intense competitors to established cab and shuttle companies that argue that TNCs are operating as lawbreakers, and are not held to the same regulatory and tax standards as taxi services. Taxis often play an important role in mobility for older Americans, the disabled, families without cars and other transportation challenged populations. Cab companies pay handsomely for city medallions or permits that allow them to operate in a city, must charge flat fares and provide service to all areas, regardless of density, convenience, wealth, etc. Furthermore, recent surveys by Pew and Gallup indicate that 35 to 38 percent of Americans do not have a smartphone, making it impossible for them to catch a TNC ride. Only 25 percent of Americans over age 65 have a smartphone.  

A number of states have warned or fined TNCs and their drivers for operating outside the law. Maryland cab companies have filed a suit alleging anti-competitive practices by TNCs. Nebraska and New Mexico have issued cease and desist orders. Pennsylvania and Virginia have slapped fines on TNCs. Police in some cities, such as Pittsburgh, are conducting “sting” operations, hailing drivers via the app and issuing citations when they arrive to pick them up. Airports are particularly a flashpoint. Citations have been issued to TNC drivers that do not have proper permitting at airports in Atlanta, Boston, Los Angeles, Houston and others. In California, the state Public Utilities Commissions recently issued a stern warning, accusing TNCs of not paying permit fees to legally operate at the airport, as well as some drivers lacking valid driver’s licenses, among other infractions. TNCs’ strategy seems to consist of quickly establishing markets and using positive public opinion to blunt any opposition.  

Besides Colorado, seven other states—Arizona, California, Georgia, Illinois, Maryland, Oklahoma and Rhode Island—and D.C. introduced legislation in 2014 attempting to define the regulatory environment for TNCs.  Arizona Governor Jan Brewer vetoed that state’s bill, citing safety and insurance coverage concerns. Rhode Island created a legislative commission to study TNCs and review existing pertinent statutes.  Illinois’ bill is on the governor’s desk, and would, among other things, require those that drive more than 36 hours in any consecutive 14 day period to acquire a chauffeur’s license, as well some stipulations for regulating fares and providing service in underserved areas. Legislation in the remaining states failed in 2014.

Thus far, common components of these bills have included:

  • Defining a transportation network company (TNC).
  • Establishing insurance requirements for the company and driver.
  • Requiring criminal and driving background checks for drivers, as well as standards and timeline for vehicle safety inspections.
  • Communication of estimated fares and the final receipt to a customer.
  • Restricting the hailing of a TNC from the street and other requirements.

Join us at NCSL’s Legislative Summit on from 2:15 to 3:30 p.m., Thursday, Aug. 21 for "The New Economy of Sharing." Panelists Ashwini Chhabra (Uber), Roger Chapin (Mears Transportation Group) and Nelson Chan (University of California - Transportation Sustainability Research Center) will engage in a wide-ranging discussion on how TNCs and car-sharing are impacting mobility, what the regulatory future looks like for these services and key dynamics for policymakers to keep in mind. 

Douglas Shinkle is a program principal in NCSL's Energy, Environment and Transportation program. (Jack Queen and the NCSL transportation team contributed to this blog).

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This blog offers updates on the National Conference of State Legislatures' research and training, the latest on federalism and the state legislative institution, and posts about state legislators and legislative staff. The blog is edited by NCSL staff and written primarily by NCSL's experts on public policy and the state legislative institution.

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