In the past year, so-called “transportation network companies” like Uber and Lyft have gone from fighting for explosive growth to fighting for survival.
They won their first fight in San Francisco but are now waging battles across the globe, from Houston to Berlin.
Brussels banned Uber last week; there have been police stings to arrest drivers in Washington; and the Seattle City Council just passed an ordinance capping the number of active drivers at any given time to 150.
The same progression of events plays out time and time again: A TNC opens up shop in a new city. The taxi industry or the city government starts making noise. Then, the TNC fights against whatever is proposed, often by pouring staggering amounts of money into advertising to fight the measure and relying on their massive public support. In Seattle alone, Uber and Lyft put $400,000 into getting 36,000 signatures to suspend the caps and send the decision to a referendum vote.
It appears the industry’s strategy is:
- Expand to as many new cities as rapidly as possible.
- Build public support in each new city as rapidly as possible.
- Insist they aren’t taxis, shouldn’t be regulated as taxis and that city governments can’t fight the future.
Simply put, this strategy isn’t working.
As soon as the first TNC regulation started to gain traction, it encouraged the taxi industry in every other city to start fighting. City councils started looking to previous legislation as precedent. To compound the TNC industry’s relative disadvantage, the taxi industry has a long history of working with city governments, while the TNCs are actively fighting against, disregarding, and disrespecting them. This pattern doesn’t exactly win over city councils to support something new.
The one thing TNCs have on their side in these fights is public opinion. But given that several street protests and thousands of phone calls and emails in Seattle had no effect on passage of legislation capping active TNC drivers, public opinion may not be much of a trump card. One could argue that going against such fierce public opinion is a dangerous move for an elected official, but rarely will those elections be timely enough to save TNC service in the area in question.
If the TNCs want to survive, they have to change their strategy. They need to stop taking a reactive and combative approach and start taking a proactive, collaborative one.
When moving into a new city, they should meet with city council members, explaining who they are, how they work, and the safety systems they have in place. They should demonstrate they have appropriate insurance coverage. They should take the initiative to come forward with a proposal that shows how they’ll work with the city to maximize transparency, including a data-driven approach to safety and consumer happiness (something the taxi industry can’t do) and explain how the city will make money from the TNCs.
Car2Go is another car-sharing service that has executed this strategy beautifully. In Seattle, they approached the city council with a detailed proposal explaining how everything was going to work and requesting approval to deploy 330 cars. They got full authorization from the council to launch. Four months later, they were happily granted an increase to 500 cars, making Seattle the biggest Car2Go city in the United States.
It’s worth noting that Car2Go is owned by German car manufacturer Daimler AG, previously DaimlerChrysler. Car2Go’s parent company clearly has experience working with governments in regulated industries, and it shows.
If Lyft, Uber, and Sidecar want to survive, they need to take a lesson from Car2Go. They need to:
- Slow down expansion and focus on strengthening government relations in their new and existing cities.
- Build a positive, collaborative relationship with the local government and city councils first.
- Proactively propose regulation themselves rather than fighting any regulation tooth and nail.
The TNCs are going to have to work with local government one way or another. They can either continue to deny the reality of the situation, or they can take a proactive approach and get ahead of the problems.
Zachary Cohn is an associate policy analyst with the R Street Institute, a non-profit, non-partisan, public policy research organization.
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