On a quiet Monday evening in December, two couples came in The Hideout at Lonerider Brewery in northwest Raleigh and ordered a round. It was only about 7, but this wasn’t the first bar they had hit. “They were feeling pretty good,” bartender Tammy Reynolds recalls. “They wanted to have another beer, but they wanted to get home, so I just gave them a card.” It was a coupon for Uber, a smartphone app that dispatches drivers who use their own cars to pick up passengers. The ride arrives quicker — about half the time it takes a taxi, Reynolds says — and it’s usually cheaper. For Lone-rider’s bartenders, it’s an easy way to discourage customers from driving when they’ve had too much to drink.
But for some states and cities, the high-tech service is a way to detour around regulations. In January, the South Carolina Public Service Commission ordered Uber to stop operating in the state, while Portland, Ore., and other cities have sued the service to shut it down. In every North Carolina city where Uber operates, cab companies must get permits and meet requirements such as vehicle inspections. That drives up their expenses, they argue, putting them at a disadvantage to the digital dispatchers. “You’ve got to obey the law and permits if you’re running a professional business,” says Dragan Zeljkovic, who owns Dragan LimoCab LLC, a Wilmington company that used to operate taxis but now focuses on private-car and limo service. “I don’t think it’s legal in the first place, and I don’t think it will succeed.”
Many of the world’s biggest tech investors disagree. San Francisco-based Uber Technologies Inc. was valued at $41 billion in its latest fundraising round — the money coming from oil-rich Qatar’s sovereign-wealth fund and large hedge-funds, The Wall Street Journal reported. They’re betting Uber will siphon off a sizable share of fares and become a feasible option for folks who don’t want to own a car. Founded in 2009, the service has expanded into 53 countries. It started offering rides in Charlotte in September 2013 and has added nine other cities in North Carolina. Uber and its largest competitor — Lyft Inc., another San Francisco-based company, which operates in Charlotte and Raleigh-Durham — contend they aren’t scofflaws but innovators, using technology to meet a transportation need cheaper than cabs can. A Business Insider report last fall found the standard Uber fare in Columbus, Ohio — roughly the size of Charlotte — about 50% cheaper than the cost of a taxi, including a tip. But Uber’s dynamic pricing can make it more expensive when demand is high.
“Uber is not regulated − right now. That might change,” N.C. Rep. Julia Howard says.
The state’s Republican-controlled legislature has, so far, given Uber and Lyft a free ride. A law passed in 2013 as part of a regulatory-reform bill exempts so-called digital dispatching from city and county oversight, but Rep. Julia Howard, who held a hearing in November on the new technology, says a bill probably will be introduced in the current session. “Uber is not regulated — right now,” the Mocksville Republican says. “That might change.” Uber and Lyft are ready for a fight, hiring lobbyists including Jeffrey Barnhart, a Republican who served five terms in the House, and Tommy Sevier, Senate President Pro Tem Phil Berger’s former deputy chief of staff for policy. (In Washington, Uber recruited David Plouffe, a key adviser for President Barack Obama’s two victorious campaigns, as a senior vice president for policy and strategy.) On the other side, lobbyists retained by taxi companies include Patrick Ballantine, a former state senator and Republican candidate for governor. Barnhart, Sevier and Ballantine did not return phone calls and emails requesting comment. Uber wants “modern, common-sense” regulation that exempts digital dispatchers from regulations governing cabs, says Arathi Mehrotra, the company’s general manager for North Carolina. That appeals to Rep. Jason Saine, a Lincolnton Republican who criticizes the taxi industry’s failure to adapt to new technology. “It’s an opportunity for the industry to become more innovative themselves,” says Saine, co-chair of the legislature’s information-technology oversight committee.
In Charlotte, regulation is stalled in a City Council committee that has reviewed the issue for more than a year. The city can’t regulate the companies but can impose rules on their drivers and vehicles, the city attorney’s office determined. The Raleigh City Council hasn’t responded to requests by taxi companies to regulate the services, City Attorney Tom McCormick says. But Uber and Lyft face obstacles at Raleigh-Durham International Airport, which through Jan. 5 had cited 370 of their drivers for operating without a permit, airport spokeswoman Mindy Hamlin says. (Lyft and Uber have paid the fines.) In November, the airport asked Attorney General Roy Cooper to interpret a state law that requires for-hire vehicles to have commercial license plates.
Until he does, drivers without them cannot get an airport permit or a required device that tracks trips to RDU. Airport and company officials are talking, but with neither side budging, a solution has been elusive. About 25 Uber and Lyft drivers have acquired for-hire license tags and registered with the authority, but most operate in violation of airport policy. Since drivers are usually part-timers who turn on the app to work a few hours as a second job, they shouldn’t be considered operators of commercial vehicles, Mehrotra says. “It doesn’t really make sense to have a burdensome process that’s antiquated,” she says, comparing her company with Bellevue, Wash.-based Expedia Inc., which provides third-party, travel-booking services.
Some cities require taxi drivers to undergo background checks that include fingerprinting, but North Carolina doesn’t mandate it for digital-dispatching services. Lyft and Uber hire companies to review driving and criminal records, which some people say isn’t thorough enough. Cities usually require inspections for taxis, but the Uber and Lyft drivers’ personal vehicles are exempt. Pricing is another concern: Both companies charge more when demand is high — which encourages drivers to work on busy nights. On Halloween, Triangle riders reported Uber charging as much as $400 for a 15-mile trip, nearly 10 times the normal fare. Lyft caps prime-time pricing at triple the cost of normal fares, spokeswoman Chelsea Wilson says.
Drivers aren’t required to carry commercial-vehicle insurance, and Uber’s coverage varies based on whether the driver has accepted a ride. If a bill is filed, Howard says law-makers will focus on safety, inspections and insurance. “Uber will say they’ve got [insurance] covered, but they don’t.” The companies say they help increase safety. Payments are handled through the app, so no cash changes hands. Drivers and riders rate each other, which proponents say should promote good behavior. Saine is a believer. After calling for a ride, “I get a verified picture of the driver, the license tag, and there’s now a digital record that I requested the ride. So if we’re going to talk about safety and potential legislation, I’d want to see the cab services provide some of the same services that Uber and Lyft already provide.”