New York City Government Cracking Down on Uber’s New Taxi On Demand Service

Earlier in the week The Points Guy wrote about car service Uber giving away free taxi rides in New York City this week. It’s to promote Uber‘s new service that lets you hail a cab with their app — solving the problem of how to available cabs connect up with riders, besides just driving around the city looking for people stepped half in the street waiting an arm in the air?

Uber is a technology company. The have an app you download and they use GPS information from your phone to identify where you are. When you double tap, you order a car to show up. Cars for hire also have apps on iPhones given to them by Uber. When those cars have downtime, they can pick up rides. Basically Uber takes the very same cars that are already licensed and operating and lets them find customers when they’re otherwise sitting idle. And it helps customers find a ride with a tap on their phone. (They also take reservations via text.)

And since your credit card information is already on file with Uber, there’s not even a financial transaction with the driver. Gratuity is included, the card on file is charged. You’re billed based on time and distance and car service fares wind up being about 50% more expensive than cabs, sometimes less than that.

Now Uber has launched the same concept for New York taxis, you aren’t even paying more for the service — it helps you hail a cab and helps the cab driver make more money by having less idling time without a trip.

But with the launch in New York this week, almost immediately the government has stepped in to say the taxi offering is probably illegal.

Two months ago I explained how taxi systems were broken in many cities. Local governments frequently fix both the number of cabs allowed to operate and the prices those cabs can charge. In New York, both practices began in the 1930s. The number of cabs permitted then is about the number permitted now, and it costs between $700,000 and a million to buy the right to operate a cab. It’s often hard to get cabs to take you outside the city, since they may not legally be able to pick up passengers on the way back or charge you to recover the cost of the empty trip. And since all cabs charge the same price, there’s no incentive to provide a better service, offering a premium product, in order to earn more.

According to the New York Times,

Taxi officials say that Uber’s service may not be legal since city rules do not allow for prearranged rides in yellow taxis. They also forbid cabbies from using electronic devices while driving and prohibit any unjustified refusal of fares. (Under Uber’s policy, once a driver accepts a ride through the app, no other passenger can be picked up.)

Since you’re calling the cab via the Uber app, taxi officials are arguing that’s a pre-arranged ride, which for some reason is illegal. And since the cab driver has a mobile app to accept rides when requested (and to close out a ticket when the ride is over), that may be illegal too. And once a driver accepts a trip through Uber, they have to turn up to pick up that passenger – which means they might bypass someone else looking for a taxi ride that they drive by on the way to their pickup, also illegal. There are counter arguments to all of these claims, but the bureaucracy is gearing up against the service that helps connect up consumers and drivers.

The Times piece identifies the opposition as coming from incumbent car service companies (who presumably don’t want competition), and also identifies even more potential regulatory arguments to use against Uber: that the tip is added automatically (so the customer can’t refuse to tip or select their own tip) and that they don’t accept cash.

Bizarrely — when it’s already tough to get a taxi ride in some neighborhoods but Uber doesn’t turn away anyone — one argument in opposition to Uber is,

that the spread of taxi apps had the potential to create a “two-tiered taxi system” in the city: one for people “with fancy smartphones” who are asked to pay a premium, and one for everybody else.

Meanwhile a Huffington Post piece reveals another entrenched interest behind opposition to Uber: the city gives out monopoly contracts to payment processing companies, and all taxis must use those. But Uber represents payment outside of the payment processing contracts.

in a statement released Thursday, David Yassky, chairman of the New York City Taxi and Limousine Commission, said drivers could not accept payments through Uber because it violates contracts the city has with two other companies — Creative Mobile Technologies and Verifone — which provide the technology that allows passengers to swipe credit cards in the backseat.

And this may explain why Uber is free for the week — a great move to introduce the city to the service since they aren’t allowed to process taxi payments.

The taxi commission is going to stand in the way of apps while those contracts are in place, and it will determine what technology is permitted in the future:

[Yassky] said the commission would work on rules to facilitate apps once the contracts expire and seek proposals for a smartphone payment system in the city’s 13,000-plus cabs.

These actions by taxi commissions provide no benefit to consumers, they protect the interests of incumbent companies. There’s no safety issue, Uber uses only existing licensed and certified drivers with their own vehicles that already operate every day. But technology is disruptive, and it’s not surprising to see the status quo react this way especially in such an ossified segment of the economy as taxis.

I’ve become a huge Uber fan as a consumer. And the ability to use Uber for Taxi rides which are cheaper than car service rides is a great innovation, though I’m no fan of taxis.

The best way I know of to sign up is with promo code YELPSF which gives you a credit of $20 to start off.

Deals We Like says that after you open your new account you can add promo code DRESSFORSUCCESS for an additional $15 credit to be added to it.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. Can you combine $10 for opening account through your link, YELPSF and DRESSFORSUCCESS for $45 total?

  2. You wrote two sentences that are in conflict with each other:

    “These taxi commissions provide no benefit to consumers, they protect the interests of incumbent companies.”

    and then:

    “There’s no safety issue, Uber uses only existing **licensed and certified drivers** with their own vehicles that already operate every day.”

    Drivers (and cars) who are licensed and certified by the same said taxi commission.

    Which is it?

  3. I’m a huge Uber fan and use it frequently in Chicago. We’ve had the option to “pre-arrange” taxis via the app for awhile now, but I find that I only look to it when taxis are hard to come by – and that usually also means the Uber taxis are not available then either. But, I love a town car pickup, too, when there’s no taxi available. It’s so user-friendly, and I especially love the automatic charge and tip.

  4. This protectionist, nanny state crap is typical in government at all levels.

    It’s high time people in this country took back their government from all the idiot do-gooders who think they can regulate the world into Utopia.

  5. @Brian — I do not think that the taxi commissions provide a benefit, take Washington where Dulles airport has a monopoly taxi contract, I’ve had drivers that appeared intoxicated more than I haven’t. So much for safety.

    What I meant to type was that these actions by taxi commissions provide no benefit. In typing a couple of words were missing. I will fix the typo/oversight of those two missing words.

    Since I was not here making the larger claim bout the existence of taxi commissions, just how they currently behave.

    And the point about safety is that *if* the taxi commissions have a safety benefit or function or role to play, then Uber is using drivers they have already signed off on.

  6. Thanks to you, I had a super Uber experience in NYC going to JFK a few weeks ago. It was a classy, easy,super comfortable ride, a great driver, and I used the credit I had on on file from their promotion for a discounted rate. Very elegant way to travel.

  7. @Carl. It depends. In Manhattan, you can call a pre-arranged car service company and it will cost you more than a yellow cab because pretty much only black town cars have those types of services in the city and do not charge by the meter (only yellow cabs have meters). In the outer boroughs, you can more easily call taxi companies and get non-yellow cabs, who charge less, but still do not use a meter.

    @Gary – I do dislike that yellow cabs will be publicly available “for hire” with their yellow lights on, but will not pick up fares. It’s really annoying when you’re on the street and a cab with a “for hire” sign doesn’t stop. If you’re a New York City yellow cab “for hire,” you should stop for the first person who hails you. That’s how it works. As far as picking up fares via Uber, if you’re a yellow cab, you’re getting the best of both worlds; you get the lucrative medallion that allows you to pick up anyone on any block, and you also get the pre-arranged fare benefit which has been reserved to the car service companies (who cannot legally pick up a hailed fare in Manhattan). Essentially, you’re getting more and screwing everyone else who doesn’t have a yellow cab medallion. And there’s no more freer market for medallions in New York, if you can pay, you get. There’s no incumbent interest being protected by the TLC in NY.

    And I say this all as a person who likes Uber and thinks in places like DC/Boston/SF, they provide a very valuable service. If black cars were using Uber in NYC, that would be a different story. But for yellow cabs, that’s essentially no longer functioning as a yellow cab.

  8. Thank you — just used YELPSF successfully, but was unable to add DRESS FOR SUCCESS — website says it’s for new users only. Since I just joined five minutes ago, I assume what they are really saying is that it’s only valid for people without another signup code?

  9. @truthiness – thanks for the info. I live in HNL, and before that Los Angeles, and in both places, can call a metered taxi company to come pick me up or pre-arrange a lift to the airport from my house. I did not realize that was not an option in NYC.

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