AUSTIN, Texas — The Lone Star State has a well-deserved reputation for being business-friendly, but when it comes to regulating ride-sharing services — the alternatives to traditional transportation options like taxis and shuttles — Texas cities get only mediocre grades.
In recent years, ride-sharing companies have exploded in popularity, rapidly spreading across the country. Pairing smartphone applications powered by GPS technology and independent drivers driving their own private vehicles,ride-sharing companies like Uber, Lyft, and Sidecar have emerged as popular transportation options in many metropolitan areas but have faced stiff opposition from taxi companies and resistance from local governments. A new study released this week by the free market think tank R Street Institute aims to grade cities on how they are regulating ride-sharing companies, and there is clear room for improvement in the six Texas cities included in their study.
R Street’s report detail show the fifty largest cities in America have approached the challenge of regulating what R Street refers to as “transportation network companies,” or TNCs. A blog post introducing the report describes what R Street views as some of the key advantages of TNCs: increased choices for consumers, lowered costs, better coverage in neighborhoods that were often neglected by taxis, and reduced congestion and environmental benefits as more people are willing to forgo owning a car or driving it alone.
These TNCs are already having an enormous economic impact. As R Street notes, transportation solutions that differ from traditional taxi and limo services,” and Uber alone was valued at $17 billion after an influx of cash from major investment firms last June. Taxi companies in several cities have reported significant decreases to their business, but at the same time,the TNCs appear to be attracting riders who would not have otherwise considered taking a taxi or public transportation, thereby expanding the potential market. The combination of what R Street describes as the “underutilized capital”of a car that previously carried only the driver and the smartphone apps that instantly connect that driver with passengers without needing a middle man is likely to have a multibillion dollar impact on our economy.
The change that comes with the growth of TNCs is not universally welcomed. As mentioned, traditional taxi and limo companies are setting their market share dwindle, and have fought back hard in many cities, including trying to force TNCs to buy the same prohibitively expensive “medallions” that artificially limit the number of taxis or follow elaborate pricing schemes that are an ill fit for the TNC business model. The traditional transportation companies have not limited themselves to simply lobbying local government officials, but have engaged in protests that have snarled traffic on major roadways, angering local residents.
As R Street writes, “the complex requirements taxi companies seek to impose on TNCs would severely hamper, if not eliminate, their ability to operate in most cities. While it is understandable that taxi and limo interests might resent TNCs for their leaner business model, the impulse to seek the expansion of restrictive regulations — rather than broader reforms that reduce the burden on all competitors — is worrying.” R Street acknowledges the heavy regulatory burden that the traditional transportation companies are bearing and describes the current moment as “a golden opportunity to discuss full-scale, pro-consumer regulatory reform.”
Thus, in grading the 50 cities studied for their report, R Street researched the regulations affecting the entire transportation for hire market, not just TNCs,but also taxi and limo services, to reach an overall “ride score”that “describes the city’s openness to competition in the market for hired vehicle services.”
TheTexas cities included in the report, and their grades are as follows: Austin (C+), Dallas (C), Fort Worth (B-), Houston (C-), El Paso (C), and San Antonio (D-). Every Texas city except Fort Worth lost points for artificial restrictions on the number of taxis, in the form of a medallion system in El Paso, and a fleet cap in the other four cities.
Austin’s grade really suffered from the “F” it received for onerous restrictions on limo services, which impose a minimum fare of at least $55 per hour. TNCs in Austin faced a “very hostile” regulatory environment until theAustin City Council passed new regulations authorizing their operations lastmonth. R Street’s report notes that these new regulations took the city’s TNC grade from an “F” to an “A.”
Dallas and El Paso’s “C” grades may change soon, as both cities have allowed TNCs to operate but have not officially legalized their operations. In Dallas, some City Council members have publicly called for stricter regulations, and there is concern that El Paso may move in that direction as well.
San Antonio, Texas’ lowest scoring city, got that grade from limo regulations that are even more burdensome than Austin’s, and a regulatory environment that is very hostile to TNCs.
As Breitbart Texas reported, the Houston City Council voted in October to allow Uber and Lyft to operate in the city, but also added some burdensome regulations, and Lyft decided to cease operations in Houston rather than comply.
Josiah Neeley, R Street’s Texas State Director, told Breitbart Texas that Texas has a long way to go in how it regulates TNCs, and transportation services in general. “There are cities in Texas, such as Austin, that have recently made big improvements in how they treat vehicle-for-hire services,” said Neeley. “But overall Texas isn’t living up to its reputation as a conservative, business-friendly state in this regard. If a student brought home a report card with these grades, he’d be in a lot of trouble. Texas cities should continue to reform and repeal overly burdensome regulations of taxis, limos, and other innovative transportation services.”
Texas at least outscores the two worst performers in R Street’s study, Portland, Oregon and Las Vegas, Nevada, where the regulatory environment is so harsh that TNCs do not operate there at all. Las Vegas even took the extraordinary step of sending cease-and-desist letters to TNCs before they began operating in the city, and when Uber attempted to launch anyway, the city impounded Uber drivers’ vehicles.
There are concerns that Las Vegas may start to suffer increased competition for conventions and major events because of a lack of adequate transportation options, especially from the airport. The influx of traffic into Austin for events like the South by Southwest festival highlighted the need for TNCs, and Uber offered free promotional rides during this year’s SXSW to help convince city officials that their services should be welcomed.
In an interview with Breitbart Texas last month, R Street President Eli Lehrer identified TNCs and other parts of the “sharing economy” as a key part of their organization’s focus. Lehrer noted the “huge opportunity made possible by the internet to remove intermediaries from commerce and unlock otherwise dormant capital,” and the frequent challenges faced by these companies as local governments seek to adapt existing regulations to these new technologies. Getting involved in this debate, according to Lehrer, is a “golden opportunity for the political right to attract people who otherwise are culturally not connected to the right…this whole sharing economy is an enormous opportunity for conservatives.”
For more information about R Street’s study about regulation of ride-sharing services, visit rideshare.org, or read the full report here.
Follow Sarah Rumpf on Twitter at @rumpfshaker.
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