Hands Off Uber, Portland

December 22, 2014 Posted by Patrick Marvin - 2 Comments

Nearly everyone knows that innovation, competition, and development are needed to bring Maine into the 21st century – but apparently not the city of Portland.

In a move that was too easy to predict, Portland is now attempting to halt the rise of Uber, the San Francisco based startup ride sharing company, which has upended the taxi system in more than 200 cities throughout the United States.

Uber and a rival company, Lyft, have caused a major disruption in the market by responding to consumers demands that were not being met by the heavy-handed, overregulated, bloated, government-centric system regulating taxis in most cities across the country. By being more nimble, typically cheaper, and with a more comfortable ride, Uber would have already been a better option than most cabs. However, they built upon that solid base and were able to develop true advancements, such as ordering a car with the convenience of a smartphone app, all digital payment systems, and allowing the driver to find you with the GPS on your phone, making waiting while frantically waving your arm in the air a thing of the past.

As reported by the Maine Wire, this fall, Uber announced that it would begin operations in the city of Portland, and offer consumers in Maine their low-cost alternative rides. Uber’s announcement claimed that their fares would be 17% less expensive than traditional taxis in Portland.  As part of their promotion, they even offered 5 free rides to new customers during the month of October.

But Portland city officials aren’t happy.

As reported by the Portland Press Herald, city councilors are claiming that they wish to more tightly regulate Uber’s activities under the guise of “safety” and “fairness”, the siren call of regulators everywhere.  They plan to draft an amendment to the already monstrous section of city ordinances that deals with transportation companies, and lay out strict rules and regulations to control ride sharing services such as Uber.

City spokeswoman Jessica Grondin admitted that one of the key reasons city leaders want to regulate Uber is to “level the playing field” with taxis and car services that are already forced to follow rigid city regulations.

Drivers and companies are required to pay yearly fees and deal with regulatory burdens that stifle the very sort of innovative changes to ride-sharing that Uber delivers.  Maximum rates are pre-determined by the city of Portland, currently set at $1.90 for pick up and 30 cents for each additional tenth of a mile, and are forced to abide by rigorous licensing procedures. Uber’s current rate, which isn’t driven by an altruistic government maximum charge, is $1.75 for the pick up and $2 per mile.  

Not only does this stranglehold result in little to no rate fluctuation between taxi companies (and thus no real competition), but it means the city gets more income, and is able to enjoy almost complete control over an industry that is vital to the economic success of the greater Portland area.

And here lies the real crux of the motivation of City Hall.  Though political leaders and bureaucrats typically couch their actions and rulemaking as necessary to protect public safety and ensure fairness, the reality is that it centralizes and increases control and power in their own hands, and also allows those same leaders to syphon more money to city budgets, while drivers and consumers pay.

Don’t think the system is ridiculous?  An illuminating example might be what is involved, as a cab driver, to simply be allowed to pick up passengers at Portland International Jetport.

Indeed, increased power in the hands of councilors and bureaucrats has a nasty habit of breeding corruption.  By restricting activity, creating artificial scarcity of drivers, and forcing additional costs to drivers and companies, more power and money is concentrated in the hands of councilors, rulemakers and large companies, and taken out of the hands of individual entrepreneurs — the drivers — to the detriment of all involved, particularly consumers.  Reason Magazine conducted a very interesting examination into the Washington, D.C. taxicab system in 2011, when the city government attempted to institute a city-wide medallion system for drivers, which highlighted many of these problems.

Uber is not currently subject to this twisted municipal regulatory system in Portland. They are able to determine their own costs, and are accountable only to the people they serve, like a true market. This has translated into lower rates, more satisfied customers, and much to the dismay of Portland, less revenue for the city.

Which is, of course, why the ever vigilant voices in Portland City Hall want to take action.  They plan on drafting regulations on topics such as insurance, licensing and fees, and background checks, which will of course be made more compelling by a handful of prominent stories of Uber drivers initiating petty, sometimes violent crime.  They also may control where in the city the company can operate.

These are, of course, all entirely unnecessary.  Uber already requires drivers to possess a valid driver’s license and undergo a 3-step background check, and every vehicle in Maine (even the ones used by Uber) is required to have a certain level of insurance.

Moreover, regulations that claim to protect rider — and driver — safety in cabs are present in every major city in America, and yet, crimes still occur.  In the city of Chicago, for instance, there were 5,295 incidents of crime in taxicabs from 2001 though April of 2014.

Taxi or Uber, it is always possible for bad people to slip through the cracks.  But there is a great deal of evidence, as cited above, that it is the regulated taxi industry, not the unregulated Uber industry, that is inherently less safe.

Why?  Because safety regulations don’t protect people, but innovation sure does.

Uber, for instance, has two advantages that make it inherently more safe. The first is the account framework employed by the company for its user base. When an Uber driver is notified of a pickup request from a passenger, that driver is transparently given information about who that person is, if they have a valid credit card on file, and what that passenger’s rating (from drivers) is. Likewise, the passenger is provided the name and rating of the driver.

More importantly, Uber’s system of electronic payments eliminates both fraud, and opportunities for conflict to arrive over cash payments. Crimes like robbery and assault are drastically reduced when consumers and drivers are no longer handling physical currency, as the incentives for bad behavior are simply gone.

The simple truth is that safety is not the real issue; Portland just isn’t ready to give up its share of the taxi market. It isn’t about to let an innovative and user-friendly company break in to the game without the city receiving some of the benefits.  Like many other state and cities around the U.S., Portland is taking oppressive and heavy-handed action in order to stifle innovation, preserve the status quo, and protect its own monetary interests.

While this turn of events may spell disaster for Uber, the real loser in this game is the people of the greater Portland area.

If city officials have their way, Uber will be hit with many requirements and fees, and will be forced to pay the city of Portland. These costs will undoubtedly be passed along to consumers in the form of higher rates, fewer drivers, and less competition and growth.

Worse still, Portland’s predictably heavy handed treatment of companies like Uber not only harms drivers and consumers, but it sends a loud and clear message to other entrepreneurs and startup companies that they should avoid Maine, and specifically Portland, at all costs.

Portland is helping to solidify Maine’s position as one of the slowest growing states in the nation, and ensuring that all Mainers have a difficult and costly path forward that does not involve innovation or development.