July | August 2017






State Leaders Work to Keep Up With Ridesharing

By Jennifer Burnett, CSG Program Manager, Fiscal & Economic Development Policy
Until just a couple of years ago, few people were familiar with the term “ridesharing.”
Today, companies like Uber and Lyft are household names, underscoring just how quickly new businesses are popping up in what has come to be known as the sharing economy. In less than five years, Uber has evolved from a startup to a company valued at $40 billion and operating in 55 countries.
But the rapid expansion of ridesharing companies—often called transportation network companies, or TNCs—has led to some growing pains for state regulators as they scramble to balance public and worker safety with the free market and entrepreneurial expansion.
Washington state Sen. Cyrus Habib said novel business models like these pose some difficult questions for state regulators.
“The emergence of services like Uber and Lyft and Sidecar has been greeted with a lot of enthusiasm by customers,” said Habib. “The challenge is most of our regulations tend to respect a boundary between personal and commercial activity.”
Habib introduced Senate Bill 5550 in January, which would provide a legal framework for on-demand transit companies like Uber and Lyft so they can operate legally in his state.
“This creates a statewide standard that is no more or no less invasive or burdensome than necessary,” said Habib. “You want to offer just enough to protect drivers and the public.”
Habib’s bill would require transportation network companies to conduct background checks, provide appropriate insurance, supply data to the state and pay for permits.
One of the stickier issues in the ridesharing market is insurance. Where does commercial activity end and personal activity begin? While Uber provides insurance that covers commercial activity, drivers must have their own insurance to cover personal activity.
“Private insurance isn’t interested in paying out for commercial activity,” said Habib.
Having a bright line where one type of coverage ends and begins is important, said Habib, “so it isn’t messy and people don’t end up in court.”
Habib believes the private sector eventually will catch up, offering hybrid policies that make allowances for both personal and commercial activity.
“We have every reason to believe insurance companies will do this,” he said. “For this to work, we need some of those tools, like hybrid policies, and the government can’t do this on its own. But we can incentivize those kinds of solutions.”
Habib explains that balancing regulations with worker and consumer protections will be difficult, but it is necessary.
“I want to make the system work—protect workers as much as possible. But I still worry about what this is doing on a macroeconomic level,” he said. “We want to find a way that doesn’t curb entrepreneurs, but also doesn’t reverse all the gains we have made in security in employment.”
In January, Nebraska state Sen. Heath Mello introduced Legislative Bill 629, which would regulate transportation network companies.
“My legislation creates a comprehensive policy framework that would allow transportation network companies to operate in this state lawfully, while ensuring both consumers and drivers are protected,” said Mello.
Like Habib’s legislation in Washington, Legislative Bill 629 would require companies to carry appropriate levels of insurance and conduct driver background checks.
“TNCs like Lyft and Uber play a unique role in both fostering innovation and developing the sharing economy in Nebraska,” said Mello. “Providing consumers new options for safe, reliable and affordable transportation is vital to both growing our cities and attracting innovation-based businesses and high-skilled workers.”
Nebraska’s Transportation and Telecommunications Committee on March 2 heard more about Mello’s bill, including comments from Uber drivers and business owners.
Dave Barmore, a public policy associate for Uber, testified in support of the bill.
“We are not anti-regulation; we are for smart regulation that takes into account this is a new technology,” Barmore said in a press release.
Inge Roettcher, an Uber driver, also spoke at the committee in support of the bill, saying that her experience as both a taxi operator and an Uber driver gives a unique perspective.
“Competition is good,” she said. “It makes us step up our game; it makes us provide a more professional service to the public.”
Mello said working with stakeholders like Barmore and Roettcher when crafting legislation is key to making sure the regulations work for everyone.
“Throughout the process of drafting this legislation, I’ve worked with representatives from transportation network companies, taxi cab companies, the insurance industry, the Public Service Commission, as well as drivers for these TNCs and riders,” Mello said. “Collaboration has been key to making sure that these companies can operate lawfully as well as be appropriately regulated to ensure the safety of consumers, protect the rights of drivers and foster economic development in our communities.”