The Tiny Deal-Breakers That Make Uber Skip Town

A look into Uber’s regulatory mess.

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May 29 2016, 6:00pm

Image: Flickr/Malinda Rathnayake.

When Uber arrives in a city, it usually goes two ways: jubilant celebration, or regulatory crackdown. Often, it's a bit of both, pitting citizens desperate for an alternative to overpriced taxis against city authorities wanting to avoid cab-lobby backlash and ensure that safety, licensing fees, and insurance are considered.

Uber takes advantage of that tension. Uber's go-to tactic is to effectively hold cities hostage, telling media and would-be drivers and riders it can't operate in their regulatory environment. It's the "sharing economy" equivalent of taking their ball and going home, or being dumped over an ultimately minor deal-breaker—something Austin has experienced recently.

But the laws Uber's willing to tolerate differ in different cities. What's deemed too burdensome in Austin, Frankfurt, or Calgary is a hurdle cleared with apparent ease in New York, London, or other cities—like putting up with a rude boyfriend because he's shit hot in bed.

London, UK vs Calgary, Canada

Here's an example I know well. While I live in London—and use Uber so long as I'm not with my boyfriend, who has opted out for ethical reasons—I'm originally from Calgary, Canada. Earlier this year, Uber pulled out of Calgary, saying it was impossible to operate under such regulatory burdens.

An anti Uber protest in Portland. Image: Aaron Parecki.

Here are those burdens: Drivers must have a commercial driver's license, be properly insured, get a police background check, and have their cars looked over once a year. To start up as an Uber driver in Calgary, it would cost up to $600 Canadian—a bill deemed far too onerous.

Compare that to London, where drivers are licensed as professional drivers, under the same system as so-called minicabs. They need to attend a one-day licencing session, pay £56.86 for an enhanced background check, and file an online application with Transport for London at a cost of £250. That can take up to eight weeks to be processed. The total cost is roughly the same as Calgary.

Yet Uber has tens of thousands of London drivers, and even smooths the application process by running the one-day licensing session, checking would-be drivers' documents, and handing successful drivers a £300 "reward" after they complete 20 trips.

Of course, Uber isn't necessarily storming off in a huff for no reason.

What's possible in London apparently isn't in Calgary. Instead, it left—a move Uber has pulled or threatened in Eugene, Belfast and Sweden with varying levels of success.

"They follow the same playbook in every jurisdiction, as though the jurisdictions don't talk to one another," Calgary mayor Naheed Nenshi said in February. "They try this everywhere. In this case, we're going to put in regulations that protect people, and they're regulations that Uber has shown it can work under all over the world. So for them to claim they're impossible in Calgary when they work under much harder regulations in New York, Houston, and in New Zealand, and Berlin, and Lisbon and all these other places, it's a bit ridiculous." (It's worth pointing out Nenshi thinks Uber CEO Travis Kalanick is a "dick".)

Of course, Uber isn't necessarily storming off in a huff for no reason. A spokesperson for the company pointed out that it's not an idle threat if Uber can't get enough drivers in a city because of local rules. If it can't get enough drivers, its model doesn't work.

That said, the company has a preferred legal model—regulated ridesharing, in which Uber pays the city a license fee and drivers apply to Uber to be licensed—and it's no surprise it'll use whatever weapon in its arsenal to try to get that in place. Beyond that, the company wouldn't comment further for this story.

Licensing issues

Being aware of the different regulations Uber operates under can help cities negotiate, help drivers understand what burdens they're being asked to bear, and help riders decide on the ethics of the app. However, it's not easy to see exactly what regulation Uber tolerates in some places and what it doesn't in others. The company doesn't publicly provide that information, and collating all of it would require me to sign up as an Uber driver in more than 400 markets in multiple languages.

We do have some examples, however. The question of commercial licenses has popped up in Germany, for example. In Frankfurt, Hamburg, and Dusseldorf, Uber was banned from using unlicensed drivers, with a potential fine of €250,000 for each infraction. Claiming it now can't get enough drivers, Uber pulled out, though rivals suggested it has less to do with the regulation and more to do with the fact licensed drivers get paid better by non-Uber platforms. Despite such rules, Uber has stuck around in Berlin—where it's little more than an app to hire official cab drivers—and also manages to deal with drivers required to hold commercial licenses in London and New York, among others.

Uber will also leave a city if it's simply called a taxi service.

How licensing fees are paid can also be a reason to pull out. Calgary and Edmonton are two Canadian cities with similar regulatory requirements, but with one main difference. Both require a commercial license and annual car inspection, and both require a criminal background check of some sort, but Calgary and Edmonton differ over how the annual license fee is paid. Calgary wants drivers to pay $220 paid up front, whereas Edmonton will take $50,000 each year from Uber directly, plus six cents per trip. That's the deal breaker that's seen Uber refuse Calgary but stick around in Edmonton (though it's paused operations there as it awaits an insurance product that's expected to arrive in July.)

Uber CEO Travis Kalanick. Image: Heisenberg Media.

Uber will also leave a city if it's simply called a taxi service. While Uber is allowed in a few cities in Brazil, it hit a brick wall in Sao Paulo last year. To license the service, that city created a new category in its existing taxi rules that would allow for cars to be booked via mobile apps, but Uber last year said "it is not a taxi company and therefore does not belong in any category of this type of service." Rather than pull out, Uber continued to operate outside of those regulations. Faced with local opposition, Sao Paulo's mayor Fernando Haddad tried again with a new system that will see Uber charged a fee per kilometre and no longer considers it a taxi firm. The company called the plans "innovative."

And in India, Uber is banned from surge pricing—something it stresses is key to its business elsewhere. It's the only way the company can operate there, and though it's warned it'll have fewer cars on the road, it hasn't threatened to pull out of the market.

Background checks

And then there's the background check issue. Uber (and rival Lyft) pulled out of Austin, Texas after locals voted to require drivers be fingerprinted as part of a background check process that taxi companies use called Live Scan, saying its own standard background check via Checkr is good enough and the fingerprint system takes too long.

However, that same fingerprint background check has been in use for Uber drivers in Houston, Texas since 2014.

Uber is getting its complaints in-line in Texas, however, now saying the Houston system is too onerous and threatening to pull out there, too.

"If fingerprint background checks were so onerous, Uber would have left Houston a long time ago," said one lobbyist, Laura Morrison. "The timing of this completely fits the pattern of their whole campaign based on misrepresentations attempting to manipulate the voters. It's one more dishonest message from Uber demanding that we have to obey Uber or else. It's an insult to Austin voters and an attempt at extortion."

Growing up

What does all this mean for cities hoping to both welcome and regulate Uber? Sofia Ranchordas is a researcher at Tilburg University, and believes the best tactic for Uber and other sharing platforms is for cities to "experiment" with light touch regulation and "assess their effects and adapt them accordingly."

"As I have suggested in my work, city-level politicians should not forget the benefits that Uber has brought about: lower prices, convenience, and even the modernization of the local transportation sector," she said. "Considering these benefits, local politicians, policymakers, and legislators should 'give a chance' to Uber's innovative potential while at the same time safeguarding the public interest. The public interest and in particular the safety of passengers can be protected in different ways which do not include stringent taxi regulation." That could include, she said, background checks, peer review systems, or adding emergency buttons to the app and creating assistance teams to step in if drivers threaten or attack riders.

It might be easier for cities to experiment, of course, if Uber had a less aggressive response to regulations it doesn't prefer—a lesson it may finally be learning. In Quebec and in the Netherlands, Uber GMs have said they're ready to "compromise" and admitted their "approach hasn't always helped the case for reform." Admitting you're wrong? Willing to compromise? Dropping the threat of a messy breakup? Here's hoping this relationship is ready to mature.

Uber Earth is Motherboard's exploration of the ways Uber has already changed the world and how it stands to do so in the future. Follow along here.