While The California PUC Cracks Down On Ride-Sharing, Sidecar And Lyft Commit To Staying On The Road

First Uber, now Sidecar and Lyft.

The California Public Utilities Commission, which sought to shut down Uber two years ago, has been serving cease-and-desist letters to ride-sharing startups like Lyft, Sidecar, and Tickengo. The Commission, which is tasked with regulating privately owned electric, telecommunications, water, transit, and passenger transportation companies, is now trying to figure out how ride-sharing companies fall into its regulatory framework. But in the meantime, it’s been asking them to get off the road.

The letters sent to ride-sharing startups have apparently had little effect: While served more than a month ago, they’re just coming into the public eye now. And in the meantime, Lyft, Sidecar, and Tickengo have all remained on the road with no apparent shutdown in service.

Lyft Says It Goes Above And Beyond

Zimride co-founders John Zimmer and Logan Green have addressed the letter in a blog post this morning, defending Lyft’s operations in spite of the regulatory scrutiny. Zimmer and Green characterized Lyft as just one more evolution in ride-sharing, which moved from physical ride boards at universities, to postings on Craigslist, to Zimride’s own social platform online, to mobile devices through apps like Lyft.

According to Zimmer, the letters that were sent out were part of the CPUC’s effort to understand how new technologies would fit under its current regulatory framework. “It’s clear that the technologies we use were never imagined when these regulations were written,” Zimmer told me by phone.

Since receiving the letter, he says Lyft has been engaged in productive conversations with the Commission, and that the regulator has a better understanding of how its service works. Key to that understanding is convincing the Commission that Lyft operates in full compliance with that law, and that it already holds itself to a higher standard than other transportation services are expected to comply with. “When you look at our criteria for background or driver checks, it’s above and beyond what the limo services do,” Zimmer told me.

For its part, Lyft runs potential drivers through a number of checks before allowing them to affix a pink moustache to their cars. That includes DMV and criminal background checks, followed by in-person interviews and vehicle inspections. Last we checked, about 5 percent of applicants are accepted as drivers, though it’s been ramping up its fleet quickly, so that percentage might have changed. Lyft now has upwards of 250 drivers on board, compared to just 100 when it officially launched to the public in August.

How Sidecar Is Different

Sidecar also received a notice, even before Lyft, founder Sunil Paul told me by email. According to Paul, the letter asked Sidecar to cease and desist operating a “charter party carrier,” which requires a license. Since he believes Sidecar is not a charter party carrier, the startup has remained on the road.

Paul writes that Sidecar is coming under scrutiny because it is a successful innovator “upsetting the status quo,” but that it was carefully designed to be 100 percent legal. “We are innovators committed to public safety. We built a system with safety in mind and will continue to expand safety and insurance features in the coming months,” Paul wrote.

He also sought to differentiate Sidecar from other ride-sharing services. For one thing, he wrote, drivers know the destination of potential passengers, and so can choose whether or not they would like to pick them up. It also doesn’t suggest a donation or set a price like other apps, instead using software to calculate the average price of a ride.

Tickengo — A True Ride-Sharing Platform?

Meanwhile, Tickengo co-founder Geoff Mathieux claims to be a true peer-to-peer collaborative transportation platform “meant to fill empty seats in regular cars,” and is not to be used for commercial purposes. While drivers on some other services are taking several passengers a day, that’s not Tickengo’s goal. In fact, it limits the amount drivers can make on a yearly basis to AAA’s official annual cost of vehicle ownership, which is currently $8,776 per year.

Mathieux also sets Tickengo apart by saying that it’s merely a platform for connecting individuals, not unlike the old ride boards Lyft alluded to above. “We are not engaged in the operation, hiring, or maintenance of driving professionals or commercial transportation vehicles,” he wrote in an email.

While other services have either booked additional insurance to cover accidents during shared rides (Lyft), or are looking to do so (Sidecar), Tickengo says it has no need to. “Drivers on Tickengo don’t give rides several times a day like the others,” Mathieux writes, therefore the trips shouldn’t be considered livery or commercial. On that basis, driver insurance policies should be adequate to cover any damages that occur during one of its rides.

Ride-Sharing Just The Newest Target

Of course, the new ride-sharing companies are hardly the first tech startups to face scrutiny from local regulatory agencies: Uber also received a cease-and-desist letter from the CPUC, and has come under fire from regulators and government agencies in a number of other markets that it operates in, including New York, Chicago, and Boston. Like Uber before it, Lyft plans to continue operating while the regulatory issues are worked out.

While the CPUC is still trying to figure out how ride-sharing fits under its regulatory purview, Lyft and others might get some aid from San Francisco’s new Collaborative Consumption Working Group, which is trying to understand the issues faced by companies like Airbnb, TaskRabbit, Getaround, and others that have created peer-to-peer marketplaces that allow users to more efficiently share resources, assets, or skills. San Francisco Mayor Ed Lee is a big fan of the sharing economy, and this group seems committed to helping those companies overcome challenges related to entrenched industries and regulations that don’t take into account new technologies.