Photographer: Rob Brink/Flickr

Uber and Lyft Fight Proposed NYC Rules—and Each Other

Will the regulations keep Uber from innovating, or make it impossible for Lyft to catch up?

Uber and Lyft are among the tech companies pushing back at proposed rules by New York City's Taxi and Limousine Commission to regulate car service apps. Uber says the rules break federal law because taxi commissions don't have the authority to regulate technology. Lyft has singled out provisions on distracted driving.

But while both companies argue that the commission could damage innovation, Lyft is also concerned it will actually make Uber too strong to compete with. 

It's the latest round in the car service apps vs. the world. Uber, Lyft, and a tech trade group representing Google, Twitter, and Facebook will be among those testifying at a hearing on the rules this morning. The tech industry seems to agree that they shouldn't be passed, but Uber and Lyft are pushing subtly differing agendas, mostly because Lyft thinks the rules as they stand would lock its rival into the top spot in the country's largest city. 

Uber has been under the TLC's authority since it opened up in New York in 2011 and has operated without major conflict with regulators. Lyft has had more problems in the city and has been operating in New York for less than a year, under terms it's not thrilled with. Now both companies are livid that regulators are changing the rules again. 

The commission says  it has to revise the rules because of the explosion of app-based car services. According to the TLC,  42 percent of for-hire vehicles in New York can now be booked through a smartphone app, and passengers can choose from as many as 75 competing apps. Compliance with TLC rules varies from app to app, prompting the commission to write a new layer of regulation specifically for the apps used to call for cars. 

The proposal has caused a furor in the technology industry, mostly because it requires companies to submit changes to their apps to the commission for approval and pay a $1,000 fee each time they do. In an open letter sent earlier this month, the Internet Association, a trade group representing Silicon Valley's largest companies, decried the idea that a local government would demand to review changes to computer code. Uber says no local government has ever passed such a rule. 

The commission has been playing down the significance of the requirements for updates to software, saying it simply formalizes existing industry practices. “Logically the rules require that material changes to driver and passenger interfaces be previewed with the TLC to ensure rules compliance and avoid customer confusion and unintended violations,” said TLC Chairwoman Meera Joshi in a statement. "Under the proposed rules, software review is simply not required or necessary.” 

The TLC says it has invited Uber and other companies to submit language that alleviates its concerns. Uber’s idea, submitted in written testimony this morning, is to scrap the rules altogether. It argues that any attempt to regulate transportation-related apps is a violation of the federal Telecommunications Act. The commission didn't respond to a request for comment on this claim. 

“Instead of regulating mobile applications, the TLC should stay within its jurisdiction and expertise by regulating the for-hire vehicle base stations that use mobile applications,” said Krishna Juvvadi and G. Scott Binnings, attorneys for Uber, in prepared comments. Uber is organizing a rally outside the hearing. 

The tech industry has raised various other concerns, including restrictions on how companies like Uber can operate at airports and the broad manner in which companies can be held accountable for the misdeeds of their drivers. The prevailing opinion in the industry seems to be that the TLC has felt pressure to rein in technology companies and that its proposed solution is rife with unintended consequences, rather than any real antipathy toward their business. 

Lyft has focused on a specific part of the rules governing distracted driving. The TLC wants to limit to one the number of mobile devices that drivers can use simultaneously to search for fares. Aside from the equipment provided by the base that a driver works with, they could use only one mobile device to find fares. A prohibition on using more than one smartphone while operating a vehicle might seem uncontroversial, but Lyft questions the very idea that public safety is at issue here. It dismisses concerns about the dangers of drivers using multiple devices at once as "hypothetical" and says that the TLC is threatening to undermine the entire industry. 

“The result could be drastic and predictable—a monopoly,” said Diana Dellamere, a public policy manager for Lyft, in prepared remarks for the hearing. “Drivers will have no realistic choice between the one dominant app dispatch company and others. They must choose the service that will keep them most busy. And that company is incentivized to game the system by supplying the maximum number of devices allowed in the car, thereby owning the market.” 

Of course, a single smartphone can be used to toggle back and forth between apps, and drivers would be free to switch services once the one they were using stopped serving them well. Still, Lyft appears to be concerned that this would relegate it to second place forever. It doesn't mention Uber by name. Uber doesn't mention the issue at all. 

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