Uber Heads for Loss in Bid for Statewide Texas Rideshare Law

Th Uber Technologies Inc. car service application (app) is displayed for a photograph on an Apple Inc. iPhone in New York, U.S., on Wednesday, Aug. 6, 2014.

Photographer: Victor J. Blue/Bloomberg

Uber Technologies Inc.’s attempt to replace a patchwork of local rules in Texas with a state law regulating its car-booking business is headed for defeat because lawmakers have yet to act on a key measure with only days remaining in the legislative session.

Barring a last-minute change of course in the Capitol in Austin, the company will walk away empty-handed in the second-most-populous U.S. state as it seeks to expand after reports this month said a new round of funding would boost its valuation to an estimated $50 billion.

Uber has been unable to garner enough support to bring the measure to the House of Representatives floor even after arming itself with almost 30 registered lobbyists and enlisting the the Texas Association of Business, an influential group that often sways policy decisions.

“We were disappointed,” said Bill Hammond, chief executive officer of the group. “It’s very clear to me that the consumers want and like this option.”

Opposition from the taxi industry and the four largest Texas cities -- Houston, San Antonio, Dallas and Austin -- was insurmountable for Uber and its fellow San Francisco-based startup, Lyft Inc.

“We wanted to let our locals continue working through an agreement with Uber and Lyft rather than having the state just topple it,” said Representative Celia Israel, a Democrat from Austin and one of two lawmakers to vote against the bill in a committee hearing in April.

State Setbacks

A loss in Texas coupled with similar defeats in other states in recent months interrupts Uber’s winning streak. In Florida, the legislature adjourned last month without acting on an Uber-backed ridesharing bill. This month, Uber pulled out of Kansas after lawmakers required mandatory background checks and strict insurance requirements, overriding a veto by Governor Sam Brownback.

Under pressure from constituents, the legislature sent a compromise bill backed by Uber to Brownback’s desk this week, which is awaiting his signature.

“We carefully review all bills that come to the Governor’s desk,” Eileen Hawley, communications director in Brownback’s office, said Thursday in an e-mail.

Uber-backed bills have also stalled in Iowa and Nevada.

In Texas, June 1 is the last day of the legislative session. Because lawmakers generally meet only every two years, the company will have to wait until 2017 before getting another shot at the Lone Star State, one of its largest markets after California and New York, and home to almost 17 million licensed drivers.

“It’s no surprise that 45 jurisdictions have adopted modern transportation regulatory frameworks,” Natalia Montalvo, an Uber spokeswoman, said Wednesday in an e-mail. “With Texas leading the nation in drunk-driving deaths, it’s a shame state lawmakers ran out of time before passing similar legislation that would have saved lives by addressing this pressing public safety need.”

Uber’s business model is being closely scrutinized by investors because in many places regulators stand between the company and its ability to cash in on the almost $12 billion U.S. taxi and limousine business. Since rolling out on American roads five years ago, the company has grown to include 160,000 drivers in 45 states.

Almost every legislature in the U.S. took up some version of a ridesharing bill this year, said Douglas Shinkle, program principal at the National Conference of State Legislatures. Last year, Colorado became the first to pass a bill allowing for the operation of ridesharing services. Since then, 16 more states have followed suit.

“This obviously is important for a company like Uber to make sure that legislation actually supports their business,” said Thilo Koslowski, vice president of the automotive practice at Gartner Inc., a technology-research firm based in Stamford, Connecticut. “For Uber, it’s essentially a hit-and-miss experience.”

Being in densely populated urban areas is critical for ridesharing companies so they can tap into large numbers of riders, and a big enough supply of drivers to accommodate them. That makes Texas, where Houston, San Antonio and Dallas compose three of the nation’s 10 largest cities, a crucial state.

Opposition Mounts

Going into the legislative session in January, Uber seemed poised for success. A bill introduced by Representative Christopher Paddie, a Republican from the East Texas town of Marshall, would have allowed the state to issue permits to ridesharing companies while limiting the ability of cities to enact their own rules. The company circulated a petition that ultimately garnered more than 100,000 signatures from people who said they supported statewide ridesharing rules in Texas.

Opposition mounted throughout the session. In April, Dallas Mayor Mike Rawlings sent a letter to House Speaker Joe Straus, a Republican from San Antonio, urging him to oppose the bill, which he said would “erode” the city’s carefully crafted rules. The taxi lobby also mobilized, telling lawmakers that the proposed rules would create an unlevel playing field while discriminating against poor and minority passengers who lack a credit card or smartphone.

“They’re picking and choosing to serve parts of the community where they’re going to get the most lucrative passengers,” said Edward Kargbo, president of Greater Austin Transportation Co. Advocates for the disabled also came out against the ridesharing legislation, saying the company excludes such passengers by not offering wheelchair-accessible vehicles.

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