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“There’s An App for That”

An overview of the regulatory response to Smartphone Booking Applications in

U.S. jurisdictions

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Smartphone Booking Applications

• On-demand car service that allows users to request a vehicle (taxicab or livery) through a free smartphone application.

• When a customer requests a taxi, the applications ping the nearest available driver. The driver can accept the fare, paying a small commission, or skip it. Some applications offer customers an estimate of the fare, ratings of potential drivers or, once a match is made, a moving blip on the map, showing  their driver’s progress.

• Apps are available on: iPhone, Blackberry, Android, etc.

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Most Popular Smartphone Applications in the U.S.

Taxi Magic Uber

Cabulous GroundLink

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Taxi Magic

• RideCharge, Inc.’s Taxi Magic application was launched in December 2008 and has been found in the top 20 iTunes applications for travel ever since.

• The first nationwide free online taxi booking service that is directly integrated with taxi dispatch systems, which requires vendors to update their software specifically for Taxi Magic, setting it apart from its competitors.

• The Taxi Magic mobile application currently has more than 4 million downloads and operates in 45 U.S. cities with fleet integrations to 30,000 taxicabs.

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Uber

• Established in San Francisco in 2009.

• Receives profits from its free smartphone application by taking a 20% “cut” from the fares of drivers with whom they contract.

• Currently operates in six major metropolitan cities in the United States: San Francisco, New York City, Boston, Chicago, Seattle, and Washington, DC.

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Cabulous

• UpStart Mobile’s Cabulous, a technology engine for car services, was created in 2008 as part of a Best Buy, Inc. entrepreneur program.

• Drivers must be part of a registered fleet and use the dedicated Android-based Cabulous device provided by the fleet, instead of personal Smartphones, in order to become a part of the Cabulous network.

• Cabulous replaced telephone-based calling between driver and passenger with an internet-based walkie-talkie push-to-talk style system.

• The Cabulous device is issued to fleets that contract with Cabulous.

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GroundLink

• Founded in 2003 and headquartered in New York City.• Using proprietary technologies and applications,

GroundLink aggregates, manages and executes ground travel services under its own brand worldwide.

• Passengers may order a car from Groundlink’s fleet for pick-up on their smartphones.

• GroundLink’s fleet is available in over 110 countries. • Electronic receipts for bookings are delivered via email

and saved on the GroundLink smartphone application.

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Smartphone Applications: General Response of U.S. Cities

• Most major metropolitan cities welcome the technological advancements taking place in the transportation industry through smartphone booking systems.

• Regulators are concerned of the potential rise in illegal for-hire service that may result from smartphone booking applications.

• Regulatory schemes may need to “catch-up” to these technological advancements.

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Concept of Electronic Hail

• Smartphone booking applications introduce the “electronic hail.”

• An “electronic hail” contemplates a signaling of a for-hire vehicle similar to a street hail, but through an individual’s smartphone.

• Jurisdictions like Chicago, Los Angeles, San Francisco and Washington, D.C. have not addressed this new concept in their regulations.

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Impact of Electronic Hail

• Electronic hails will make it difficult to ensure properly licensed for-hire vehicles are picking-up passengers.

• Some cities, like Seattle, prohibit third parties from hiring for-hire vehicle services.

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Impact of Electronic Street Hail

• Cities such as New York City, San Francisco and Washington, D.C. have also expressed concern regarding the potential for illegal pick-ups resulting from electronic hails, and are looking for solutions.

• Companies like Taxi Magic and GroundLink, which integrate with licensed dispatch companies, automatically create a record of trip sheet data through their licensed bases, which alleviates regulatory concerns.

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Restrictions on Fares• Uber and Cabulous-like technologies, which allow for contracting

directly with drivers, open the door to concerns of potential unlicensed or unaccountable drivers.

• In New York City and Washington, D.C., the manner by which fares are calculated in taxicabs and for-hire vehicles has been a challenge to smartphone booking companies entering into the respective markets.

• The District of Columbia Taxi Commission (“D.C. Taxi Commission”) has recently cited Uber’s vehicles for charging an improper fare.[1]

[1] DeBonis, Mike. “Uber Car Impounded, Driver Ticketed in City Sting.”WashingtonPost.com, available athttp://www.washingtonpost.com/blogs/mike-debonis/post/uber-carimpounded-driver-ticketed-in-citysting/2012/01/13/gIQA4Py3vP_blog.html (February 22, 2012).

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Washington, D.C.

• The driver was cited for not holding a chauffer’s license, driving an unlicensed vehicle, and charging an improper fare.

• Uber calculates fares in the same manner as traditional street hail taxicab fares – via mileage and time.

• The D.C. Taxi Commission is concerned about the companies that contract with Uber because such cars are not properly licensed to accept pre-arranged fares calculated at a mileage and time rate, like a street hail taxicab.

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Washington, D.C.

• If a properly licensed taxicab or for-hire vehicle accepts pre-arranged service, it must arrange an advance fare, like a limousine.[1]

[1] D.C. Taxi Commission, FAQ. Available at

http://dctaxi.dc.gov/dctaxi/cwp/view,A,3,Q,487826,dctaxiNav,%7C30625%7C.asp#46 (February 22, 2012).

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Washington, D.C. • Uber’s problems stem from fare calculation under the current rules,

coupled with proper licensing in the District of Columbia.

• The D.C. Taxi Commission states Uber’s contract vehicles are “limousines” and should be charging a fare based on a pre-agreed upon hourly rate, as mandated by the licensing and regulation of limousines.

• Further, the Uber vehicle cited was licensed in Virginia and was only permitted to pick-up passengers on a pre-arranged basis and transport back to Virginia, based on the driver’s inter-jurisdictional license under the limousine sections of the D.C. Regulations.[1]

[1] See, Title 31, Section 1216 of the DC Muni Code, Inter-jurisdictional limousine operation – permit required. Available at http://dctaxi.dc.gov/dctaxi/frames.asp?doc=/dctaxi/lib/dctaxi/pdf/dcmr/Chap12Up.pdf (February 22, 2012).

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San Francisco

• Uber was initially called “Uber Cab” when it was introduced in San Francisco.

• Traditional cab companies complained that the business was violating State of California for-hire vehicle rules regarding advertising, and unlawfully competing with taxicabs licensed by the San Francisco Municipal

Transportation Agency (“SFMTA”) .

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San Francisco

• The SFMTA sent a cease-and-desist letter to Uber in October of 2011, which objected to Uber’s unlicensed taxi-like service.

• A similar letter was sent to Uber by the California State Public Utilities Commission (“PUC”), demanding that Uber stop doing business because it did not have the proper state permit. A meeting was scheduled thereafter between Uber and the PUC to resolve the issues.[1]

[1] Jefferson Graham, “Uber app hails a Town Car foryou”, USA Today, Mar. 8, 2011. Available athttp://www.usatoday.com/tech/products/2011-03-08-uber-carapp_N.htm.

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Efforts to Advance Regulations in-line with Technology:

New York City • As smartphone application companies like Uber entered the New York City

market, the New York City Taxi and Limousine Commissione (“TLC”) issued two Industry Notices to make clear the relevant TLC Regulations applicable to such companies.[1]

• TLC Industry Notice #11-15, dated July 1, 2011, stated that the use of smartphone applications is permitted, provided the base is in compliance with TLC regulations.

• TLC Industry Notice #11-16, dated July 18, 2011, stated that a “smartphone application that functions solely as a referral, reservation or advertising service for a licensed base will generally not require a licensure.”

[1] See TLC Industry Notice # 11-15 on July 1, 2011; see also TLC IndustryNotice #11-16 on July 18, 2011

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New York City Response

In Industry Notice # 11-16, the TLC cautioned ofpotential violations in connection with using a smartphone application, including the followingpotential violations:

• All base advertising, including advertisements via a smartphone application, require the base to disclose the base name and license number;[1]

[1] TLC Regulation 59B-25(c)(1)

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New York City Response

• Bases must maintain on file with the TLC their rates, including if its Smartphone rates are different from the existing rates;[1]

• Bases must maintain on file with the TLC its smartphone application’s public contact information;[2]

[1] TLC Regulation 59B-21(a)

[2] TLC Regulation 59B-21(c)

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New York City Response

• Bases must ensure the trip sheets of any trips dispatched via Smartphone application are maintained and available for at least six months after the trip; and[1]

• Bases must be able to handle customer complaints, including via Smartphone application.[2]

[1] TLC Regulation 59B-19(b)(2)[2] TLC Regulation 59B-17(a)

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New York City Response

The TLC went as far as to notify all drivers that: • No for-hire vehicle owners and drivers may contact a

smartphone application developer without the approval of its for-hire base; and

• That accepting fares from a smartphone application without approval would not only put the application at risk, but also the base; and

• That under no circumstances may a medallion taxicab use a smartphone application for dispatch services. [1]

[1] The TLC may change its position on this issue in the near future.

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New York City Response

• The TLC also declared in Industry Notification 11-16, that a smartphone application that provides for-hire services directly through the use of a smartphone application and not through an agreement with one or more licensed for-hire bases will be charged with full TLC compliance, including registration as a for-hire base.

• The TLC may request evidence be produced to determine whether or not the smartphone application is in compliance with all TLC and other regulations or if it must be licensed as a for-hire base.

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Smartphone Applications & Regulation

• As the aforementioned discussion illustrates, when smartphone applications are indirectly regulated, as in New York City, regulators can adequately address implementation challenges through heightened agency oversight.

• Despite the complex regulatory scheme, New York City – and other jurisdictions – can address regulatory compliance issues as they are raised creating a developing market and a favorable climate for new technologies.