State regulator tells 2 ride services eyeing Omaha, Lincoln to cease and desist

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Posted: Tuesday, April 22, 2014 12:00 am

A state transportation regulator on Monday sent cease-and-desist letters to ride services Uber and Lyft and warned Nebraskans that serving as a driver for one of the services could land their car in an impound lot.

Mark Breiner, director of transportation at the Nebraska Public Service Commission, said the services are illegal in Nebraska. Carriers need a state certificate to transport passengers, and neither company has communicated with the state about applying for one, he said. Breiner sent emails to the services March 31, and on Monday he sent them certified letters.

Commissioners at their regular weekly meeting Tuesday said they had more questions than answers as they wondered about the services’ insurance policies, background checks and business model.

No one representing the ride services spoke. Neither service has announced concrete plans to operate in Nebraska. But commission staff was clear on what would happen if they do.

“If they begin operation, I believe our next step would be to enforce the law,” Breiner said.

The commission is trying to head off the kind of legal battles several major cities are mired in with the services. Taxicab drivers have protested in cities such as Minneapolis, Chicago, Los Angeles and San Francisco, saying drivers for these services are essentially operating as illegal taxis.

In St. Louis, Lyft ignored a cease-and-desist letter from the local taxi commission and launched its service Friday evening, the Post-Dispatch reported. Ninety minutes later, a Lyft driver had been cited.

Lyft is running ads for drivers in Lincoln to gauge demand, and Uber said in an ad it is looking for drivers “to help launch Omaha.”

Uber argues it is “a request tool, not a transportation carrier.” Both San Francisco startups use apps to connect riders with independent drivers who use their private vehicles to provide rides. Uber, founded in 2009, operates in 35 countries and in 47 U.S. cities. Lyft, founded in 2012, is in more than 30 cities.

Breiner told the services in the letters that any vehicle used by their drivers in Nebraska would be “impounded as a public nuisance” and that each must stop advertising and any other operations here until it obtains a certificate.

“Any operations that you undertake in the state, as well as the persons who perform any such operations on your behalf, are violating state law,” his letter said. “These violations will result in criminal prosecutions as well as civil penalties.”

Anne Boyle, commissioner from Omaha, said she worries that the services will launch without permission.

“They're skirting by the law.”

Boyle and Tim Schram, a commissioner who represents parts of Douglas and Sarpy Counties, both said they are concerned that drivers operating under the services don't carry the same level of insurance coverage a taxi service would. They also are concerned about the quality of vehicle inspections and background checks the companies conduct before hiring a driver.

Paige Thelen, spokeswoman for Lyft, said the company provides drivers with insurance with a $1 million limit, covering passengers and third parties, or twice what Nebraska rules require for taxis.

“While we have not confirmed a launch in Nebraska yet, we take the cease-and-desist letter as an opportunity to open a conversation with state leaders to explain what Lyft is all about,” Thelen wrote in an email. She said people who have seen Facebook ads for drivers responded with “excitement and enthusiasm.”

“We believe the state would not want to take that service away from residents,” she said.

Uber spokeswoman Lauren Altmin wrote in an email that the company has a “best in class safety and screening process” for drivers and conducts background checks, an interview and vehicle inspection, and that drivers are backed by their own insurance policies as well as a corporate insurance policy.

Both services rely on customer ratings to weed out problem drivers.

Lyft describes itself as “your friend with a car,” and decorates its cars with giant fuzzy pink mustaches. It says passengers are part of the “Lyft community,” and drivers are paid in “donations,” of which the company keeps 20 percent.

Each has a variety of business models to appeal to different market demands and laws.

For example, people who follow Uber's ads for Omaha drivers are directed to its page for uberX, “the low-cost Uber,” which promises “everyday cars for everyday use” as opposed to the luxury vehicles it uses in some markets.

Lyft suggests a “donation” rather than a set fare, and that allows it to operate in St. Paul, Minn., which regulates only vehicles with meters, according to the StarTribune. Minneapolis, however, classifies Lyft as a taxi service.

Several cab drivers who were lined up for fares Monday at Omaha's Eppley Airfield said they welcomed competition, but want all drivers to operate on a level playing field.

“If you're going to start any kind of business, you have to go through the proper channels,” said John Wermuth, a driver for City Taxi. For example, he said, without a liquor license, “you can't just open a bar and start selling beer.”

Alex Peprah, a Happy Cab driver, wondered about background checks. “Somebody has to monitor,” he said. “If these online systems come on, who is going to monitor? You don't know who the driver is.”

“Any competition that comes into the market, they need to follow the rules that everybody else does,” said John Davis, director of operations for Omaha cab companies Yellow, Checker, Cornhusker, Safeway and Happy Cab.

His cab services last year launched an app that people with a smartphone can use to hail a cab and pay for the ride.

“They're trying to operate under the guise that they're not a transportation company,” Davis said. “They actually do provide transportation. They contract with drivers and they do training for drivers.”

But they follow different rules, he said.

For example, he said, his drivers are prohibited from raising prices during peak hours, while the ride services have used “surge pricing” in some cities.

“Their business model is that regardless of what the regulations are, 'We'll just go ahead and roll it out.' ”

Uber and Lyft have opposed efforts in other places to regulate their services, using social media to urge users to speak out on their behalf. In Arizona, the companies support legislation that would regulate their services but exempt them from some insurance regulations that apply to taxi drivers.

Lyft opposed a bill passed by the Illinois House that would require drivers to have a chauffeur's license and prohibit them from giving rides to and from the airport, among other rules.

On its website, Lyft said politicians are “shutting out innovation, progress, and people from neighborhoods all over Chicago who depend on Lyft every day.”

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