Business Management

California clears a road for ride-sharing with new regulations

Transportation apps, start your engines: The California Public Utilities Commission on Thursday approved regulations on so-called "transportation network companies." Now companies like Uber, Lyft, and SideCar don't have to fear the long and fickle arm of the law cracking down on them for connecting drivers and riders.

California's regulations require transportation apps to apply for permits from the Public Utilities Commission, mandate criminal background checks for every driver, train drivers, and establish zero-tolerance policies on substance abuse. Then there's the whole matter of insurance: minimum coverage of $1 million is required.

In the unanimous approval, the commission wrote that it "is aware that [transportation network companies] are a nascent industry. Innovation does not, however, alter the commission's obligation to protect public safety, especially where, as here, the core service being provided--passenger transportation on public roadways--has safety impacts for third parties and property."

The affected companies were, of course, ecstatic.

The battle of new vs. old

The commission's decision to approve ride-sharing regulations has been a long time coming in tech time, which moves at the speed of light. (In regular time, the regulations took almost a year to develop.)

Lyft and Uber have argued that they are tech companies, not transportation companies, and so don't need to be regulated as taxi and livery services are. Uber fought regulation altogether, arguing that the PUC has no jurisdiction over tech companies. Lyft didn't go quite as far in its opposition, instead telling the commission that existing regulations don't fit emerging industries.

"We reject Uber's assertion that TNCs are nothing more than an application on smartphones, rather than part of the transportation industry," the commission wrote. "Uber is the means by which the transportation is arranged, and performs essentially the same function as a limousine or shuttle company dispatch office."

But just because California has handed down its rules doesn't mean other states will follow suit. Lyft, Uber, and SideCar have tangled with authorities in nearly every city they've launched in, and because every state has a different set of transportation laws, expect regulations to proceed one step at a time--very, very slowly.

California's regulations apply only to transportation apps, not the sharing economy as a whole. Buckle up, folks: It's going to be a bumpy ride.


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