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New for-hire car service combines luxury with technology

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Under the plush leather exterior of Uber Technologies Inc. beats the heart of a rebel.

The app-driven startup, which began operations in Baltimore at the end of January, hopes to attract upscale customers who don't mind paying extra — a lot extra — for the luxury of hiring a town car by smartphone to take them where they want to go.

"All we're doing is helping people find a classy ride easily," said Rachel Holt, general manager of Uber's local operation. "When you look at transportation in Baltimore, there's room for us here."

To carve out space in cities across the country, Uber CEO Travis Kalanick thumbs his nose at the establishment: the taxi and limo companies and local regulators who don't know what to make of his startup. Kalanick, critics say, moves in first and asks for permission later, counterpunching against resistance by accusing public officials of protecting the old guard.

Baltimore is shaping up as the latest battleground.

Century-old Yellow Cab filed a challenge with the Maryland Public Service Commission, contending that Uber should not be allowed to operate here until it complies with the same safety and insurance regulations as traditional taxi and limo companies.

Commission staff members have recommended that Yellow Cab's cease-and-desist request be denied because at the time of their review, Uber had not begun operations. The case will be heard Wednesday.

"They play on an unlevel playing field. They don't play by the regulatory rules," said Mark Joseph, CEO and vice chairman of Veolia Transportation, parent of Yellow Cab. "We know Uber very well. They are great for rich people. They are great at skimming the cream off the top."

Uber insists it is playing by the rules.

"Before we enter a market, we do our research," Holt said. "The biggest go, no-go for us are the local laws. In Baltimore, we're totally legal."

Uber got its start in 2009 in San Francisco and has attracted more than $40 million from investors, including Goldman Sachs. It has branches in more than a dozen U.S. cities as well as London, Berlin and Paris. The company launched its Washington operation in late 2011.

Unlike traditional for-hire operations, the company does not own cars or employ drivers. Instead, it draws its stock and manpower from contracts with limousine companies and independent drivers with their own luxury cars. Customers sign up, download the Uber app, set their pickup location and request a ride. The company uses GPS technology to find the nearest driver for the pickup.

There is no exchange of cash or tip. The entire transaction, including 20 percent tip, is processed through the customer's account. Uber charges about double the city's taxi fare schedule but below what it would cost to hire a private car by traditional means. The driver gets a cut of the fare.

Uber publishes its rates but does not calculate an estimated total, except for flat-rate trips between downtown Baltimore and Washington ($140) and to the region's three airports. It uses dynamic pricing, charging more when demand is high, weather is bad or drivers are few. The minimum fare is $15, and there is a $20 cancellation fee.

When a ride ends, the passenger and driver rate each other. Uber said it weeds out drivers with poor ratings, and drivers can use the rating to choose their fares and ignore requests from boorish passengers.

"You can go out with friends at night and not worry about how you're going to get home," Holt said. "When you open the app to get a ride, we know that, so we've got the data to show where people want rides and we're able to adjust in a market."

The company declined to say how many drivers it has in Baltimore or how many fares it carried while operating in "stealth" mode here before its formal launch.

Uber officials insist they work for a technology company, not a transportation company. Uber operates more like eBay, facilitating a transaction between private parties. It's a blurring of lines that has annoyed and confounded the competition and regulators from California to Boston.

Alfred LaGasse, president of the Taxicab, Limousine and Paratransit Association, laughed at Uber's attempt to create a new category for itself.

"Uber is a transportation company, no matter how hard they try not to be," he said. "They don't make money on the app. They make money off the trip you take."

The international trade group labeled Uber a "rogue" service "operating outside of the public's best interests. ... Such apps are a danger to public safety and operate in violation of community standards for taxi and limousine transportation in terms of passenger safety, access, nondiscrimination and regulated fares."

In fact, LaGasse said, one only has to look at the fine print that accompanies signing up for the app to see that Uber is out for itself.

The terms and conditions on Uber's website state that by signing up for the service, the customer waives all liability claims against Uber. "By using the application and the service, you may be exposed to transportation that is potentially dangerous, offensive, harmful to minors, unsafe or otherwise objectionable," the terms state.

"Uber wants a total open market. I understand that," LaGasse said. "We used to have that, and it doesn't work. The public wants rules. They want to feel safe."

In November, a lawyer filed a class-action suit on behalf of San Francisco taxi drivers, alleging that the for-hire service does not have a city license. At the same time, the California Public Utilities Commission sent citations threatening to shut down or fine not just Uber but two other app-based services, SideCar and Lyft.

In September, the New York City Taxi and Limousine Commission put a roadblock in the way of Uber's attempt to launch a cab service, saying it had not approved the use of apps for cab hailing or payment.

But recognition is coming. In December, Washington officials created a regulatory category to accommodate services such as Uber. After ordering Uber off the road last summer, Massachusetts officials reversed course. Chicago officials are looking for a way to accommodate Uber and the taxi and limo industry.

Holt said times are changing and that established companies and government agencies will have to adapt to what the public wants.

"These regulations were created before there was an iPhone, before GPS," Holt said. "When something new and different comes along, the natural reaction is anxiety. ... But demand for this service is there. Our customers are speaking out and we're growing."

candy.thomson@baltsun.com

Copyright © 2014, The Baltimore Sun
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