The Maryland Public Service Commission's decision this week to classify the ride-sharing service Uber as a common carrier is probably not the end of the story as to whether the company will continue its operations in Baltimore City and Annapolis. Uber has said it will appeal the decision, and the PSC itself ordered regulators to begin crafting new rules for for-hire companies in a tacit recognition of the changing nature of the industry. Ultimately, what needs to emerge is a compromise that allows consumers to continue to benefit from Uber's innovative business model (and others that may come after it) but also protects the public's interest.
This week's ruling affirmed a finding by the state's chief public utility law judge in April that the PSC should exercise the same regulatory authority over Uber that it does over taxis and other for-hire vehicle services in the state. The commission gave its staff 90 days to draft new rules for the company and invited Uber to participate in the process.
Uber's business model is based on a cellphone application consumers can download to match drivers with passengers looking for a ride in their area. Users request rides via their smartphones and also pay through the app. The cab companies say ride-sharing companies like Uber and the similar Lyft service represent unfair competition because they don't have to bear the costs of insurance, permitting and vehicle inspections required of traditional cabs and because they can adjust their rates to match consumer demand.
The ride-sharing model has proven popular with consumers, but the PSC is right to insist it should be subject to certain requirements to protect passengers from bad or uninsured drivers, unsafe vehicles and other hazards. Until now, Uber has argued that it is a technology company, not a cab company, and thus should be exempt from the rules and regulations governing taxis or other for-hire vehicles. Uber doesn't own the vehicles used to transport its customers or employ the drivers who pick them up. But that could change if the new rules the PSC is preparing require Uber to behave more like traditional for-hire companies.
Regulators need to be mindful not to stifle innovation and the potential for new business development in the state that could offer consumers more choices. As the PSC itself acknowledged, the rules governing common carriers were created long before the use of personal computers and smartphones became widespread. Gov. Martin O'Malley underscored that message when he issued a statement saying that Maryland "shouldn't try to limit a 21st-century marketplace with 20th-century regulations."
But the commissioners' dilemma isn't going to made any easier by a patchwork of rules and requirements other states have adopted to regulate ride-sharing companies in their jurisdictions. The District of Columbia, for example, presently allows Uber to operate largely without any of the restrictions imposed on traditional cab companies while other states have legalized such services but only on condition they meet certain strict requirements.
Virginia authorities recently reached a compromise by mandating background checks of drivers to disqualify those convicted of felonies, fraud, sexual offenses or violent crimes, establishing a zero tolerance policy for the use of drugs or alcohol by drivers, and requiring automobile liability insurance as well as $1 million in coverage for passengers on every trip. In addition, drivers may only accept rides booked through the company's mobile app, not from people hailing drivers on the street.
Maryland's PSC should take Virginia's example as a starting point for establishing its own rules for Uber and its competitors. Officials here need to consider which of the regulations on taxis and other for-hire vehicles are still necessary. For example, do smartphone-wielding consumers need to be protected from Uber's dynamic pricing model? Should traditional carriers also be given more flexibility from their regulatory obligations in recognition of the greater choices now available to consumers? And besides the precise shape of the regulations on Uber and its ilk, it will be crucial to establish whether the companies themselves or the state will be in charge of enforcing them.
This week's ruling comes on the heels of a PSC decision last week to require taxicabs in Baltimore City to install credit card-reading devices in the back seats where passengers sit — a convenience riders in other cities have long taken for granted. It's an indication of the rapid changes overtaking the industry that innovations that once seemed to be on the cutting edge of technology now are viewed by customers and regulators alike as routine, basic necessities. Uber's ride-sharing business model certainly fits that pattern, and Maryland regulators are right to recognize that whatever new rules they come up with, there's no turning back the clock.
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