Transportation network companies mirror early 20th century jitneys — except this time they'll survive.
A few times a year I head to Los Angeles (more specifically, Glendale) to visit my grandmother. Each trip begins with the same burst of enthusiasm — I will finally appreciate L.A.'s urban form as something more thoughtful than the random spray of an exploded water balloon — and ends shortly after I land at LAX and realize that without access to a car the city eludes me. But my last trip was different.
After finishing dinner at my grandmother's house, I texted a friend about meeting in Silver Lake. Normally we slip into our roles as transit-ready New Yorker and car-ready Angelino: I offer to take the bus, and he volunteers to pick me up. Only this time his offer was different: "Why don't you just UberX it?"
A half hour later I'd registered an Uber account, requested an UberX ride, scored a $20 credit which covered the $13 trip, had an interesting conversation with the driver, and met my friend 5 miles away in Silver Lake. The same journey by bus would have taken over an hour, required a transfer, and involved two miles of walking. For this specific trip, the transit option was woefully inadequate, and without UberX I would have foregone the trip.
Did travel in Los Angeles — nay, in any American city — just get ridiculously easy? Over the course of three days, UberX enabled me to conquer L.A. on my own terms without reverting to a childlike dependency on someone with a license. UberX isn't free; it's still more expensive than transit. But it's a lifeline in a city that offers few reliable alternatives to car ownership. And if history is any guide, I think it's here to stay.
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Ride services like UberX and competitors Lyft and Sidecar — officially dubbed "transportation network companies" — connect passengers with regular people driving regular cars. (At least ostensibly; more on this later.) These services might feel radically different from the traditional taxi model, but in fact American cities have seen this movie before. Long before TNCs captured public attention, the low-tech jitneys of the 1910s disrupted the existing transportation order by promising a more customized service at a similar price to public transit.
The rise of the low-tech jitneys coincided with a spike in unemployment at the outset of World War I, and the availability of affordable secondhand cars. With more cars on the road and fewer jobs to occupy the labor force, drivers began picking up rides for a nickel. The appeal of flexible service — in conjunction with streetcar dissatisfaction, low rates of automobile ownership, and shifting housing and travel patterns in many cities — led to a dizzying increase in jitney operations across the country. "The mushroom growth of the jitney has been so rapid that cities which were in blissful ignorance of it in the evening found cars in operation the next morning," The New York Times reported in 1915.
As quickly as jitneys flooded into cities, however, local regulations washed them back out to sea. Streetcar companies, which paid more in state and local taxes and maintained roads adjacent to tracks, complained that the jitneys reaped the benefit of these roads without paying for their upkeep. Municipalities largely sided with streetcar interests because they didn't believe jitneys could handle the same passenger loads, and thought the loss of streetcars would be disastrous at a time when the vast majority of Americans relied on transit for travel. Between 1915 and 1918, the number of jitneys operating nationally declined from 62,000 to 6,000.
The jitney more or less disappeared by 1920, but the idea of car-like convenience at the price of transit never disappeared — most U.S. cities still run public vanpool and dial-a-ride services — and with TNCs it's returned with a vengeance. The situations aren't entirely the same; TNCs compete with taxis, which are seen as a luxury, rather than transit, which is seen as a public service. Still, city regulators and competing interests have once again mounted a response. Only this time around, the power has shifted to the TNC side, largely on the back of technology and organization.
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The main advantage TNCs have over the original jitneys is their ability to unite riders and drivers via the widespread adoption of smartphones into everyday life. Smartphones are especially helpful for ridesharing and taxi hailing because they dramatically reduce search costs. For anyone with a smartphone, the days of calling a car service or wandering the streets looking for a cab have suddenly disappeared. Ridesharing barely existed in the pre-smartphone era largely because coordinating riders and drivers proved too difficult. As smartphone ownership expands and these services become more prominent, regulators will be forced to develop rules that respond to the public's demands.
New technology often pushes existing regulations to their limits and forces regulators to catch up to a new reality. (Think: Bitcoin.) Regulators acknowledge that current municipal licensing rules don't gel with the ride services the public wants. However, even tech-friendly regulators maintain that many TNCs are really taxi services hiding behind ridesharing mustaches (pink mustaches, in the case of Lyft). Their position is that if ridesharing services operate like cabs, they should also be regulated like them.
The regulators have a point. During my trip to L.A., all of my UberX trips were more like taxi rides in private cars with part-time cab drivers than genuine rideshares. In the eyes of the regulators, there's a significant difference between actually "sharing" a ride that is already in progress or been planned and generating a new trip by requesting a ride (a typical taxi ride). While the TNCs do vet drivers and arrange insurance coverage during trips, regulators and the public aren't privy to how those processes work. While regulations vary from city to city, many regulators require routine vehicle inspections, drug testing, background checks, finger printing, driver training, and appropriate insurance coverage to ensure that service is reliable and safe.
But smartphones aren't the only technology that should make the fate of TNCs different from that of early jitneys. Global communications will play as big a role. Uber, for instance, operates in close to 75 cities but has a singular brand identity. It's hired lobbyists to fight regulatory battles and opened local offices to interview drivers and deal with city-specific issues to ensure that the Uber experience in New York looks and feels like the Uber experience in Cape Town. Unlike the original jitneys, which were fragmented and limited by geography, Uber is a hyper-centralized corporation that has the financial might, vision, and customer base to withstand and challenge unfavorable regulations.
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The financial forces being amassed by TNCs will prove impossible for regulators to fend off for very long. Sidecar, for instance, just raised $80 million in angel investments, much more than the annual budget for the Taxi and Limousine Commission in New York City, the country's largest such entity. And Sidecar isn't even the industry leader. As TNCs expand their popularity in cities they will in turn hire more local lobbyists and achieve even more momentum. There's a painful day for traditional cab companies in the offing, and while regulators can delay that day's arrival, they can't stop it.
Even assuming TNCs are here to stay, local regulation is still very necessary. In some regards, TNCs have the ability to make the regulator's job much easier: they track rides, record route selection, handle money exchange, identify drivers and passengers, and keep a tally of driver income. These digital traces protect drivers and passengers against false complaints and price gouging and give a clear picture of tax implications (sorry, drivers).
The starting point for sensible regulations begins by admitting that the private sector is smarter than the public sector when it comes to understanding the demand side issues of taxis and ride-hailing. But the goal should be shared public-private knowledge and more reliable service, rather than runaway profits and market manipulation. Once regulators have a clear idea how travel services are distributed across their cities, they can begin to understand demand, which can inform decisions to cap or expand supply.
Sensible policies that protect riders and reward drivers and innovative TNCs are already within reach. California has already blazed a path forward by requiring app companies to implement criminal background checks, drug testing, and more intensive driver education. The sooner smart regulations are adopted and uncertainty about the fate of these apps is mitigated, other industries, like insurance and automobile manufacturers, will begin to tailor new products to serve these profitable services.
So regulation doesn't have to be the enemy of TNCs as it was of jitneys — so long as it seeks to promote new technology and protect riders. Regulations that protect entrenched interests at all costs or are bought by new interests won't yield a net improvement for the passenger-riding public. With public attention trained carefully on these issues, it is time to act and create a new set of regulations and redefine transportation services in the 21st century. The future of visiting our grandmothers and making sense of the modern American landscape may depend on it.