With CEO Travis Kalanick taking leave, the company's leadership is in turmoil. But unless city regulations change, the ride-hailing company will remain on top.
With the results of a wide-ranging investigation led by former U.S. Attorney General Eric Holder into sexual harassment, discrimination, and alleged criminal activity among Uber employees, founder and CEO Travis Kalanick will take a long-term leave of absence from the company, with diminished responsibilities upon return. The highly unusual move follows the firing or resignation of several of Kalanick’s direct reports for reasons connected to the probe.
There’s a lot of uncertainty swirling around the polarizing ride-hailing firm. But one thing’s for sure: In the growing dog-pile of transportation network companies (or TNCs), Uber and its number-two competitor Lyft remain at the top of the heap. They are likely to stay there so long as regulatory conditions are favorable.
Just look at Austin. Uber and Lyft pulled out of the Texas capital in May 2016 following a tussle over local regulations that required driver fingerprinting. A host of new TNCs, such as Fasten, Fare, and Ride Austin, leaped to fill the vacuum, relying on similar software with slight variances on business models. One year later, Texas Governor Greg Abbott signed off on legislation enacting statewide, free-enterprise-friendly rules for ride-hailing companies, which nullified cities’ regs. (For a complete survey of such state preemption battles, see Richard Florida’s latest report.) Within hours, the big fish swam back in town—and promptly devoured their competition.
Andy Tryba, the co-founder CEO of Ride Austin, which had the largest local ride-hailing market share prior to Uber and Lyft’s reentry, writes on Medium about what happened next:
In just one week — Fare, the #3 player in the market, closed up shop in Austin. Fasten dropped their rates within 3 days and quickly expanded their discount program to attempt to keep the most price sensitive riders. And at RideAustin — we saw our volumes drop by 55% in 1 week[.] The market power of the giants is undoubtedly significant as they’ve gained at least 20K rides from us alone.
That’s pretty astonishing, and it says a lot about how customers have adapted to this ultra-competitive industry. For all the indignant tweeting and guilt about using companies with malignant labor practices, “the cheaper apps win share,” writes Tryba. With heavy VC funding as ballast, Uber and Lyft can subsidize the cost of their rides far more heavily than smaller players can. They’ve also got name recognition working in their favor. For those reasons—but mainly money—Uber and Lyft are here to stay, no matter what spills out of Holder’s investigation.
That is, until one thing changes again: regulations. Regulations will matter far more than consumer ratings or public opinion in deciding the fate of TNCs. Start-up acolytes love to babble about business “ecosystems,” but here it’s useful. To continue the fish metaphor: The species that is adapted best to an environment can easily dominate others, sucking up more resources and energy. But if one environmental factor changes—like temperature, salinity, or the availability of prey—the hierarchy can easily shift.
To a similar effect, it cannot be forgotten that Uber and Lyft left in a huff after Austin officials (and voters!) put their foot down on what constituted a verifiably safe driver, and that other start-ups moved in to seize the riders they left behind. Regulations determined their viability. The Texas statehouse may have written a market-dominance check to Uber and Lyft by waving its preemption wand over Austin, but that hasn’t happened everywhere yet, and not everything lies under state authority. Most cities have jurisdiction over most street space. They’re beginning to understand what tools are available to shape access to that precious commodity, as congestion worsens and new technologies flood in. These kinds of regulations can and will help determine which TNCs stay standing.
Certain rights of way may be reserved for high-occupancy vehicles only, as New York City has done to smooth peak commutes on its bridges. Curbside controls may limit where Ubers or Lyfts can pull up to hot destinations, as dozens of airports have set up to keep bumper-to-bumper madness at bay. Cities could move to require TNC vehicles to meet certain tailpipe standards, as Portland does. Officials can crack down on data-sharing mandates, as San Francisco is to better understand TNCs’ traffic impacts. Or, as London, Stockholm, and Singapore have done to great success, cities could price their roads to manage congestion and encourage carpooling and transit.
They can also test out “right-sizing” public vehicle fleets to make them more attractive commute options, even working with TNCs that specialize in shuttle services that create pick-up routes based on real-time demand. The Kansas City Area Transportation Authority’s 2016 experiment with the microtransit company Bridj didn’t draw many riders, and Bridj folded earlier this year. But (guess who!) Austin’s Capital Metropolitan Transportation Authority is now hopping on the microtransit train with a one-year pilot offering free rides, three days a week, within a specific commuter corridor.
Austin’s program is a bit different than KC’s, which used Bridj-branded vehicles. (That may have been one of its marketing failures.) Instead, Austin is demo-ing software from the mictrotransit company Via* and is running public vehicles stamped with a special name: Pickup by CapMetro. “We're the first agency in the country to actually operate the vehicles as our own,” says Chad Ballentine, CapMetro’s director of paratransit. “This is us being more responsive to what customers need.”
Is Pickup designed to compete with Uber and Lyft’s return to Austin? No. But it should teach Austin and dozens of other microtransit-curious cities about how to deploy the technology successfully in a spread-out urban setting. Austin may or may not be the one to unlock microtransit for the suburban masses, but some city will crack the code. When it does, it’s not hard to imagine service with, say, 8 to 10 passengers per vehicle getting preferred access to certain lanes, at certain times of day. Once shared van rides start getting both faster and cheaper, that could limit the attractiveness of lower-occupancy rides.
As local leaders map out routes towards improved mobility, some TNCs will be better suited to play along with new policies than others. “What happens as cities become more knowledgable about what works and delivers the outcomes they're interested in?” wonders Susan Shaheen, the co-director of UC Berkeley’s Transportation Sustainability Research Center and shared mobility expert. “It’ll be interesting to see how that changes the dynamics of the market.”
It is impossible to say whether Uber and Lyft will be the ones to withstand these kinds of nascent congestion policies. But’s safe to say that these kinds of regulations would by definition be local, and in that sense, amount to the sort of “patchwork” regulations that chafe the giants and delight smaller competitors. Uber’s reign has not ended yet, and whatever Holder’s probe finds is unlikely to kill it. Strong-willed cities, however, may have that power.
* CORRECTION: A previous version of this article stated that CapMetro purchased this software.