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SideCar Approaches A Regulatory On-Ramp

· May 6, 2013

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Can SideCar get a lift from the District of Columbia, or is it only going to get taken for a ride?

The ride-sharing service, which matches passengers with drivers heading in about the same direction, launched in San Francisco last June and began limited operation in D.C. in late March.

The District of Columbia Taxicab Commission is not pleased by the development.

“The DC Taxicab Commission has determined that Sidecar offers a public vehicle for hire service and as a result their drivers must have licenses from the Commission and those drivers’ cars must have L tags,” wrote spokesman Neville Waters in an e-mail Wednesday.

DCTC has yet to take enforcement actions against SideCar. In New York, however, the Taxi & Limousine Commission had police briefly detain two drivers and impound one’s vehicle. In Philadelphia, the city fined three drivers and impounded their vehicles, then fined the company too.

Here’s how the app works: After you open an account in SideCar’s iOS or Android app, including storing a credit card for a “donation” covering each ride, you set pickup and destination addresses. The app suggests the right donation for that route, you confirm the ride, and a driver accepts and arrives. At your destination, you pay what you want, then you and the driver rate each other.

Or so I’m told: The service only runs on weekends for now in the District, and I’ve yet to have an opportunity to use it.

Co-founder and CEO Sunil Paul explained Thursday morning that the company provides a matching, not a dispatching service.

A driver need not accept a ride request, and a passenger can balk when a driver rolls up (Paul said he declined a ride when the car wasn’t the one pictured in the driver’s profile.) Drivers aren’t supposed to drive full-time or even go out of their way; a FAQ states “you share the rides you’re already taking.” And that voluntary payment can be zero.

(The suggested donations on a few sample itineraries are in the range of taxi fares–for instance, $11 to go from 15th and L Streets in downtown D.C. to the Rosslyn Metro stop in Arlington, less than three miles away.)

SideCar also aspires to be a friendlier ride than a taxi. “It’s social versus chauffeur,” Paul said. “Most people sit in the front.”

Passengers and drivers discussing SideCar on Quora have made the same point. As one driver wrote, “Money shouldn’t be your motivation, [….] meeting new people, discovering new places in the city & being a friend giving a ride to another friend should be.”

There’s more than one historical precedent. Since the 1970s, commuters in the Washington area have queued up at “slug lines” to accept free rides from solo drivers who need passengers to use the the region’s high-occupancy vehicle lanes.

Slug lines operate without any central organization, only consensus rules, including one that passengers shouldn’t offer money to drivers. Local governments have long since accepted that the practice works, to the point of putting up signs for slug lines.

SideCar, however, imposes requirements for drivers: a 2000 or newer four-door vehicle, valid insurance, a clean driving record, taking a training session and passing a background check.

In theory, having an organization take responsibility for safety in a ride-sharing system might be more palatable than the quasi-anarchic nature of slug lines.

But while no cash changes hands in a SideCar donation, funds do regularly move, with SideCar taking a 20 percent cut of each donation. And money changes everything. Especially when regulations are involved.

New markets like the District add an extra wrinkle: In what Paul called its “brand ambassador mode,” SideCar pays the dozens of drivers it’s recruited to keep enough cars available.

(When I asked Paul if that incentive might cause a regulator to see those particular drivers as more akin to cabbies, he paused and said “We’re paying them really to market, not to drive.”)

In rejecting the D.C. taxi commission’s view that its drivers’ cars qualify as “public vehicles for hire” subject to its rules, Paul said agencies like that are in the business of incumbent protection.

“It’s not surprising to us that regulators want to assert their jurisdiction,” he said. “Most regulators want to protect their monopoly. They don’t lead with questions on public safety or fairness.”

(I should note that my meeting with Paul started 45 minutes late because he was finishing breakfast with Ward 3 city councilmember Mary Cheh. A spokesman for her didn’t return an e-mail asking for comment.)

But many existing laws–written with the underlying goal of ensuring a viable business model for the point-to-point, on-demand transportation that taxis have provided for decades, and which SideCar and other ride-sharing services can’t readily replace–don’t quite address what the company does.

Said Paul: “What drivers are doing… is either fully legal or not illegal.”

That’s the problem, isn’t it? If you’re an incumbent, “not illegal” is your green light. If you’re a challenger, it’s at best a yield sign, at worst an arrest by the side of the road.

Competition

Some, if not all of society’s most useful innovations are the byproduct of competition. In fact, although it may sound counterintuitive, innovation often flourishes when an incumbent is threatened by a new entrant because the threat of losing users to the competition drives product improvement. The Internet and the products and companies it has enabled are no exception; companies need to constantly stay on their toes, as the next startup is ready to knock them down with a better product.

Innovation

New technologies are constantly emerging that promise to change our lives for the better. These disruptive technologies give us an increase in choice, make technologies more accessible, make things more affordable, and give consumers a voice. And the pace of innovation has only quickened in recent years, as the Internet has enabled a wave of new, inter-connected devices that have benefited consumers around the world, seemingly in all aspects of their lives. Preserving an innovation-friendly market is, therefore, tantamount not only to businesses but society at large.