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With all the excitement over last week's decision to test out taxi apps in New York City, another technological step forward got overlooked. During a meeting at its Beaver Street headquarters last Thursday, the Taxi and Limousine Commission also unanimously voted in favor of new rules for those credit card swipers and "entertainment systems" (scare quotes necessary) in back of your cab, referred to as T-PEP.

Rather than stick with exclusive, bureaucratic contracts--like the ones New York has with VeriFone and Creative Mobile Technologies--competition for T-PEP 2.0 will go free market in February. TLC Chairman David Yassky told us the rule changed was designed to keep vendors competitive and open to new technologies. Because of the barriers to entry with mobile credit card processing, the city would most likely see one or two new players. That still means that Jack Dorsey's mobile payments company Square, which ran a pilot program with iPads in taxis earlier this year, has a chance to become a contender.

But last week's vote didn't signal the end of all the sniping between competitors.

Yesterday, Creative Mobile Technologies (CMT) filed civil action against VeriFone seeking damages in excess of $250 million. The suit charges Verifone with “wrongful, malicious, tortious and contractual breaches” of CMT’s agreement with Verifone, its "exclusive in-taxi advertising partner."

According to a press release from CMT:

Among other things, the lawsuit alleges that VMS withheld financial information from CMT, delayed payments to CMT for certain advertising, refused to pay CMT for other advertising, and violated the agreement’s broad rights of first refusal by installing similar technology and placing advertisements in taxis outside of New York City without first offering those opportunities to CMT as required under the agreement. Such locations include Miami, Las Vegas, Atlanta, San Francisco, South Africa, and London.

TLC spokesperson Allan Fromberg told Betabeat, "This [lawsuit] would have no impact whatsoever on T-PEP," pointing out that VeriFone and CMT "are competitors who have separate and distinct customers." Verifone spokesman Pete Bartolik said the company does would not comment on pending litigation, however he did say that VeriFone will be "active participants" in the revamping the technology in the back of your cab.

Your move, @Jack.

cmtsuit.121712.releasefinal

Smartphone and the City?

In a packed boardroom across from City Hall last week, members of the New York City Council's Committee on Transportation met to discuss the Taxi and Limousine Commission's plans for a smartphone app that will allow riders to digitally hail and pay for yellow cabs, with just a few taps of their phone. The TLC shared the results of a survey--conducted through backseat screen, naturally--which found that almost 70 percent of passengers owned a smartphone and that 50 to 60 percent of respondents want an app that lets them find and pay for taxis.

The testy standing-room-only crowd didn't shy away from cheering (when Councilman Vincent Ignizio accused the TLC of secret plans to destroy the livery cab industry via e-hailing apps) and jeering (Councilwoman Darlene Mealy, who represents Bed-Stuy and Brownsville, pointedly rolled her eyes when a TLC rep implied it's not that hard to find a cab to the outer-boroughs.)

The notion of radically altering as iconic a New York moment as flagging down a yellow cab was met with wariness and derision from council members. It's hard enough trying to explain the off-duty sign to tourists or parents visiting from out-of-town--imagine if you had to instruct them on how to navigate an app. "What happens if you are a senior citizen or a disabled person and you do not have access to the apps or you don’t know how to work with them?" asked committee chair James Vacca. "Somebody with an app will be able to hail a cab and you’ll be standing in the street longer than you normally would."

The primary concern seemed to be creating a two-tiered system, one that privileges tech-savvy smartphone owners traveling around downtown Manhattan, credit cards in hand. The second major worry was the potentially devestating impact on the city’s black car and livery cab providers. Historically, for-hire vehicles have had the monopoly on pre-arranged rides, while yellow taxis pick up passengers off the street.

The TLC is the agency responsible for regulating and licensing city taxis. Whereas the City Council, on the other hand, "doesn't have a lot of power to do a whole lot, other than to make noise, which they seem to do reflexively,” a source familiar with city politics said when asked about the council's authority over the TLC. Nonetheless, testimony and off-the-cuff answers from Ashwini Chhabra, the TLC's dapper deputy commissioner of policy & planning, offered the clearest picture yet of the agency's thinking on e-hailing, credit card processing, and competing with livery cabs.

Mr. Chhabra revealed that the TLC plans on releasing a set of rules for comment on those issues "as early as October."

The urgency surrounding the matter is tied to the request for proposal (RFP) for a city-sanctioned smartphone app that was released in March. For the first time, Mr. Chhabra revealed that 19 companies have submitted proposals. That includes startups like Uber, Get Taxi, Hailo, and Taxi Magic, which have all publicly acknowledged their bids. But the RFP focuses primarily on in-app credit card processing that would work with the existing T-PEP system (the credit card readers and screens run by Verifone and Creative Mobile Technologies through an exclusive contract with the TLC.) “It did not contemplate hailing functionality,” said Mr. Chhabra, although the TLC asked to hear about that feature.

The folly of requesting specs for e-hailing before the TLC had promulgated rules on how that should work it was not lost on Mr. Vacca. But Mr. Chhabra seemed convinced that could be done simultaneously and wouldn't require postponing the RFP.

He reminded the council that T-PEP contracts are scheduled to expire in February, which might open the way for something more smartphone-friendly. "We will need to provide specs for T-PEP 2.0," he said, pointing to the city's pilot program with Square, Jack Dorsey's mobile payments system, which has run a pilot program in 13 vehicles replacing T-PEP with iPads in the back seat and iPhones in the front. "We have received positive preliminary feedback. If the final results of this pilot program are similarly positive we will allow similar solutions as part of the T-PEP 2.0," said Mr. Chhabra.

Earlier this month, Uber tried to jump the gun on the RFP and expand its existing request-a-ride offering from black cars and hybrid cars into New York's yellow taxi market. (This brash, bulldozing approach seems to be something of a pattern with Uber. Currently, the DC Taxi Commission is butting heads with the startup, although the chairman of the FCC is a fan.) Here in New York, Uber's bum-rush was quickly shot down when the TLC started notifying drivers that using payment or e-hailing apps was punishable offense, but only after the TLC permitted Uber to offer free rides to New Yorkers for a week.

"I can tell you that looking at the availability of cabs this morning on one of these apps, it looked like there were four yellow taxis available in the whole city," Mr. Chhabra said with whiff of amusement.

Uber did not speak at the hearing, but a trio of Hailo ambassadors were present, sporting bright yellow company T-shirts. Jing Wang Herman, CEO of Get Taxi's U.S. operations, offered testimony explaining her company's approach, which offers an option to sidestep the e-hailing issue by sending the passenger a beacon to locate nearby taxis, "without pre-arrangement."

From the tech world's perspective, the TLC's response to Uber has been anti-innovation--a hallmark of bureaucracy and counter to Mayor Bloomberg's pro-startup agenda. But hearing the City Council's concerns clarifies the number of legitimate and troubling issues in play. In fact, during the hearing, the agency came across as eager to move fast and break things, as Zuck might say. "It is not the rightful function of government to protect one segment of an industry from competition from another segment," Mr. Chhabra said. "So long as passengers win and the industry over all wins, our goal to be to encourage innovation and forward movement."

Here are the problems any startup that wants to offer their app in yellow cabs will have to keep in mind:

SAFETY FIRST!

If you think texting while driving is hazardous, try to imagine responding to a request for a ride from within an app. After a council member quipped about implanting computer chips in drivers' brains (to make sure there hands stayed at two and ten), Mr. Chhabra retorted, "I don't think we have to go as far as a chip in the brain, maybe Google Glasses." He explained that the existing T-PEP system, which is occasionally used to dispatch messages to drivers, only delivers the message when the cab comes to a halt. TLC is looking for an app that offers a similar technological fix for that issue.

YES, THE MTA WOULD LIKE A RECEIPT

Currently, the MTA takes a 50 cent tax on any ride where the passenger pays with a credit card, and the council pointedly wondered how that would work with apps. Mr. Chhabra responded that the T-PEP system currently offers "a full accounting" of everything from the rate of fare to taxes and tolls accrued during the ride. "I want to be clear that when we look at apps as technological innovation they have to be that, we don’t want to take a step backward," he noted. "If apps are going to be permitted to play some of that functionality, then they will also have to bear some of the reporting requirements and tax collect requirements."

HAILING FOR THOSE WITHOUT A SMARTPHONE

Mr. Vacca, the committee chair, came back time and again to his fear of a two-tiered system. "A lot of the people that I represent don’t have credit cards. A lot of people in the Bronx don’t have checking accounts. They have cash. I want to protect those people too. They’re entitled to a cab. How are we protecting the person of limited means who is entitled to our care like anyone else?" he asked, wondering whether the TLC had studied smartphone ownership outside of the Manhattan Central Business District, where the TLC said most yellow cabs have to operate. (We didn't have the heart to tell Mr. Vacca that no amount of innovation was likely to improve Bronx residents' chances of finding a yellow cab willing to take them home.)

Mr. Chhabra responded he didn't want to prevent anyone from paying with cash, but didn't really offer a picture of how a smartphone app would allow that. He did, however, point out that the smartphone apps already being used by black cars and livery cars, like Uber, allow a texting option. "So that’s something we would explore as well," he said. During the TLC's testimony, Mr. Chhabra also said where e-hailing may be "particularly disruptive, for example in taxi stands or transit hubs and at airports, we will seek to prohibit the use of these apps."

IS THIS EVEN LEGAL?

As last week's hearing, it quickly became clear the relationship between the council and the TLC was contentious at best. Members questioned the TLC even had the authority to permit e-hailing considering that it could affect the millions of tourists who come to New York City every year, especially without clarifying the rules around it. "It's like you've become this superpower and something is wrong with that," said Ms. Mealy. But political bluster aside, it'll take more than mass-adoption of smartphones to squash these legal issues. Back in June, for example, a state judge blocked the TLC's plans for livery cabs that could pick up street hails called "borough taxis" after the judge found that "Mayor Michael Bloomberg's administration improperly skirted the City Council to get its plan approved in Albany."

OUTER-BOROUGH DISCRIMINATION

Many of the council members present represent constituencies in the outer-boroughs and seemed particularly concerned about discrimination when it comes to both appearance and destination. For those of us that have kicked out of the backseat of a taxi once we utter the word Brooklyn or Queens, it's not hard to see the danger in disclosing our end point to a driver via an app. But Mr. Chhabra said an app that doesn't disclose your destination could "introduce an element of colorblindness." This elicited some laughs. Almost every council member who spoke felt compelled to share their story of being denied a ride because they wanted to go to the airport or the Bronx, despite the fact that drivers are legally required to take you there.

Another argument Mr. Chhabra made in favor of smartphone apps was that they, "may also serve to reduce deliver reluctance to take trips out of Manhattan, if drivers think these apps can provide a greater prospect of finding a passenger for a return trip." It was at this point that Mr. Vacca talked about how of the people he represents don't have smartphones.

DEATH TO LIVERY CABS?

The notion that the TLC is not responsible for protecting one segment of the industry, which could refer to its contracts with Verifone and CMT, did not sit will with Mr. Ignizio, who worried that offering pre-arranged rides via yellow cabs would cut into livery cab margins. "That's true in a free market," he said, but as a government agency, the TLC should "ensure that both survive and thrive. I don't believe they want a livery industry. The TLC wants to be the big base station that's the unstated goal of the TLC," he ranted, eliciting a "Hallejuah," from the older gentleman sitting next to Betabeat. Mr. Vacca echoed those sentiments when he told Mr. Chhabra, "It's within your purview to cushion an industry."

Mr. Chhabra pointed out that black cars and livery cabs are already using these smartphone apps themselves, but said the TLC would be vigilant about monitoring negative impact. During earlier pre-written testimony on behalf of the TLC, he pointed out that the same concern was voiced when the agency discussed offering credit card processing. The TLC heard back that some businesses now allow employees to use yellow cabs because they're able to pay with a card and get a receipt. "But no one would suggest that credit card readers is a bad idea. Not least of all the 100 million plus passengers, who pay for taxis trips with credit cards each year."

SLIM MARGINS

Councilman Fernando Cabrera wasted no time getting to point, asking "For these app companies, how are they gonna make money?" The council was concerned whether riders or drivers would have to pay a premium for this enhanced mobile service. (When Uber discussed its yellow cab plan with Betabeat, the company proposed a flat 20 percent tip to cover its service. That's a little lower than the average credit card tip since the TLC installed those automatic tip buttons starting at 20 percent, and much cheaper than the prohibitive fee for its black car service, but it also means less of the tip is going to the driver.) "I don’t think the margins are going to be very substantial," for smartphone startups said Mr. Chhabra. "That said, I’m not the entrepreneur and if someone thinks there is a business model that they can make work, we want to give them that opportunity." At the same time, he said, the TLC wants to make sure that e-hailing and paying only becomes an option for people who can afford it.

NECESSARY EVIL INNOVATION?

Companies like Uber, Get Taxi, and Hailo all currently offer their service for the equivalent of yellow cabs in taxis from Chicago to Moscow, but council members suggested that startups have a stronger burden of proof that it's necessary in New York. Mr. Chhabra himself noted more than once than he didn't see the necessity of this kind of app. "New York, of course, is unique. Unlike Chicago or San Francisco, you don’t generally need a smartphone to hail a taxi. At least not in the Manhattan Central Business District, which is where yellow taxis operate for the most part. All you need is to put your hand in the air, and as if out of nowhere, a taxi appears to take you where you want to go."

“Yeah, if you can fit in the back seat,” an older woman in a wheelchair yelped from the audience.

City Councilman James Vacca (council.nyc.gov)

Paying for your cab fare with a credit card seems simple enough, but for the visually impaired, it can be a lot more difficult. New York's yellow cabs just weren't equipped with the proper software enhancements to help the visually impaired--until now.

Lighthouse International, an organization dedicated to overcoming vision impairment through rehabilitation, education, research and advocacy, teamed up with Creative Mobile Technologies and city council member James Vacca to announce software enhancements to New York's taxis to optimize the payment experience for the visually impaired.

According to the press release:

CMT created adaptive software that will allow blind or visually impaired taxi passengers to hear the fare changing in regular intervals during the trip and facilitate all aspects of the credit card or cash payment functions upon reaching their destination, including selection of payment options, verification of fare and selection of tip percentages.

Former New York Governor David Patterson helped debut the newly revamped taxi TVs at City Hall today, quipping, "This is the first time I'll be able to use a credit card by myself in a taxi cab—and I was the Governor of New York!"

The new software will begin to hit the 13,000 New York taxis run by Creative Mobile Technologies within the next few weeks.

via dailydooh.com

It seems like every other tech story these days is about the old guard banding together to protect the status quo. So it's a relief to hear that  New York City's Taxi and Limousine Commission agreed yesterday to test out Square's proposal to replace Taxi TV with its own iPad mobile payments system, despite objections from Verifone and Creative Mobile Technologies--the duopoly that currently controls what technology gets placement in your yellow cab's partition.

As the Wall Street Journal reports, Square will mount a "ruggedized” iPad on the divider of the cabs. Using Square's payment system, riders can swipe a credit card and decide whether to receive a receipt by paper, email, or text. Oh yeah, and a chance to look at a map on an iPad's sleeker touchscreen.

Square also offers a chance to stop the squawking of the Taxi TVs, which New Yorkers voted the second-most annoying thing about cabs last year.

Part of the appeal, said TLC staff members who presented the Square proposal, is what will not be there: Unlike the current consoles that accept card payments in taxis, the Square proposal includes no advertising, and no video or sound, providing a respite from the cacophony that has turned off some riders and drivers.

As we've discussed in previous posts, the bigger deal here is really the cost of credit card transaction fees, the burden for which is levied on cabdrivers. Square offers a 2.75 percent fee to Verifone's and CMT's 3.5 percent. With the latest numbers from January showing 55 percent percent of fares collected by credit cards, it's a growing issue.

Verifone has argued that Square's prices will go up when it has to absorb the cost of installing terminals, complying with security requirements, and managing tax withholdings. The Journal says Verifone and CMT will also be launching their own 30-cab pilot program to test new technology. But it's hard to imagine that a startup like Square couldn't be more nimble about cost-cutting.

After Betabeat called Square CEO Jack Dorsey "dashing," in our post yesterday, Verifone reached out to plea for less bias. We assured them it was all very platonic and asked Verifone to explain what, exactly, was innovative about their proposal, which reportedly included  a lottery-ticket machine.

Pete Bartolik, from VeriFone Media Relations (and likely every bit as dashing!), said the company is already testing tablets in 50 cabs in the city. "The current fee structure, which we're bound to by contract, was set six years ago and based on variety of services for passengers and operators, including GPS tracking (handy for recovering items left in taxis), trip logging, providing info/entertainment content," he wrote by email.

Besides the lottery system,  Verifone is testing out other examples of payment-enabled media. "Other possibilities - buying a theater ticket while on route to the venue; getting dinner discount coupon as you've being driven to the restaurant; ordering/paying for items online based on ads playing in the taxi," he said, adding, "We've already been running advertiser sponsored games, including one we did for Uno as well as a trivia game for Seinfeld. Much more is being explored such as social media tied to location, etc."

Hmm, sounds like a far cry from "Silence is golden."

via Wikimedia

Last week, we told you about an innovative proposal from Square, the mobile payments company run by dashing parallel entrepreneur Jack Dorsey, who is simultaneously employed as the executive chairman of Twitter. Rather than squawking Taxi TVs, which allow consumers to pay by credit card, but force cabdrivers to absorb costly processing fees, Square proposed testing out iPads with apps--and its own cheaper mobile payments system, of course.

Currently, fleets can withhold 5 percent of fares paid by credit card from drivers after a shift to cover the 3.5 percent processing fee and a 1.5 percent bookkepping costs. David S. Yassky, the chairman of the Taxi and Limousine Commission, made no bones about his goal in testing it out: to push down the price of credit card transactions.

Existing vendors Creative Mobile Technologies and Verifone, who maintain a duopoly among yellow cabs, already made a fuss when the idea was raised earlier this year, but now, the Wall Street Journal reports, they've muscled their way into the TLC's pilot program. CMT, Verifone, and Square will all get a chance to test out ways to transform 30 yellow cabs a piece.

Will the old guard actually come up with something new-fangled? That depends if you think buying a lottery ticket is Web 2.0:

"Neither Verifone nor CMT provided details of the new services they might offer, and their proposals weren't expected to be completed for weeks. But there was a strong hint in the timing of a Verifone corporate announcement on Wednesday: The company, with a partner, is working to offer mobile lottery ticket sales in five states from a variety of locations, including taxicabs and TV screens on gas station pumps.

The company is hoping to expand the offering nationwide, and an executive didn't rule out New York."

Let's hope the prospect of additional lottery ticket sales doesn't sway the city into thinking this is progress.

TLC chairman David Yassky said the tablets would also enable the commission to test out Square's mobile payment technology "and swipe a credit card at any point in the trip," reports the New York Times. It should come as no surprise to Brooklyn-dwellers who've to had to promise to pay cash in order to get back from Manhattan, but the current credit card system, controlled by Verifone and Creative Mobile Technologies, is hard on cabdrivers, who have to eat the fee for the transaction. With Square, there's a chance to push down the price of transactions.

The future may be closer than you think as Square is making a presentation to the commission on March 1st. The presentation was initially scheduled for January 19th, but general counsel for Creative Mobile Technologies wrote in to ask the commission to delay a vote.  Creative Mobile suggested, as other Square rivals have in the past, that Mr. Dorsey's technology may put rider's information at risk.

However, as Square told the Times, its payment system is processing more than than $2 billion in annual transactions and already employed by taxi drivers, who attach the Square dongle to their headphone jack in their smartphone, in cities like Baltimore, Portland, San Francisco, and more.

Switching over to tablets also reduces the chance over backseat divisiveness when one passengers wants the Taxi TV on and the other can't stand it. For the record, Betabeat is squarely (forgive us) in the latter camp.