"This way," he said, "We can maximize the number of drivers on the road." Turning off the surge pricing will result in "huge losses for the business," he noted. But Uber will "do it as long as we can today while we figure out more sustainable ways to keep supply up while the city is in need."

In response to complaints about prices doubling today, when many commuters are left stranded by Sandy, Uber's NYC community manager Ed Casabian had defended the company's position, noting that rising prices help increase supply:

@frankdenbow Higher prices means more drivers will come out and work. We've seen nearly a 50% increase in supply this morning.

— Uber New York (@Uber_NYC) October 31, 2012

Although Uber's since-shuttered beta service for yellow cabs in New York only cost riders a 20 percent tip (shared with drivers), Uber's black car and slightly cheaper hybrid car options come at a considerable premium. And this morning, the additional surge charge left local users frustrated:

Remember the good old days when "demand pricing" after a supply/demand shock like a hurricane was called price gouging? cc/ @uber

— Jeremy Fisher (@jeremyhfisher) October 31, 2012

However, the press-friendly about-face has its critics too:

Good of Uber to operate surge pricing in NY today, defend it on economics grounds and only finally to back down once everyone was furious

— Paul Carr (@paulcarr) October 31, 2012

Slate's Matthew Yglesias mounted a nuanced defense of so-called "price-gouging" in Slate yesterday.

"Stopping price hikes during disasters may sound like a way to help people, but all it does is exacerbate shortages and complicate preparedness.

The basic imperative to allocate goods efficiently doesn’t vanish in a storm or other crisis. If anything, it becomes more important. And price controls in an emergency have the same results as they do any other time:  They lead to shortages and overconsumption. Letting merchants raise prices if they think customers will be willing to pay more isn’t a concession to greed. Rather, it creates much-needed incentives for people to think harder about what they really need and appropriately rewards vendors who manage their inventories well."

And that's how your free market capitalism gets made, ladies and libertarians.

UPDATE 10/31 1.30 p.m.: Betabeat just spoke to Uber general manager Josh Mohrer by phone. He noted that Uber only had surge pricing for riders turned on for less than one hour today--squeaky wheels, everybody!--before he and Mr. Kalanick decided to drop it. "Most of our drivers live outside of Manhattan, so it was difficult for them to get in yesterday," which is why surge pricing seemed like a good option, Mr. Mohrer said. "But this is really an extraordinary circumstance."

Drivers are currently making double and demand is pretty high with most subways and mass transit options out, he said. As for when and if surge pricing would be turned back on for riders, Mr. Mohrer wasn't sure. "Obviously this is a real time situation."

(Photo: Wikimedia)

"We got a love letter from the TLC," Uber CEO Travis Kalanick just told Betabeat over the phone. He was referring, sarcastically, to a statement issued today by the Taxi and Limousine Commission to "remind" medallion yellow cab drivers and owners that the TLC "has NOT authorized any electronic hailing or payment applications ('apps') for use in New York City taxicabs."

The TLC's statement (pasted below) is clearly a direct response to Uber's thwarted attempted to launch an app to digitally hail and pay for yellow cabs in New York City. (Uber already operates a separate request-a-ride payment app for private black cars in New York.) "Basically it's saying that Uber can't do credit card processing, that's what it's saying, as far as I can tell," Mr. Kalanick told Betabeat. "If we don't do credit card processing and the drivers are stopped when they get the pick up request, we'll be okay," he added.

Uber will still be permitted to offer New Yorkers a free taxi ride worth up to $25 (the deal expires next Tuesday), the TLC told Betabeat, but drivers will be penalized by fines or suspension if they use the app for payment.

Check out our interview with Uber about its plan for a New York City taxi service that only costs a 20 percent tip.

The issue is around the TLC's existing contracts with Verifone and Creative Mobile Technologies, the companies that power the entertainment screen and credit card processing on the partition of your taxi. The exclusive contracts are around running the screen and the credit card swipe, referred to internally as the Taxi Passenger Enhancements Program (TPEP).

A representative from the TLC clarified Mr. Kalanick's interpretation, noting that, "Due to contractual obligations, payment apps cannot be used while the existing technology contracts are in place. However, we intend to update our regulations to reflect new innovations and new realities by February when existing contracts expire," adding, "We don't approve or disapprove apps."

The TLC rep said this will does not affect the agency's plans to go forward with a smartphone app RFP. Earlier this year, Uber was one of at least four companies to respond to a request for an app that lets riders pay for cabs with their phone. As stipulated in the RFP, any app approved will be fully integrated with TPEP and existing vendors, so there is no regulatory issue there.

By February, when decades-old rules governing the TLC are updated, we might well see other options enter the market. The TLC seems less resistant to change than hampered by existing rules and contracts.

Mr. Kalanick said he intends on fighting this, regardless. "Our attorneys still say that credit card processing is totally legitimate and we should be able to do this," he insisted. "We believe we are totally legal."

In an earlier interview with Betabeat, Josh Mohrer, Uber's general manager in New York City said, "You can't really RFP your way to innovation."

Mr. Kalanick said Uber has a couple different options in terms of proceeding with its plan for a taxi app in the immediate term. "We can offer it for free. Or Uber can help you get the car, but then you'd have to pay normally inside the taxi," he said, adding, "But still our attorneys tell us that we should be able to process credit cards, that we're not breaking anything regulatory or in contract."

He characterized negotiations as still in flux. The point of giving New Yorkers a free option, was to allow time for "the TLC to digest bringing this innovation to market," he said, noting, "This is moment by moment, this is a very fluid situation. In a week things can change."

Immediately after the TLC issued its statement, Mr. Kalanick had a more candid take on the TLC's comments: "This makes New York a worse off place," he said, "People are more likely to get stranded in outer boroughs, and taxi drivers will have a harder time making minimum wage. This looks like a regularity regime resisting change, but without the regulations to back it."

This post has been updated to reflect breaking news. 

Here is the TLC's press release:

TLC Commissioner/Chair David Yassky………..

“The TLC is eager to pave the way for taxi riders to take advantage of the most up-to-date technology, including smartphone apps that may help passengers locate available taxicabs more quickly.  However, current contractual agreements between the TLC and payment processors restrict the use of apps.  We intend to quickly begin a rulemaking process that will permit broader use of apps when these contracts expire in February.  As part of that process, we will work collaboratively with the livery, black car and taxi industries to address their concerns about the impact of apps on existing business models and to ensure that our rules provide full protection to passengers. In addition, we are currently requesting proposals for a smartphone payment system that will integrate with our existing technology. Time and again, New York City’s Taxi and Limousine Commission has led the country in terms of putting new technology to work for riders and we are eager to see products that allow taxi passengers to take advantage of the latest innovations.”

NOTE: The notice below will communicate to our regulated industries the relevant current requirements, in advance of our commencing the rulemaking mentioned in Commissioner Yassky’s above statement.

 

Electronic Hailing and Payment

 

The New York City Taxi and Limousine Commission (TLC) reminds medallion taxicab drivers and owners that it has NOT authorized any electronic hailing or payment applications (“apps”) for use in New York City taxicabs.

In light of the recent release of applications which may permit the electronic hailing of taxicabs and payment of taxi fares, including a release by UBER, taxicab drivers and owners are reminded that:

• Taxi fares must be accurately entered into the TPEP system.  A passenger paying by credit or debit card must use the TPEP system.

• TLC rules also require that medallion owners maintain accurate trip records; if a driver accepts payment of taxi fares through a payment app not connected to the TPEP system, the trip records will not be accurate and the medallion owner will be summonsed.

• A driver cannot charge a passenger more than the fare on the meter for a taxi ride.  If a driver uses a payment app that charges the passenger more than the fare on the meter for a taxi ride, the driver is responsible for a passenger overcharge.

• A driver must not use any electronic communication device, including a cell phone or smartphone running a hail or payment app while operating a taxicab.  Any driver using such a device at any time except when the taxi is legally standing will be summonsed.

Drivers and owners are reminded that violations of Commission rules can lead to fines and, in some cases, the suspension or revocation of their TLC license.

(Photo: Wikimedia)

Yesterday, we broke the news that Uber, the San Francisco-based request-a-ride service, was close to launching an app in New York City to let you digitally hail and pay for a yellow cab with your smartphone. The launch was planned for today, but hit a road block in discussions with the Taxi and Limousine Commission (TLC)--prompting CEO Travis Kalanick to offer free taxi rides for New Yorkers for a week while they sorted it out.

This morning, we spoke to Mr. Kalanick, as well as Uber NYC's general manager Josh Mohrer by phone. Both offered more detail regarding what Uber's taxi app might cost riders and drivers, why the launch was delayed (cough Verifone cough), and why they rushed into the market (hint: it concerns a different kind of British invasion). 

(Photo: an unverified screen grab of Uber's messages to drivers)

How the Taxi Service Might Work

A similar service Uber offers for private black cars and hybrid cars comes at a prohibitive premium on your standard cab--40 to 100 percent for black cars and 10 to 25 percent for hybrid ones. Negotiations are ongoing in terms of how the taxi option will work in New York City. However, Mr. Kalanick pointed out that Uber's yellow cab service in Chicago and Toronto only sets riders back a 20 percent tip, with no additional fee.

"The level of details we have on New York are not finalized," he said, "But what we would like to do is charge what's on the meter plus gratuity and that's it."

In other cities, riders request a cab through the app and the meter is turned on. Once the ride is over, the meter is turned off, the fare is punched into the app. "The 20 percent tip is automatically added and that covers our service charge, so the driver is still getting a tip," said Mr. Mohrer. According to Mr. Kalanick, if you average it out across the board for all Uber taxi services in Chicago and Toronto, "Uber makes [a] single digit percentage on rides."

It's worth noting that after New York City introduced default payment buttons with a 20 percent, 25 percent, and 30 percent option, the average tip percentage for riders who paid with credit cards jumped to 22 percent.

To keep the service "elegant," Uber doesn't let riders increase or decrease the size of the tip from 20 percent. "We may have to put in choice in New York," Mr. Kalanick noted, emphasizing that discussions are very much up in the air.

Uber's taxi app also doesn't allow for payment in cash, which is one of the reasons trade groups representing cab drivers--like Metropolitan Taxicab Board of Trade and the Livery Roundtable--have expressed reservations about the service creating "a two-tiered taxi system" for riders with smartphones, as the New York Times reported.

Mr. Mohrer explained, however, that Uber's use case is more about filling dead time with supplemental income. Since launching a taxi cab service in Chicago in April, Uber has seen the thousand-odd drivers that have registered for its service earn an average of an extra $200 a week through a couple extra fares a day.

"You'll probably have a pretty easy time getting street hail," during rush hour in Midtown, said Mr. Mohrer. "We're thinking more about outer-boroughs, off-peak times, parts of the city that don't always get a lot of coverage. Late night when it might not be safe."

In Chicago, Uber has experienced a spillover effect into its premium offerings. "It has does great things for our black car service too," explained Mr. Mohrer. "It just brings a lot of people under the Uber tent at a more accessible price point."

Free-for-All

Currently, the only way riders can utilize the taxi option is to access the free offer--one ride per person, up to $25, until midnight on Tuesday, September 11th.

We've already heard reports from riders about some difficulty redeeming the offer. Uber only has 105 cab drivers pre-registered with the app. "We're working really hard this week to add as many drivers as we can," said Mr. Mohrer.

To that end, Uber has brought in staffers from other cities and Mr. Mohrer said he expected to add about 500 drivers this week.  "We know it's hard to get everyone in a car this week but we're going to do our best," he added.

One source mentioned that Uber is offering taxi drivers a $50 bonus if they pick up at least two Uber fares today, as per the unverified screen shot (above) of messages Uber sent its taxi drivers obtained by Betabeat. Mr. Kalanick wouldn't offer any specifics except to note that incentives are often packaged and aren't typically contingent on one thing.

In the meantime, Uber is hoping a week will buy enough time for the app to be up-and-running. "We're confident that in that time frame, the TLC will come to some kind of resolution," noted Mr. Mohrer.

The Hold Up Is Over Payments

A New York Times article out last night said Uber's taxi service was potentially in violation of a number of city regulations, including prohibitions on prearranged rides in yellow taxis and restrictions on cabbies for refusing a fare. But both Mr. Kalanick and Mr. Mohrer, who were present in yesterday's meeting with the TLC dismissed those concerns, pointing only to objections regarding using Uber's app as a payment system.

"They're concerned about credit card processing and whether we're even allowed to do it," Mr. Kalanick admitted.

In terms of ignoring street fares, Mr. Mohrer said, it won't be any more of an issue than when you get passed up for the person across the street. "By the end of the week, the maximum distance is going to be less than half a mile. Our electronic hail is never gonna be more than a few blocks away. It was just the payments," he said.

Uber initially met with the TLC about this launch a few weeks ago, at which point the startup was instructed to take a look at the existing contract governing medallion drivers. Uber thought they met the existing terms, but last week they were once again called in by the TLC, which had concerns about whether it interfered with an exclusivity clause with Verifone, a payments conglomerate with a $3.8 billion market cap.

"It's also our understanding that those contracts run out in February [2013] and it hasn't been communicated to us that those contracts are going to be renewed," said Mr. Mohrer. Both the TLC and Verifone declined to comment.

Back in March, the TLC put out an RFP for a smartphone app that will let riders pay for taxis from their phone. After looking through the lengthy RFP, it's clear that any proposal will face integration issues governed by the TLC's contract with Verifone.

A British company called Hailo, an Israel company called Get Taxi, and another company called Taxi Magic are all competing for the same RFP.

"We really don't think that's a great way to do this," said Mr. Mohrer. "You can't really RFP your way to innovation. You need to let free enterprise do its thing."

The British Invasion

Why the rush to market, if Uber still has to lock down its payments service and could benefit from onboarding more drivers? As we reported yesterday, Hailo's impending entry into New York City may have been a deciding factor.

Reports about Hailo's launch suggested the TLC wasn't waiting around to decide the RFP. "Hearing that a potential competitor was launching in New York, one of our most important cities, indicated to us that the TLC was open to have these things move forward now," said Mr. Mohrer, who noted that adding a yellow cab service had always been a part of Uber's long-term plan.

Yesterday, Betabeat received confirmation from Hailo that it had 2,500 drivers pre-registered for its service, which seemed to pale in comparison to Uber's scant 105 drivers.

Mr. Mohrer questioned Hailo's numbers. "What they mean by 'pre-registered drivers' is an email address. When we say we're working with a driver, the relationship is a little more committed than that," he said. "They've been trained on our system to have one of our devices, they have a real relationship with us."

In response to questions from Betabeat, a representative from Hailo said the company had 1o drivers currently evangelizing the service to other drivers in New York City. Through those relationships, the representative said Hailo had obtained verified driver information, including email addresses, phone numbers, and medallion status, although that did not represent a commitment to use the app.

(Photo: Wikimedia)

Update 9/6/2012: The TLC just issued a statement reminding drivers they are not authorized to use digitally hailing or payment apps. Uber CEO says, "We believe we are totally legal.”

Check out our interview with Uber about its plans for taxi service New York City.

Earlier this afternoon, Betabeat broke the news that Uber planned on launching a request-a-ride app for yellow cabs in New York City that would let riders digitally hail and pay for taxis with their smartphones. The company already offers a similar service here for private black sedans and SUVs.

However, Uber's plan ran into some delays as the New York City Taxi & Limousine Commission tried to make sure that it complied with city rules and payments regulations.

As Uber tries to resolve those concerns with the agency, CEO Travis Kalanick has decided to offer the yellow cab option for free for the next week to give riders "a taste of the future," The New York Times reported.

Josh Mohrer, general manager of Uber NYC, told Betabeat the offer begins at 8 a.m. Wednesday, September 5, and ends at 11:59 p.m Tuesday, September 11.

"We're giving a free ride to every New Yorker," Mr. Mohrer told Betabeat by email. "Starting tomorrow you'll be able to request a taxi from the app, and the ride you take will be free, up to $25. After your ride is over, the taxi request option won't be available for a week, because we want to give everyone a try."

That's one way to flood the market with Uber fans before Hailo, London's answer to a taxi app, comes calling in a couple weeks.