Disrupt taxis! (Photo: nycgov.tumblr.com)

The era of the e-hail is upon us at last! A judge has dismissed a lawsuit against the city's taxi apps pilot program, meaning the Taxi and Limousine Commission is free to proceed.

The Livery Roundtable and the Black Car Assistance Corporation filed the lawsuit back in February, just as the TLC's year-long experiment was scheduled to begin. E-hailing apps would, of course, challenge the stranglehold the black car business has long had on the pre-scheduled pickup business. Naturally, the industry has fought like hell against the program, asking the court for an injunction against it and claiming it exceeded the TLC's authority and was basically a sneaky way to fully and permanently implement e-hailing.

But the courts didn't bite. The decision handed down today rejects the request to block the program, noting that most of the parties to the suit "represent or have financial interests in businesses that operate vehicles known as black cars or livery or for-hire cars." Judge Carol Huff also points out that, contrary to arguments made in the lawsuit, e-hailing apps are likely to reduce discrimination, since it's not like drivers can see their passengers first.

After going through each of the complaints in the suit, she concludes: "the petition is denied, the restraining order is lifted, and the proceeding is dismissed." Insert your own Law and Order sound effects.

Randy Mastro, the lawyer handling the case on behalf of the BCAC and other parties, is not a happy camper: “While we are continuing to review it, this decision is so fundamentally wrong in so many respects that we are contemplating an appeal," he told Betabeat in a statement.

TLC Commissioner David Yassky was singing a happier tune: "The market will ultimately decide which apps rise or fall and we have an obligation to give the riding public that choice. Thanks to today’s ruling, they have that choice."

Uber CEO Travis Kalanick also took a victory lap, crowing in a statement that, "Ever since our initial launch of Uber for New York CIty yellow cabs in September, we've been saying that you can't stop progress when the people want it enough."

He also held up the TLC commissioner and the mayor as almost Howard Roark-like warriors against the grain: "New York City has some of the deepest dug-in, most entrenched special interests in the country. The fact that Taxi Commissioner David Yassky and Mayor Mike Bloomberg were able to overcome the transportation industry's blatant self-interest should be a lesson for other cities and states who also want to be forward-looking, tech-friendly and visionary."

Don't expect to whip out Uber for your commute tomorrow morning, though--it'll take time to get the ball rolling again. But the biggest barrier to the pilot is now gone.

(Update) Hailo CEO Jay Bregman has also provided a statement, saying: "Hailo always believed that e-hailing is not only legal, but inevitable. We are delighted by the ruling and are preparing to launch immediately."

BFFs

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

Mayor Bloomberg and Jack Dorsey during Square's short-lived pilot program.

This morning, on his weekly Friday radio show with John Gambling, Mayor Bloomberg discussed the Taxi and Limousine Commission's vote in favor of a year-long pilot program to test out e-hailing apps, which let riders flag down a cab with their smartphone.

As we noted yesterday, the pilot was a last-minute compromise when it seemed like lobbying from black car and livery car incumbents would prohibit the passage of permanent rules to open up the taxi market to any app with a license. (Black cars and liveries worry that the ability to "pre-arrange" taxi rides with an an app will hurt their business.)  

In his remarks this morning, Mayor Bloomberg mused on some potential pitfalls of incorporating the apps into the taxi hailing experience:

"The mobile phone knows where you are, so in theory you hit a button and any taxi driver that’s on the same app on his mobile phone or her mobile phone can hit a button and say, 'I’m going to come.' What happens if two guys hit a button at the same time? What happens if you hit the button, a guy says he’s coming, and in the meantime some cab pulls up empty--somebody’s getting out? Do you hop in? And what do you do with the first cab guy? Whose obligations are what?"

Overall, however, he advocated for a free market approach, echoing statements made by TLC chairman David Yassky in our interview earlier this week.

"Everyone’s different, I have absolutely no idea which one is better. My sense is always that you should have more than one so the public has a choice and let the marketplace decide."

But things really started to heat up when Mr. Gambling guessed that cab companies and drivers would be into this sort of innovation. Mr. Bloomberg reiterated the example of adding credit card payment options, which came up repeatedly during negotiations as an example of unfounded fears of incorporating new technology.

"Uh. There is a group of cab owners that are opposed to anything, but yeah most cab drivers should like this. They didn’t like credit card use and now they’ll all tell you their tips are up dramatically."

Somehow that segued into a diatribe on corruption in the taxi industry!

"The cab industry is a funny industry. I don’t know if there’s any other place in the world where the city gives a license and the people that have that license can then trade it and resell it and the city doesn’t have any interest and any ability to share in the value going up. And the politics, because they support candidates--a normal market would just say: Well, we’ll just issue more taxi licenses. Wrong! Because they have bought the legislatures and stopped the ability to do that. It is one of the great rip-offs of the public any place I’ve ever seen."

Mr. Bloomberg's agenda for 2013 might be to disrupt medallions, but the rest of us are more concerned about the MTA.

(Photo: Wikimedia)

In a packed meeting at the Taxi and Limousine Commission headquarters this morning, commissioners voted 7-0 in favor of adopting a year-long pilot program to test out e-hailing apps that let riders flag down yellow cabs from their smartphone. The pilot won't commence until February. After reviewing data from the test run, the TLC will assess whether to make it permanent. The more limited pilot program is an abrupt change from an earlier proposal by TLC chairman David Yassky: to vote on e-hailing rules that would have opened New York's taxi market up to any app that met guidelines and secured a license.

The TLC pivoted from voting on rules to voting on a pilot program, "Because it wasn't going to pass," commissioner Nora Marino said with a laugh. Ms. Marino, who abstained from voting, said she was only notified about the possibility of a pilot program yesterday, which is when word spread of the change. "Are you kidding? Really? Can we have some time?' That was my response," she told Betabeat after the meeting adjourned.

Fears that the rules wouldn't pass were related to heavy lobbying from the livery and black car industry. They argue that if yellow cabs were allowed to venture into pre-arranged rides (as opposed to just street hails) it would gravely impact their business. Elias Arout, the only other commissioner who also abstained, said he had never received so many lobbying phone calls: "I'm amazed my wife is still talking to me." Commissioner Frank Carone was careful to note that he would have voted against the rules because they could endanger the financial stability of black cars and liveries, but approved the pilot as a more cautious compromise.

Nonetheless, today's decision still represents a big leap forward, bringing New York's complicated for-hire-vehicle market closer to cities like London, which have long embraced these apps. That might be why Uber CEO Travis Kalanick has been crowing about today's "big win," noting that "New York City’s government overcame its own reticence." Hailo cofounder Jay Bergman likewise congratulated the commissioners "for helping to keep New York City at the forefront of transportation technology." The TLC, meanwhile, has issued an ecstatic press release about "appy days ahead."

BIG thanks to @mikebloomberg and @davidyassky for supporting innovation in NYC; UberTAXI on its way! #UberNYCLove: blog.uber.com/2012/12/13/ano…

— travis kalanick (@travisk) December 13, 2012

UPDATE: Apparently actor Ed Norton is (a) a Uber fan and (b) likewise amped about the TLC's decision.

Thanks to @mikebloomberg and @davidyassky for supporting innovation in NYC; UberTAXI on its way! #UberNYCLove

— Edward Norton (@EdwardNorton) December 13, 2012

Under the rules of the pilot program [embedded below], apps will have to be approved by the TLC and enter into a binding "memorandum of understanding." Riders will only be able to use apps to hail taxis "within a reasonably close distance," said Mr. Yassky: within half a mile in Manhattan below 59th Street and a mile and a half for the rest of the city. Applicants are prohibited from offering any monetary incentive to drivers for picking up passengers through the app, as opposed to a street hail. (During its short-lived attempt to break into the yellow cab market, Uber had offered drivers cash bonuses.) In response to safety concerns, today's rules also say apps have to enable drivers to accept trips with "a single touch."

A number of the stipulations revolve around payment, both in terms of what apps are allowed to charge, how riders are notified of fees, and how payment is processed. Payment has to be integrated with the meter, in order to ensure that the fare is properly calculated. Payment also has to be processed by the so-called T-PEP vendors, which run the credit card swipers in the back of taxis. That may mean startups that already offer this service in other markets, like Uber, Hailo, Get Taxi, and Taxi Magic, will have to alter their offering to meet New York's requirements. Indeed, the pilot isn't starting until at least February 13th because that's when the TLC's exclusive T-PEP contracts with Verifone and CMT expire. Both companies have been wary of cooperating with apps.

There's a bright spot for app providers, however. The rules state that "the Chair may waive this integration requirement" if T-PEP system can't adequately support it and the app provider comes up with a viable alternative.

Before calling for the vote, Mr. Yassky acknowledged that the switch to the pilot program was made "after considerable discussion among the commissioners," noting that the pilot will "allow us to collect data and information and feedback from all of those parties--passengers, taxi drivers, taxi owner, and importantly, car service, livery, and town car drivers and owners as well because they are affected and they have a legitimate interest in participating in our process."

But he also emphasized that regulators shouldn't stand in the way of a benefit to passengers. "This is not speculative. This is real today. We can look at other cities and see that passengers are using these products and benefitting from them," he said, name-checking Uber, Hailo, and Get Taxi. The pilot will allow the city to proceed in a "measured way."

Ms. Marino still had doubts. "We have an industry that is divided in a unique way here in the city and we’re addressing one aspect of that industry, the yellows. Well, what about the liveries and the black cars? They have apps too!" she said, comparing the pilot to a marriage because it's easier to get into than get out of. "I think once you have hundreds of thousands of people using the apps--you have public support--[then] no one is going to care about the losers, which could be an entire industry, the black car and livery. I mean apps are hot and we don’t know where they’re going to be a year from now. There may be ways to avoid enforcement."

Ehail Pilot Res FINAL as Passed 12 13 12

In April, the San Francisco startup expanded its service in Chicago from black cars to include taxis as well. (Uber's recent attempt to expand from black cars to yellow taxis in New York City were swatted down last month by the Taxi and Limousine Commission.)

Although Uber's brash tactics and outspoken CEO, Travis Kalanick, have rankled city governments and competitors--the complaint even features a screengrab of a contentious tweet from Mr. Kalanick and references his open criticism of "of any regulation in general"--this marks the first time a taxi or limousine company has filed a suit against Uber.

The complaint was filed in the Northern District of Illinois, on behalf of the following companies: Yellow Group, Yellow Cab Affiliation, Taxi Affiliation Services, YC1, 5 Star Flash, Chicago Medallion One and Your Private Limousine.

It accuses Uber of violating numerous local and state laws regarding public safety, consumer protection, and fair practices.

Twitter really has made it!

Mr. Kalanick had not yet seen the lawsuit when Betabeat reached him this afternoon, and said he would respond with a full statement once his attorneys had looked over the document, although he did offer clarification on a couple matters below.

The most noteworthy claim in the suit, at least where consumers are concerned, is related to pricing. In Chicago, Uber charges consumers a 20 percent gratuity as the only charge associated with its e-hail and payment service. When Betabeat spoke to Uber last month, they hoped to be able to use the same 20 percent payment structure in New York's yellow cabs.

The lawsuit, however, alleges that only half of that "gratuity" goes to the driver, with the other half going to Uber. It also says the practice violates Chicago ordinances by charging more that the meter's set rate and that its illegal to pass on the credit card processing fees to passengers.

Mr. Kalanick  responded that the 20 percent tip passes through the driver and that "Drivers pay a service fee to Uber for bringing them the additional business," similar to many radio dispatches in the Chicago area.

The unlawful practice allegations seem to rests on the argument that Uber does not have the knowledge or consent of cab and limo companies, but rather contracts directly with drivers driving the taxi and livery cars. It's worth noting that while Uber develops relationships with black car companies (only one is named in the suit), it reaches out to taxi drivers directly. That's partially a function of the fact that it has a dispatch license in Chicago for taxis.

"We connect riders with taxi drivers directly, we've never claimed otherwise" Mr. Kalanick told Betabeat in regards to the lawsuit. In fact, Uber is currently trying to recruit taxi drivers in both Chicago and New York. However, the suit also calls that dispatch license into question, stating that "mischaracterized its true methods of operation in order to fraudulently acquire a dispatch license" and "failed to disclose" that it had no taxi affiliations.

According to the complaint, this "false impression" of association with transportation companies gives Uber  "the aura of legitimacy," with the public, while avoiding "the costs and time necessitated by compliance with the laws and regulations."

The suit then goes on to accuse Uber of "outright violations of the laws and regulations governing legally operating transportation companies," for example, the liability for checking whether vehicles are inspected and licensed. Chicago taxi drivers, the suit also notes, are prohibited from using cellphones "whether or not hands-free, while operating a cab."

Today's lawsuit is hardly the only legal morass Uber will have to climb out of in Chicago. Earlier this week, a Chicago attorney filed a class action lawsuit in the Circuit Court of Cook County on behalf of local passengers for "false price advertising and deceptive use of wording in communicating how Uber makes a profit from each booking."

Looks like the New York City Council's objections to e-hailing might be the least of their concerns.

This is a breaking story and we will update the post as we learn more. 

Yellow Group LLC Et Al v Uber - FILED Complaint

(Photo: Uber)

Uber will not go gently into that good night. The request-a-ride app raged against New York City's Taxi and Limousine Commission last week for putting a stop to its rogue mission to let New Yorkers hail and pay for a yellow cab with a few taps of their smartphone. Uber already offers the services for black cars and hybrid cars, but at a hefty premium.

To keep the company top of mind for New Yorkers, Uber is partnering with HBO today and tomorrow to promote the premiere of the third season of "Boardwalk Empire" this Sunday. The startup will be offering free rides in a fleet of vintage vehicles from the Roaring 20's on September 13th and 14th. The offer is only available 11am to 6pm and only for up to three people travelling between Midtown and Soho in Manhattan. 

If it's anything like the free yellow cab option Uber offered last week, good luck getting on board. We tried numerous times from Brooklyn and Manhattan, but got the same apologetic pop-up and text about the lack of drivers currently available.

Offering up these kind of free gimmicks is the only way Uber can operate a taxi service in New York City right now. Last week, the TLC, which posted a smartphone RFP for yellow taxis earlier, essentially told Uber to slow its roll, reminding drivers that they will be penalized for violating city regulations regarding electronic hails.

The real roadblock, it seemed, was over credit card processing related to the TLC's exclusive contracts with vendors like Verifone and Creative Mobile Technologies. The contracts expire next February and the TLC plans on going ahead with its smartphone RFP.

Although Uber CEO Travis Kalanick couched it as a moral imperative for innovation, Uber's sudden urgency may have had more to do with a British competitor, Hailo--hot on their trail to New York City's taxi market. While medallion owners, livery cabs, and even politicians take issue with the politics of e-hailing--imagine smartphone-less riders standing on a street corner, not understanding why that cab just rode by--the TLC told Betabeat that Uber could continue to offer what sounds like an outlaw taxi function, if the service was free.

The tagline for the HBO campaign? "Uber is going Gangster in NYC!" Sounds about right.

(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.

(Photo: Facebook/Uber)

A source has informed Betabeat that Uber--the pricey, San Francisco-based request-a-ride app for black cars--plans on an imminent launch for a similar service for yellow cabs in New York City. Uber already lets riders in New York City order and pay for private sedans and SUVs from their smartphone, but this new launch would offer the service for regular taxi cabs.

The launch was scheduled for today, but appears to be held up as the New York City Taxi and Limousine Commission (TLC) explores "whether it complies with the TLC’s rules," said Allan Fromberg, the agency's deputy commissioner for public affairs.

Earlier today, Mr. Fromberg told Betabeat by email, "We just met with the Uber folks this afternoon and I don’t have a response for you at this moment." We have reached out to Uber and will update the post when we hear back.

UPDATE 11.15 p.m.: The New York Times reports in tomorrow's paper that Uber initially planned on launching this new service Wednesday with 105 cabs. However, the TLC said Uber's yellow cab service may not be legal for a few reasons: (1) city rules prohibit prearranged rides in yellow taxis, (2) cabbies are forbidden from using electronic devices while driving, and (3) cabbies can't refuse a fare without justification. (The latter is a concern because Uber's policy says once a driver accepts a ride through the app, he can't pick up another passenger.)

The Times also confirmed what we had previously heard: that today's meeting concerned regulatory issues surrounding Uber's ability to process credit cards to pay for yellow cab rides. The good news? In response, CEO Travis Kalanick agreed to make the yellow cab app available for free for New Yorkers for the next week.

UPDATE 6.30 p.m.: Taxi and Limousine Commissioner David Yassky offered Betabeat the following statement by email:

“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 – from credit card payments to our innovative use of GPS data to find lost belongings. If fact, we are currently requesting proposals for a smartphone payment system that will integrate with our existing technology. We are eager to see products, including apps, that allow taxi passengers to take advantage of the latest innovations, provided they are consistent with the TLC’s rules, and we will continue to work with the technology community to make sure we stay at the forefront of new developments.”

Each town car or SUV ordered through the Uber app starts at a $7 base fee and $3.90 a mile after that. In July, Uber began rolling out a "cheaper" option by adding hybrid vehicles to their fleet. But even the incrementally more affordable option still comes at a 10 to 25 percent premium on a standard taxi, as opposed to a 40 to 100 premium for its black town cars, the New York Times reported.

Uber CEO Travis Kalanick (Photo: Tech Cocktail)

Uber has run into some problems with the legality of its car-booking app this year. In July, the company won a victory regarding price-fixing in Washington D.C. when the City Council passed an amendment legalizing the service. As the Verge noted, the Council has been debating legislation that "these sedans charge no less than five times the minimum cost of a taxi." At the close of the year, the Council will reconsider the bill. Massachusetts initially asked Uber to stop operating in Boston until officials could establish guidelines for the app, but quickly reversed the decision.

Perhaps prompting Uber's rush to offer yellow cab service in New York City? We also heard that Hailo, a London-based company that operates a similar service, is planning on launching here in a couple of weeks. However, Hailo does not have explicit approval from the TLC either.

Hailo, which already works for licensed taxis in London, seems to have a strong foothold in the European market. Uber, on the other hand, is popular in San Francisco where early adopter techies are willing to pay extra for a convenience of hailing a hard-to-find car. That leaves the big whale, New York City, still up for grabs.

Both Uber and Hailo applied to an RFP in March from the New York City Taxi and Limousine Commission for a smartphone app to let riders pay for a cab with their smartphone, although the soon-to-be released offerings are independent of the RFP. The TLC would not disclose the full list of all the companies that applied, but Get Taxi and Taxi Magic also submitted proposals.

There are some drawbacks to trying to beat a competitor to market, however. According to our source, Uber has 10 to 15 yellow cab drivers pre-registered to use its app, whereas Hailo has 2,500 pre-registered to use its app. A representative from Uber scoffed at that number. [Update: The Times later reported that Uber planned to launch with 105 cabs, or less than 1 percent of the 13,000 yellow cabs in New York City, with ambitious plans to recruit 100 new drivers a week.] Reached by phone, Hailo confirmed both its planned launch and the number of registered drivers in New York City, adding that it also had 400 drivers pre-registered in Toronto, where Uber launched last week.

Both Uber and Hailo have plenty of cash in the bank to help extend their reach. In March, Hailo raised a $17 million Series A round led by Silicon Valley's Accel Partners to take on Uber in the U.S. However, that figure is dwarfed by the $32 million Series B Uber raised last December from Menlo Ventures, Amazon's Jeff Bezos, and Goldman Sachs.

Over breakfast recently, an entrepreneur from London told Betabeat, "Hailo is for the 99 percent whilst Uber is for the 1 percent," explaining that while Uber can cost twice or more the cost of a yellow cab, Hailo charges users what's on the meter. The entrepreneur, who uses Uber's black car app in New York City, recounted a recent dinner in London's Camden Town neighborhood. Afterward, the diners walked to the curb and three of the four immediately whipped out the Hailo app to order a car.

Uber, however, has a head start with New Yorkers. The company courted influencers with a deal on a ride to the Hamptons this summer. Then they tried winning over locals via door-to-door ice cream delivery, with Justin Bieber blasting, of course. We're willing to entertain the notion of higher costs, if it'll save us from buying $5 Duane Reade umbrellas every time we're caught in the rain.

This is a breaking news post and we will update the story as we learn more.