(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

Mr. Yassky.

Tomorrow morning, New York City's Taxi and Limousine Commission will hold a momentous vote at its headquarters on 33 Beaver Street concerning two sets of proposed rules--one of which could radically alter the taxi hailing experience for New Yorkers.

That highly contested proposal calls for changing e-hailing rules that have traditionally given yellow cabs province over street hails, where black cars and livery cabs focus on prearranged rides. If passed, those e-hail rules would open up New York's massive, much-coveted market for yellow cabs to any request-a-ride app that meets guidelines and secures a license.

So rather than having to hail a taxi on the street, these apps will let you flag down and pay for a taxi with a few taps of your smartphone.

The best stat we've seen to support the need for such technology: at a public hearing on the proposal last month, it was estimated that New York taxis only spend 40 percent of their time on duty occupied with a passenger. On the other hand, we can't really picture our mom getting the hang of it, considering she has yet to understand the soon-to-be-extinct "Off Duty" light.

Initially, the TLC tried to solicit e-hailing apps by putting out an request for proposal. Uber, Hailo, Get Taxi, Taxi Magic and Cabulous all applied. But in October, the TLC threw out the idea of bureaucratic RFP in favor of a free-market approach. Once you have the license, there's just the small matter of dominating the competition.

The TLC opted for a similar free-market strategy with the second proposal up for vote, which calls for upgrading the TV screen and credit card swipers in the partition of your taxi (referred to by the agency as T-PEP). Earlier this year, Jack Dorsey's mobile payments company Square ran a pilot program testing iPads in the back and iPhones in the front as an updated alternative. But that program was cut short after the TLC decided to throw out the RFP--once its exclusive contract Verifone and CMT expires in February--in favor of allowing for more competition and, in theory, more innovation with T-PEP 2.0.

We talked to TLC chairman David Yassky by phone to get some insight into what to expect at tomorrow's vote and what happens if the proposals pass. (You can find the TLC's reports on e-hailing and T-PEP 2.0 presented at last month's public hearing embedded below.)

An open-market approach could mean a lot of change for taxi riders in New York. I was wondering if you had a sense of what to expect if there are multiple T-PEP vendors and multiple licensed apps. How do you see that rolling out?

On T-PEP, there are two companies that do this work today in the taxis. I don’t think you’ll see a big influx of other companies looking to compete in that market. It’s a specialized product; it’s not as easy as it looks. If it was just credit card processing, then there are plenty. But it’s mobile credit card processing in a taxicab. It involves a lot of support equipment that’s part of the same system--text messaging to the drivers, trip records that we rely on for our enforcement and lost property, so it’s got to be accurate. I guess I think that the reason to move from a contract to a set of standards is so you allow for the possibility of competition. I think that will keep the pressure on the existing companies to keep serving their customers well and keep coming up with improvements, even. But you may not even see any new entrants, or maybe at most one or two.

But even if Square came into the picture, that would mean something very different in terms of iPads in the back of taxis.
It does open it, and you may see another competitor and with that innovation, so that would be good. Just to be realistic about what to expect, I don’t think it’ll be "a thousand flowers bloom." The barriers to entry are significant. It’s a fair amount of hardware you have to put in the taxis.

And what about the app side?
That’s the classic environment for a tech startup. I think to have a successful one, you need a certain amount of market penetration, but you can get up and running with a certain amount of investment. The market is untried and untrodden, so nobody quite knows what appeals to customers. So there I expect you'll see a decent number of competitors.

I was talking to Jay Bergman, the New York CEO of Hailo, who suggested at the public hearing that there be universal integration to help app providers who want to work with, say, three T-PEP vendors. Is that something the TLC is inclined to stipulate?

There are two different issues. Sometimes standardization helps a market develop. Like with what used to be called videocasette recorders and then used to be called DVD players. Sometimes a standard helps competition flourish, right? Maybe a better example would be Apple's approach to their iPad and iPod products, where you let a lot of other companies play on your platform. So we do want to make the T-PEP system available as a platform for apps to utilize. That's part one. But another reason to prescribe ways of doing business is customer protection. So, for example, we want to make sure that the fare that is on the meter ends up being the fare that is charged to the passenger. What we're trying to do in our rules is do both those things: make T-PEP a platform that's available, but not restrictive for app developers, and at the [same] time have some basic level of restrictions that are necessary to insure customer protections.

Another thing Mr. Bergman brought to my attention, which was also mentioned in the public hearing, was downgrading e-hailing to just the idea of a broadcast technology that puts out a beacon for riders in search of cabs, but doesn't actually connect them with taxis. The notion was put forth by some of the incumbents, so you're just broadcasting a rider's location.

Look, if we're gonna bring e-hailing apps to New York, we're gonna do it right, and we don't want a kind of half measure that won't provide real service to customers. What customers want is to be able to send a signal out to taxis and then know if a taxi is coming. You don't want a customer not knowing, saying, "Huh, here's an empty cab just went by, should I get in it, or wait for the guy who's on his way to get me?" For the system to work, the customer needs some feedback from the driver. We don't prohibit that, we absolutely allow the broadcast model too. Maybe customers will provide that. Our general approach is the customer knows best what he or she wants and what works for him or her.

Are you at all concerned about fragmentation in the market? If you look at mobile payments apps like Square Wallet, for example, everyone from Dunkin' Donuts to Walmart has their own app and that's led to maybe less adoption than you would have seen if there were one dominant player.

I figure that's really one where the market sorts it out.

Apps also offer different payment structures in terms of what they charge for their service. Uber, for example, initially wanted to take a percentage of a 20 percent gratuity to drivers. 

On this front, we just want to make sure there is full disclosure to the customer. So if the customer thinks that he or she is tipping $3 to the driver, you want that $3 to go the driver. You want the customer to know what they're paying for the taxi fare itself, which better be what's on the meter. If they're tipping, you want the passenger to fully understand what their tip is, and if there's a service fee or surcharge that the app is charging, you want the customer to understand that.

Do you have a sense of the commissioners' openness to these proposals?

I've gotta tell you, this has been really one of our best debates. We've had a really full and searching debate on the substance and merits, and there are arguments both ways. The taxis in New York work pretty well. Whenever we're considering an improvement, I think the the argument "it ain't broke, so don't fix it," is something you want to take seriously, right? The taxi system works really well for the 600,000 people a day that taxis transport. This has been one where we fully vetted the arguments about possible disruptions to that existing service, but I think weighing appropriately the opportunity for improvement. There's not unanimity of opinion about how to weigh the pros and cons here.

There has been significant opposition from industry incumbents. Do you think there's a chance that this could end up in court like the plan for borough taxis?

I think, like with borough taxis, the basic idea is quite sound. In the end, sound ideas generally win out.

How much has the mayor been involved with these proposals?

This started because the TLC put out these proposed rules as part of the Bloomberg administration’s overall communications to keep New York City at absolutely the forefront of technology acceptance and embracing it.

There has been some debate about whether it's the TLC’s job to protect one market segment, like livery cabs, from being hurt by innovation. App companies have complained about heavy lobbying against their product. In public testimony, the TLC has said that’s not their responsibility.

That’s part of the process. We should absolutely expect that business will try to protect their interest and make argument to regulators in service of their interest, and sometimes public policy does coincide with one or another’s interest and sometimes it doesn’t. We should expect that companies will be vigorous advocates for themselves. When I see that phenomenon, which I do frequently, I’m not surprised. I’m sure you’re not surprised either.

I think the commissioners have done a good job hearing all sides. What you termed ‘incumbent,’ are businesses open in New York City that employ New Yorkers. Their viewpoints are entitled to respect, and regulators would be doing a poor job if they didn’t listen. That doesn’t mean that you automatically accept them. Oftentimes businesses know better how a proposal will affect them than a regulator does.

Have you tried out e-hailing apps for black cars, like Uber?

I personally have not, although several TLC employes have, so I’ve been able to get their sense [of the] customer experience.

What did they say?

I, uh, the reason I don't want to answer that question is that we’re not advertising for one company or another. I can tell you which of the two pizza places near 33 Beaver Street employees prefer, but I would have to tell you off the record.

E-Hail Commission Presentation FINAL

TPEP 2.0 Presentation JR v3

(Photo: Wikimedia)

After a series of tussles with regulators across the country, yesterday something went right for Uber. Washington, D.C.--a city where regulators have long been skeptical of the service--has passed a bill that essentially allows the service to continue operating legally. And just a couple days after the appearance of a New York Times article about the company's many regulatory challenges, too!

As CEO Travis Kalanick explained over at the Uber blog, the bill creates a special class of for-hire vehicles that "operate through digital dispatch and charge by time and distance." This solves part of Uber's problem, which is that it's neither fish nor fowl as far as regulators are concerned. Said Mr. Kalanick:

Above all, it brings regulatory certainty to the vehicle-for-hire marketplace – making it very clear that Uber and its partners, the licensed/regulated sedan companies and drivers, can’t be regulated out of existence.

Given all the high-profile dustups Uber and regulators and allegations of consumer fraud from its competitors, it's natural to wonder what Uber did different this time. Well, it turns out your grandma was right--honey nets you more flies than vinegar. According to the Washington Post:

Uber, after the months of sturm und drang, sat down at the table (or at least its ace lobbyist did) with council staff and made legislative sausage that tastes good enough that the bill is likely to pass without incident Tuesday and without paroxysms of Uber outrage.

Don't assume victory has turned CEO Travis Kalanick into a cuddly wuddly teddy bear, however. On a teleconference to explain the move yesterday, he called the taxi industry a "well organized, well-oiled machine," and compared their lobbying efforts to the movie Thank You for Smoking. "It's on that level," he said.

Uber, in Mr. Kalanick's telling, is but a humble tech company, unused to Tammany-style wheelings and dealings: "We're not really set up to make that kind of lobbying effort. We're just not pros at that kind of stuff." Sure, they've hired lobbyists, but in some towns, Mr. Kalanick added, you need a lobbyist to get so much as a meeting. He also insisted that much of the persuasion is still in the hands of local general managers.

It's too soon to tell what the victory means for Uber's strategy here in New York City, where the taxi business is a world unto itself and the company's attempt to launch in yellow cabs couldn't quite get off the ground. (We've reached out for comment and will update if we hear back.)

But Mr. Kalanick did offer a little wink wink, nudge nudge to other cities giving his company trouble: "I think the really powerful part about this is that it shows that D.C. is basically leading the charge in embracing this kind of innovation and setting the standard for how other cities should be looking at this kind of innovation," he said.

You don't want to be less innovative than Washington, D.C., now do you?