Gallery gurl.

Yesterday night, Vine, the video-clip sharing app Twitter acquired back in October, held its launch party at Marquee. Yes, that Marquee. DJs spun above a lighted sign with the hashtag "#party," and users obliged by Vine-ing the experience.

There was the meta-Vine of people Vine-ing at the Vine launch. And, because no one got the memo, an attempt to do the white man's Harlem Shake. Although our favorite had to be a guest appearance from "Gallery Girl" Chantal Chadwick.

Chantal from "Gallery Girls" at last night's Vine party: vine.co/v/b6Egw5WnxTT

— Rex Sorgatz (@fimoculous) February 22, 2013

"I guess the interesting thing was that it wasn't a tech-heavy crowd," one guest told Betabeat. "This sounds strange to say, but it felt more like a cultural event, almost something you would have witnessed in pre-millennial NYC." Hey, if the bubble fits.

As for Vine itself, by February 19 the app--which hung in the top 10 spot for the first week of its existence--had fallen to number 73 in the rankings of free apps, according to AppData. Maybe everyone needs to up their video game?

(Photo: Instagram via TMZ)

Snoop In Startupland According to TMZ, Snoop Dogg and Suge Knight buried the hatchet at AV Club in Los Angeles this week. And who should take credit for the amicable reunion but Uber CEO Travis Kalanick, who was photographed in the VIP section along with Snoop, Mr. Knight, and venture capitalist and Uber advisor Shervin Pishevar.

.@uber making peace in the LBC: tmz.com/2013/02/22/sno…#sugeANDsnoop cc/@shervin @snoopdogg

— travis kalanick (@travisk) February 22, 2013

Snoop, who's palled around with Sean Parker and Mark Zuckerberg in the past, is slated to appear at SXSW Interactive next month to promote Leap Motion, a hand gesture controller. Hey Mike Judge, you may want to take a gander at our reporter's notebook.

Type-uhoh Brit Morin, founder of Brit + Co. and wife to Path founder Dave Morin, might have run into a little autocorrect problem. "Catch this week's BritList for your daily dose of dishonesty," she tweeted last week.

Dishonesty? Either that's a typo, or Ms. Morin had some sort of come-to-Jesus moment about the real truth behind the perilous world of crafting.

(Photo: Twitter)

Trivial Pursuit Techstars' former managing director, Dave Tisch, may have recently left the incubator, but that doesn't mean he's resting on his laurels. Mr. Tisch Instagrammed a slightly humblebraggy photo showing some spoils from a recent trip to Dave & Busters. "Successful evening dominating trivia," he captioned the photo, which showed hundreds of arcade tickets flowing out of paper cups. The real question is what he brought with those tickets. Our bet's on the 2006-era iPod.

(Photo: Instagram)

Caught with his pants down New York Times technology writer Nick Bilton is really, really excited for both Google Glass and Apple's rumored iWatch. Like, so excited he doesn't even give a f*ck about pants. Can't say he's not dedicated to his craft.

https://twitter.com/nickbilton/status/304666533190332416

FacePlace Sheryl Sandberg's Lean In hits bookstores in March, and feedback is already trickling out. One reviewer? Mark Zuckerberg, who popped into a Facebook conversation and said, "I think 'radically realistic' is a very good description of what you write in this book." We can't say we're entirely surprised "work harder" as a solution to gender inequality would appeal to a workaholic kid billionaire.

Who needs Zuck's support when you've got Ms. Sandberg's infinite self-confidence, though? She recently appeared in the documentary Makers saying, "I always thought I would run a social movement." Well all righty then!

(Update, 2/26/12) Turns out, there's a little more context to that line about running a social movement, beyond what the New York Times quoted Ms. Sandberg as saying. The Grey Lady has issued a correction:

In a video excerpt, which accompanied the article online, she said: “I always thought I would run a social movement, which meant basically work at a nonprofit. I never thought I’d work in the corporate sector.” She did not merely say, “I always thought I would run a social movement.”

Robot rock Who can resist a little hashtag trolling?

#ifihadglass my individuality would serve the collective. Shields lowered, ready to assimilate... #resistanceisfutile twitter.com/smart/status/3…

— Steve Martocci (@smart) February 20, 2013

Baby, baby, baby A social media mystery to ponder, from Twitter biz dev VP Jana Messerschmidt: "Photos of babies on Facebook annoy me, while Vines of babies make my day. Why is this?" We're going to guess it's the cooing noises.

Gizmodo’s Sam Biddle sluttin’ it up at CES. (Photo: Gizmodo)

"Objectify a man in tech" day is no longer a thing. Tech journalist Leigh Alexander proposed the exercise last week in hopes it would "catalyze discussions about the way we use language and how seemingly-innocuous 'compliments' are belittling and distracting";  now she's "worried that point will be lost and that harm can be done." [Sexy Videogameland]

The Department of Defense is gearing up to add 4,000 employees to its Cyber Command; The Pentagon may make an honest hacker out of you yet. [NYT]

Is Marissa Mayer's relationship with Wall Street already on the rocks? Analysts will be looking for tangible improvements under Ms. Mayer's leadership when Yahoo reports quarterly results later today. [CNN Money]

Uber CEO Travis Kalanick has a prediction for e-hailing in New York: "Drivers will make a lot of money." [WSJ]

"Wait, how 'bout we trade you some promoted tweets for a tax break?" [BuzzFeed]

It's the year of the sexy, sexy enterprise startups. [Tech Crunch]

Second problem: To deal with high demand during the early hours of 2013, San Francisco-based Uber is instituting surge pricing, which will likely lead to some serious transportation expenses.

Well, don't say you weren't warned. The company emailed customers over the weekend, explaining its surge pricing policy in advance, giving fair warning to the prices they can expect during the New Year's crunch.

NYE pricing is not for the faint of heart. The average surge multiple will likely be 2x normal prices, but during extreme spikes it could cost you $100 MINIMUM before time and mileage charges! So be careful with those Uber ride requests. Uber rides will be reliable on New Year’s Eve, but they’ll also be pretty pricey.

Here's a helpful graph:

In case that wasn't enough, Uber founder Travis Kalanick and Ryan Graves, the company's head of operations, livestreamed a Q&A session to explain the surge pricing scheme. The basic gist: By charging customers higher fees during periods of heightened demand, Mr. Kalanick said the company creates incentive for more drivers to pick up fares from Uber.

"We work with limo companies and their drivers," he said, speaking generally of the service in cities around the world. "On New Year's Eve, these guys have alternatives. They can rent their car out for $1,000 and sit around all night. In some cities, drivers might have relationships with hotels or restaurants where they can get filled very quickly."

With Uber's surge pricing system, he said, "drivers know the price is coming up, they go on the system, they stay on the system longer, and more drivers come onto the system."

Surge pricing, Mr. Kalanick insisted, is more or less revenue neutral for the company, which takes 20 percent of total fares for its black car service: When surge pricing takes effect, demand tends to come down on a roughly linear basis. "When the price goes from 1x to 2x, we're seeing half as much conversion," he said. "When it goes from 2x to 3x, we're seeing a 30 to 40 percent decrease of the number of people requesting a ride."

Mr. Kalanick has good reason for communicating clearly on surge pricing. Not only is New Year's Eve the "craziest time of year" for Uber, but 2013 is going to be a crucial period for e-hailing, at least in New York. Earlier this month, the Taxi & Limousine Commission approved a year-long pilot program for taxi apps that will let New Yorkers flag down yellow cabs with their smart phones as early as February.

Meanwhile, with the pilot set to launch, Uber competitor Hailo is said to be closing on a $30 million Series B that will help the company ramp up in the New York market, with Union Square Venture's Fred Wilson reported as the probable lead investor in the round.

In addition to the livestream and the warning emails, Uber unveiled what it calls a sobriety test for the app: If you want to use your phone to hail a car during a surge period, customers have to enter the multiplier they're paying to use the service amid high demand. That system worked out well in Sydney, Australia, which Mr. Graves pointed out has already rung in 2013.

At peak hours, Australians paid about 4.7 times the regular Uber fare, but Mr. Graves reported that the company had only received one angry email thus far. Of course, New York is not Sydney. "Australians generally polite in social media channels," said Mr. Graves. "We hope you'll be nice to us. We're doing the best that we can."

(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?

"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."

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.