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.

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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

Smartphone and the City?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SAFETY FIRST!

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

YES, THE MTA WOULD LIKE A RECEIPT

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

HAILING FOR THOSE WITHOUT A SMARTPHONE

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

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

IS THIS EVEN LEGAL?

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

OUTER-BOROUGH DISCRIMINATION

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

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

DEATH TO LIVERY CABS?

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

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

SLIM MARGINS

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

NECESSARY EVIL INNOVATION?

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

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

(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.

via dailydooh.com

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

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

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

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

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

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

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

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

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

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

via Wikimedia

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

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

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

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

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

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

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

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

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

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

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