Here’s Why Uber & Lyft Voluntarily Shut Down In Austin

Uber has changed the way I approach ground transportation, as they make getting around in cities without good public transportation easier and more comfortable than ever before. I’m happy that they take the taxi mafias around the US to task, given that the taxi industry has had zero innovation for decades, with horrible service, dirty cars, and “broken” credit card machines.

That being said, I’m not disillusioned about Uber’s tactics. They use some really questionable methods to expand, and at times even cross the line. The thing is, that’s probably the best way to trigger change when the taxi mafias are in the pockets of so many politicians.

So over the years we’ve seen Uber expand to hundreds of markets, but also on occasion be kicked out of certain markets.

Both Uber & Lyft are no longer operating in Austin… voluntarily.

Uber-Austin-1

The Uber app provides the following explanation:

Due to regulations passed by City Council, Uber is no longer available within Austin city limits.

We hope to resume operations under modern ridesharing regulations in the near future.

Uber-Austin

Why did Uber & Lyft pull out of Austin?

To simplify the situation as much as possible:

  • Late last year Austin City Council passed a new regulation requiring that drivers through ridesharing apps pass fingerprint-based background checks, despite Uber and Lyft threatening to pull out if such regulations are approved
  • Uber and Lyft managed to collect enough signatures to bring this issue to a public vote
  • Ridesharing Works (the political committee for Uber and Lyft) spent $8.1 million campaigning for their cause
  • This past weekend the issue went to a public vote, and it failed by a margin of 56 to 44
  • As a result, the regulation requiring fingerprinting passed, and Uber and Lyft have both pulled out of Austin altogether

It’s crazy to consider that the ridesharing apps have spent over $8 million campaigning for this, and are now pulling out of the markets completely, leaving lots of drivers without jobs and people without rides. And all over fingerprinting, which surely would have cost less than $8 million to implement.

At the same time, I get what the ridesharing apps are concerned about in general. It’s not about the individual market, but rather it’s about them being concerned about setting a precedent which will be followed in other cities. By taking a hard stance against this, they’re sending a message to other cities.

On one hand requiring drivers to get fingerprinted seems like a fairly reasonable regulation. At the time time it’s worth noting that Uber already performs their own background checks on drivers, so it’s not like there aren’t presently any checks in place.

Bottom line

This whole situation sort of rubs me the wrong way, especially when we’re talking about something like fingerprinting. There’s no way it would have cost Uber and Lyft more than $8 million to implement this. Yet they’re also concerned about the big picture, which I suppose I can’t fault them for too much? I dunno…

I suspect Uber and Lyft will be back in Austin soon, whether it happens after regulations are changed, or after they realize that regulations won’t be changed, and they’re better off operating there than not.

Where do you stand on this issue?

(Tip of the hat to The Points Guy)

Comments

  1. “There’s no way it would have cost Uber and Lyft more than $8 million to implement this”

    Just curious as to how you have inside knowledge of the financial operations of uber/lyft to make such a claim?

  2. I think the politicians are in the pocket of the taxi mafias, not the other way around.

  3. ultimately what it comes down to is, “if you ban us, we’ll barge in anyway.” “if you regulate us, we’ll leave.” while i’m not surprised uber takes this attitude, i’m a little disappointed with lyft

  4. To my understanding, another major reason for Uber and Lyft wanting to avoid fingerprinting is their concern that it will make the drivers more like employees than independent contractors. And I believe keeping the drivers as contractor (vice employees .. and all the expenses associated therewith) is the primary reason for them fighting the requirement.

  5. Where is the evidence that doing “fingerprint” background checks ensures a safer public? I can tell you from experience that the system the U.S. utilizes to conduct background checks based on fingerprints is antiquated and likely ineffective at identifying those who should not be drivers.

    So, this means that the city, and voters, have placed a financial and bureaucratic roadblock for all drivers (rideshare and taxi alike) without any evidence that it is beneficial. Good on Uber and Lyft for sticking to their guns and letting the citizens know that if they put up roadblocks, they will be walking.

  6. @ Christian: In this case it was the voter’s who decided, not politicians. Uber collected 63,000 signatures to put this measure to a vote. Then they spent $8.1 million on the campaign compared to $170,000 from the opposition. Uber should have won, but in the end only 39,000 people voted in favor of Uber’s initiative. Unlike other cities whereas Uber had people contact government officials to change their minds and policies, when it came down to people voting they didn’t receive support.

    Another interesting note, Uber drivers in New York City already have the requirement to be fingerprinted and drug tested. Houston is also fighting Uber on this issue. This issue is more about keeping driver’s employed as independent contracts. The more regulations, the more drivers become employees, which is a big problem for the sharing economy.

  7. FYI, they already have to do fingerprinting check in Houston. They’ve complained about that but so far haven’t pulled out.

    P.S. I believe the reason cities want a more stringent background check is that some of the drivers that had caused problems did pass Uber’s own background check which isn’t quite as thorough.

  8. As an uber driver myself, I myself am in support of such regulations. (I operate in houston though, which has similar regulations) Uber does NOT pay for the fingerprinting (which costs 39.99) it is borne by the driver since we are classified as independent contractors. This make this whole fuss by Uber and Lyft even more silly. They are protesting the same thing in houston and are threatening to do the same. The only reason they are concerned about this issue is because according to them this is what is happening hampering new driver sign up, Which is weird since I have not met many Uber drivers who fussed about the steps they need to take to meet the regulations. Sorry for the rant, but it its kinda pissing off when they are really compromising Rider safety.

  9. Fingerprinting costs < $50 in most cases, depending on the purpose, and the bulk of the fee are related to reporting (to DOJ or FBI, etc). If we assume that system setup and administrative costs bump the average up to $100 per finger print, $8 million can get 800,000 drivers taken care of.

    Even if it isn't the most effective at eliminating all criminals, it does seem to be an inexpensive way to filter out some problematic would-be drivers.

  10. UBER should just go along with it and allow those Austin Drivers to work. Ultimately, they are hurting their own people.

  11. Peter said:

    “If we assume that system setup and administrative costs bump the average up to $100 per finger print, $8 million can get 800,000 drivers taken care of.”

    Let’s make that 80,000 drivers. 😉

  12. As Uber and Lyft continue to transition from being just an innovative small upstart to maturing as a key business model in that industry, you will continue to see things like this as they behave more and more like a traditional big business. You already see it with Google, Facebook, and other internet/social media concerns that have grown into substantial businesses. No longer are they just renegades but, in some cases, market leaders in on-call transportation. Traditional taxi services didn’t change because they didn’t have to. It was a business model that worked and was continually profitable due to regulations that created necessary barriers of entry to protect the business. Traditional taxi companies serve two basic clienteles, travelers getting from the airport to hotels and such and locals that live on the margins that either cannot afford a car or cannot drive. Those can be widely disparate groups of people especially in metropolitan areas. In Charlotte, NC where I live, where Uber and Lyft have grown substantially and are popular with the young urban crowd, the taxis that do not have a contract to collect airport fares have been mostly left with low fare short local trips between home and grocery stores, etc.

    As far as the regulations themselves, like many people, I see no problem with them per se. There is little question that a fingerprint system could be put into place for far less than $8 million and once implemented, not be a particular burden on the companies themselves. It may even encourage more stability in the driver pool as drivers may be inclined to commit to occupation longer or for more time than currently. It seems that Uber and Lyft driver pools seem to be far more part time and casual than traditional taxi companies that are often staffed by ethnics of recent immigrant status and others who may be driving as their primary income opportunity. Locally here, Uber and Lyft drivers are far more mixed cars seemed to be staffed more by part time and short term drivers. But again it is about controlling the environment as much as it is the cost.

  13. Uber and Lyft mean net improvements for safety, Austin’s Sheriff supported prop 1 because the introduction of ridesharing has driven down DUIs int he City.

    Residents of downtown Austin actually supported the measure, it lost outside the city core where people more regularly drive cars.

    People were voluntarily using Uber and Lyft, based on the value proposition offered, because they believed it made them better off. And drivers drove because they believed doing so made them better off as well. Why stand in the way of that? How does this make people better off than they were before?

    Getme is an Austin-based ridesharing startup that pledges to continue to operate. But their Android app is currently broken. Wingz requires prebooking. There’s the Hail-a-cab app but that’s just for a single cab company.

  14. What is Uber/Lyft’s screening criteria for their background checks. It is one thing to do a check, but what are the criteria for excluding drivers?
    Do they exclude ex-cons? people with bad credit? people with bad driving records? people with a speeding ticket? people with a parking ticket?

  15. @Gary

    Too bad, it looks like the majority of voters in your city disagree with you and want more safeguards, in agreement with their elected representatives.

    And I am not shedding a single tear for Uber et al. who continue to violate laws across the country in order to build a userbase and then unleash them on legislators, rather than participate in the legislative process legitimately.

  16. Seems to really disregard the interests of the drivers. Pulling out sends a clear message from Lyft/Uber to their drivers that says, “you have zero job security.” I guess that’s capitalism, but still.

    Also seems to send a message to city governments worldwide that are in cahoots with the local taxi industry: “If you want Uber and Lyft to leave, just require fingerprinting.” Major win for the “taxi mafia.”

  17. I am confused as to why fingerprinting drivers is an issue for Uber in Austin.

    In NYC, the TLC requires all Uber drivers to register with the Commission which includes a background check, fingerprinting, and car inspection. (Non-hybrid cars must be 5 years or newer.) The car is then given a TLC registration sticker.

    The total time to register is approximately 2-3 months, from what I understand.

    The TLC also requires the Uber cars to have insurance, however it is minimal coverage compared to the yellow/green cabs with the City’s medallions. I believe the City’s medallion cars require coverage up to $1m.

    I’m not sure if Uber provides any insurance coverage for passengers and drivers if the driver is in an accident… Would like to find out, if anyone knows for NYC operations.

  18. I love the shake up Uber has given to the protectionist rules of urban transportation.

  19. It’s the leftist government in Austin that caused all of this…and the corrupt city council. The town is already screwed up because of the people from CA that have invaded and ruined a once great city. How these freaks are all concerned about background checks and who pays.

    Austin govt is about as screwed up as DC currently is.

  20. From the hundreds of “Prop 1” commercials that aired leading up to the May 7 vote, it sounded like City of Austin was going to pay for the fingerprinting out of tax revenue. If that turned out to not be the case, I’m sure the costs would have been passed on to the drivers.

    That said, I’m confident that the real reason Uber and Lyft (herein “UL”) are so opposed to fingerprinting is the cost in driver recruitment (and to a lesser extent, a delay in driver onboarding.) Not every driver who signs up for UL ends up driving for UL long-term. The way UL got around this was to constantly, and rapidly, onboard new drivers…if 40% of new drivers drive a few times then call it quits, UL still have their existing long-term driver pool plus the 60% of new drivers that decided to stick around.

    With the fingerprinting requirement, however, those potential drivers who were unsure if they wanted to give UL a try might decide it’s not worth the trouble. UL may have to incentivize drivers to agree to be fingerprinted, show up at a fingerprinting station and be fingerprinted, and after passing, actually drive. Sure, there will be people who actively want to drive for UL, and will happily jump through those hoops. There will, however, be many more who are less sure about driving for UL and certainly don’t want to pay for the privilege of finding out. The cost of recruiting those drivers are unquantified, but if the “sign-up to drive” promotions that UL ran when they first entered Austin are any indication, it could be hundreds of dollars per driver.

    Now assuming UL managed to recruit a gaggle of drivers, they then have to wait for those drivers to pass their background checks before allowing them to drive. At best, the turnaround time could be 1 day…more than likely, however, based on other professions or licensures that require fingerprinting, the turnaround is between 2 and 14 days. UL is then going to have to spend more to retain the drivers they already have and otherwise curb attrition.

    But UL didn’t make their message clear to Austin voters – that if Prop 1 failed, rides from UL would cost more due to fewer drivers. Instead, they bought in has-been local politicians to voice ads talking about how taxpayers would have to pay for background checks if Prop 1 failed – a situation that will never come to pass since UL collectively decided to take their toys and head home.

    Perhaps UL will take a different tact and actually contribute to state and local campaigns and/or fund the campaigns of pro-UL politicians to get what they want instead of just inundating non-voting locals with asinine ads that lack a clear message.

  21. Having just ‘sampled’ under in two cities, I have to comment…
    The first being in Chicago, the driver, I presume Chicago based, followed his GPS
    to the WRONG Blue line station to ORD…despite my telling him he was proceeding in the wrong direction….OK, newbie experience. The second was a trip to ORD, when well but the fare was no bargain…isn’t that why this service exists ?
    Next ABQ where I again sampled this service. I requested a ride to the National Museum of Nuclear History….we got there within 5 minutes from my hotel…..despite its actual location being next to Kirland AFB….after some review, it seems that the GPS was never updated to reflect the actuality that the museum had moved several years ago….all of the above cost me time and distance…..
    No, I am more ‘under’ than uber, and really cannot appreciate its true value based on my experiences….I’lll take a local cab.

  22. In New York all uber drivers get finger printed and there are no problems. Uber and Lyft should take passenger safety first and agree to finger printing… Kudos to the people of Austin for trying to keep people safe. Shame on uber/lyft…

  23. Funnily enough, today I received a US mail solicitation to join 55,000(?!) other drivers in my area, telling me that at $17/hr driving for Uber X, I could make $340 this weekend!

    No, thank you.

  24. @Swell most drivers have started carrying a hyrid commercial/personal insurance policy. Uber and Lyft also have a blanket $1M policy for each of it’s drivers. So if a driver only has his personal insurance (which may not cover ridesharing), the Uber/Lyft insurance kicks in if the personal insurance doesn’t kick in. So from an insurance issue that is covered.

    @Tom the Uber/Lyft background checks cover an individuals driving record and criminal record….. if you have too many moving violations you won’t pass. If you have any sort of sexual convictions you would also not get approved. Not sure of what other convictions would prevent you (I would think homicide) Lyft (don’t know about Uber) run background checks annually, so if changes to your record could get you dropped.

  25. Someone probably already said this. The issue isn’t fingerprinting per se. Uber’s whole model is that drivers are not employees. Fingerprinting treats them as such They can’t have both. I think that’s the issue

  26. I live in Austin and spent the last several weeks being completely inundated with my share of that $8 million in political advertising. Every day I had 2-3 fliers in my mailbox, an ad during every commercial break, and visitors to my front door. Snapchat offered me a special ‘Vote Yes on Prop 1’ filter last week, and I had friends who got robo text messages asking them to vote Yes (Uber is currently being sued for this as a violation of their own terms of service). The propaganda was aggressive and insulting to my intelligence.

    Honestly, I think Uber and Lift would have won this if they had spent less on trying to win it. As it is, their tactics came across so poorly that they turned Austinites against them. This is not a city that wants to feel manipulated by business.

  27. I need fingerprints and background check I pay for, and a second for my wife, repeated every year … So we can enter the building at our kids school as opposed to stop at the door.

    It’s something I consider reasonable for a driver. honestly I assumed it was already required.

  28. @Rachel

    Nwwsflash–you are ‘manipulated’ by business everyday. It’s called advertising. Have a feeling you haven’t lived in Austin more the a few years (at most). You are one of those who has recently moved their that feels entitled. Pack your stuff and go move back to CA.

    The losers in this are all of the drivers and people who use these services in Austin…no longer because of cry babies like you. Thanks for screwing things up yet again.

  29. Try Arcade City. It’s a new ride-sharing service that started up 3 months ago.

  30. I’ll tell you how it affects me. I have to me in Austin next week, and six weeks later. I was really hoping to take uber. Now I’m not even sure how I’ll get from the airport to downtown. 🙁

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