Concerns Over Surge Pricing And Insurance Delay Passage of TNC Ordinance for Uber & Lyft

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Austin is one step closer to legalizing Uber & Lyft, but the Council isn’t there just yet. The final vote comes this Thursday.

As we have previously reported, there is an urgent need to create a legal method of operation for Transportation Network Companies in Austin. The City of Austin is in serious need of more transportation options, and we have a dangerous rate of drunk driving in the absence of safe ways to get home.

There is also strong grassroots support for these companies. Over 30,000 signatures were delivered to City Council in support of Lyft and Uber. Unfortunately, there has been little nuance between supporting the concept of TNCs and the specific company practices of Lyft and Uber.

Contentious votes at City Hall and the massive influx of visitors brought on by two consecutive weekends of Austin City Limits have made conversations about Transportation Network Companies like Uber and Lyft ubiquitous, particularly in the gridlocked urban core.

Last week the main sponsor of the effort to legalize TNCs, Councilman Chris Riley, moved to have the ordinance passed on an emergency basis before ACL commenced last weekend, but that effort failed due to concerns over legitimate issues including insurance and surge pricing.

At issue are a slate of amendments offered by Councilwoman Kathie Tovo that Uber and Lyft have implied could prevent them from signing a contract with the city.

The first issue is insurance. Drivers are required to have their own insurance, and TNC’s provide an additional policy that comes into effect when the drivers are actively working by providing rides. The companies contend that they fully cover their drivers as long as they are carrying a passenger or are en route to pick one up. Councilwoman Kathie Tovo wanted to see the companies go further and cover drivers as long as they were logged in and had the app on.

Inevitable or not, it is perfectly acceptable for elected representatives to be concerned about how new industries will affect residents and how they will roll into our existing suite of transportation options.  Austin is currently one of the nation’s most congested cities, and as we move towards another very close citywide vote on urban rail we do need options in the short term. Still, council members should not let anyone take advantage of our desperate transportation situation for profit without ensuring that customers and residents are getting a fair deal.

Yes, we have a drunk driving problem in the city, and yes, TNCs can help alleviate that problem — but only if passengers can afford the ride home.

To that point, Councilman Riley accepted a friendly amendment by Councilman Mike Martinez that would ban surge pricing during times of emergency. But, like in the case of the past two weekends sometimes a flood of out-of-towners can price many local residents out of a ride.

The companies maintain that surge pricing allows them to get more drivers on the road when they are needed most, a logical idea for sure, but is it too much to ask for reasonable caps? Given the fact that TNCs choose to operate regardless of city approval it seems appropriate that Council would stick to its own guns regarding public safety and consumer protection.

An article in the Austin Chronicle reported that one trip from “north of the UT campus to another house in Rosewood – a distance of 2.8 miles – ended up paying $50.44. Uber’s fare calculator quotes that ride as typically costing $10-14.”

Even with Uber offering discount cards to ACL-goers some rides still eclipsed triple digit fares, and Uber’s spokesperson Chris Nakutis told KVUE that prices for rides on Saturday night surged as high as 500% at peak time, and that just doesn’t seem like a reasonable option for the average Austinite.

“There have to be reasonable limits on surge pricing — we should not allow TNCs to charge an unlimited amount, or we’re going to continue to hear stories like those in the media about students who have been charged almost $140 for a few-mile ride,” said Councilwoman Tovo.

“I realize that it would create more drivers to jump onto the system, therefore providing more transit services, but at what point is surge pricing too much? And in some cases, when folks are being charged $200 for a minimal short ride, I think you see that as price gouging,” said Councilman Martinez.

Ed Kargbo, the President of Yellow Cab in Austin, asked, “How could it possibly be equitable to allow one group of service providers price flexibility and completely restrict flexibility for another group of service providers?” The short answer is that it is not, but the long answer is more complicated. The City of Austin is also simultaneously and with much less fanfare reviewing the current taxi regulations.

The traditional taxi-cab industry has been one of the more obvious opponents of TNCs and their apocalyptic predictions should not be taken without a grain of salt, but they have a legitimate claim to the reevaluation of strict taxi regulations that keep many drivers just above water and barely making ends meet.

As more vocal proponents of TNCs have their own personal experiences during peak times hopefully they will come to the conclusion that we need to look at transit solutions as a whole and not view anyone option including urban rail or TNCs as a panacea.

In the meantime the City of Austin should move to appropriately regulate and legalize Transportation Network Companies to the benefit of consumers and ultimately a robust, reliable and affordable transit system.

With a 6-1 vote on 2nd reading it might appear that TNCs are an inevitable addition to our transportation options in the city. The only council member who voted against the idea of legalizing TNCs based on the proposed language was Laura Morrison but she is not running for reelection or higher office at this time.


About Author

Joe Deshotel

Joe was born and raised in Beaumont, Tx, but live music and politics brought him to Austin. He has worked in and around government and elections for over a decade including for a member of US Congress, the Texas Legislature, the Mayor of Austin. He currently serves as Communications Director for the Travis County Democratic Party. He is most interested in transportation, energy and technology issues. He also likes Texas Hold'em and commuting on his electric skateboard. Follow me on Twitter at @joethepleb.

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