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New York City Votes to Limit the Number of Uber & Lyft Vehicles

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【Summary】On Wednesday, New York became the first major American city to limit the number of for-hire drivers. The city council voted to halt new vehicle licenses for ride-hailing services and establish minimum pay rules for drivers. New York will cap the growth of the services for one year, while the city studies the booming ride-hailing industry.

Paul Young    Aug 09, 2018 5:32 PM PT
New York City Votes to Limit the Number of Uber & Lyft Vehicles
author: Paul Young   

NEW YORK — In 2011, the launch of Uber in New York City was a major milestone for the young startup up. Uber's ride-hailing platform offered a much easier way to hail a ride in the city, and offered a more attractive option than hailing one of New York's well-worn yellow cabs. However, Uber's rise in New York City resulted in thousands of more vehicles competing to pick up passengers, while disrupted its traditional taxi-model of selling a set number of expensive medallions to operate a cab.

Now Uber is meeting resistance in some major cities around the country, as the service itself is being blamed for an increase in traffic in New York and San Francisco, two of Uber's largest U.S. markets. In addition, Uber is being accused of paying its drivers, may of whom work full time for Uber, with wages well below what it takes to live in both cities.

On Wednesday, New York became the first major American city to address both problems. The city council voted to halt new vehicle licenses for ride-hail services and establish minimum pay rules for drivers. The legislation passed overwhelmingly by the City Council and will cap the growth of the services for one year while the city studies the booming ride-hailing industry.

The cap on new for-hire vehicles would take effect immediately.

Uber has faced increased scrutiny from government regulators and struggled to overcome its image as a company determined to grow at all costs with little regard for its impact on cities.

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Thousands of Uber drivers now compete for fares along with New York City's taxi fleet

Councilman Eric Ulrich, a Republican from Queens, one one of the few council members opposing the cap. He argued that limiting Uber to help yellow taxis was similar to regulating Netflix, the streaming service, to help Blockbuster, the video rental chain.

Ride-hail apps have become an essential backup option for New Yorkers regularly subjected to delays on the city's aging mass-transit system. Ride-hail services have also grown in neighborhoods outside Manhattan, places where the subway does not serve.

New York's move to become the first major city restrict the number of ride-hail vehicles and to establish pay rules for drivers could provide a model for cities looking to curb the explosive growth of ride-hailing companies.

Mayor Bill de Blasio and Corey Johnson, the City Council speaker, said the purpose of the bills will curtail the worsening traffic on NYC streets and improve low driver wages.

"We are pausing the issuance of new licenses in an industry that has been allowed to proliferate without any appropriate check or regulation," Mr. Johnson said before the vote, adding that the rules would not diminish existing service for New Yorkers who rely on ride-hail apps.

Mr. de Blasio praised the bills and said he planned to sign them into law.

"More than 100,000 workers and their families will see an immediate benefit from this legislation," Mr. de Blasio said, referring to the city's for-hire drivers. "And this action will stop the influx of cars contributing to the congestion grinding our streets to a halt."

New York's aggressive stance also raises questions over how fast Uber can continue to grow, as the company as other cities might follow New York's lead. Uber, which is valued around $62 billion, plans to move toward an initial public offering next year.

Reaction from Uber

Uber immediately criticized the Council's decision to approve the cap, but said the company would work to keep up with the increasing appeal of its service despite the limit on new vehicles.

"The City's 12-month pause on new vehicle licenses will threaten one of the few reliable transportation options while doing nothing to fix the subways or ease congestion," Josh Gold, a spokesman for Uber, said in a statement.

The company also mounting a major advertising campaign to make the case that New York's yellow cabs have a history of discriminating against people of color.

Ahead of the city council's vote, Uber launched an ad campaign to protest the proposed cap on cars in the city. The company produced short ads warning riders that the cap could produce higher prices and longer wait times for passengers if the company cannot keep up with the growing demand.

In Seattle, the City Council approved a bill allowing Uber drivers to form unions, but the measure has faced a legal challenge. Uber left Austin in 2016 after the City Council passed a measure requiring the company to perform fingerprint background checks. However, Uber has since returned to the city.

Uber has also faced regulatory battles in American cities, including Austin, Texas and Seattle.

The company's new chief executive, Dara Khosrowshahi, has embarked on a campaign to repair the company's image after a series of controversies, including complaints among workers over gender discrimination and harassment.

Speaking with the New York Times, Anand Sanwal, chief executive of CB Insights, a software company that examines technology trends, said the cap could impact Uber's planned IPO in 2019 if it reduces their revenues and emboldens other cities to take similar action.

"If it changes their growth trajectory, that could have an impact on their valuation and the narrative around the company," Mr. Sanwal said.

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Passengers line up waiting for a ride at a taxi stand near Grand Central Terminal in New York

Uber said it would immediately reach out to tens of thousands of for-hire vehicle owners who are already licensed in New York City but work for competitors like Lyft, to try to recruit them to work for Uber. The company said it would also continue to press for another solution, known as congestion pricing — a proposal to toll drivers entering Manhattan's busiest neighborhoods and that would require approval from state lawmakers.

Many experts believe congestion pricing is the best way for New York City to fix congestion and secure the funds needed to fix the subway. Mr. Johnson supports the idea, but Mr. de Blasio has opposed it.

New York Gov. Andrew M. Cuomo, who controls the subway, has said he will push for congestion pricing during the next state legislative session to help pay for an ambitious, multibillion dollar overhaul plan for the subway.

Many taxi and Uber drivers say they support the cap proposal. They hope it will halt the flood of new vehicles clogging city streets and allow them to make more trips and improve their earnings. Uber and other ride-hail services could add new vehicles only if they are wheelchair accessible.

The number of for-hire vehicles in the city has surged to more than 100,000 vehicles, from about 63,000 in 2015, according to the city.

The taxi industry has also been decimated by Uber's rise. The price of a taxi medallion, which is required to operate a taxi in New York, has plunged around 80 percent, from more than $1 million to less than $200,000.

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