By: Philip Kachajian
It is no understatement to suggest that phone-based taxi service apps such as Uber and Lyft have fundamentally altered what for so long had been an industry completely dominated by traditional taxi companies. As with so many other fields, the world of taxi’s, courtesy cars, hotel and airport shuttles, and limos, once an exclusive fiefdom open only to those lucky enough to afford a “medallion”, has been forever changed by the advent of the smart phone and the app revolution that came with it. The year is 2015, and now anyone and everyone can be a taxi driver, medallion or no. As apps like Uber and Lyft have shown, all you need is a car, a driver’s license, a smart phone, and a GPS, and you too can be picking up fares and taking people wherever they need to go. It truly is the dawn of transportation’s golden age. Or is it? As it turns out, not everyone is thrilled that being a taxi driver is suddenly no longer an exclusive club, and most of those who are unhappy with the new arrangement happen to be taxi drivers.
The resentment of those who drive the iconic yellow cars is hardly surprising, after all, in a place like New York City, where cab medallions are worth their weight in gold, (literally, the going rate for one is close to a million dollars) it hardly seems fair that with the advent of the smart phone, suddenly anyone with a car can become a taxi driver. It’s also easy to see why, in a place like NYC, drivers working for Uber and Lyft do so well. The city has a massive taxi shortage, and when you can get a cab, the rates are extremely high. There are also plenty of well-known stereotypes about cab drivers; that their cars often smell, they aren’t the most polite people in the world, and many do not have a great command of the English language. While it is true that many Uber and Lyft drivers are also not native English speakers, users of both services routinely report preferring them to cabs because their cars are much cleaner and the drivers are much friendlier. When you add the fact that you can call an Uber or a Lyft from anywhere, and that they’ll take you anywhere you want to go, (I once had a Lyft driver tell me he’d take me to the moon if I could pay for the trip) it is easy to see why these services are quickly taking up a substantial share of the taxi market. Added to all of this is the fact that your average Uber or Lyft ride is half the price of a taxi ride of the same distance, and it is no wonder that many cab drivers already see the writing on the wall.
However the taxi companies will not go quietly, as evidenced by several high profile lawsuits in various cities all over the world filed by major taxi companies attempting to force cities to either severely limit the activities of Uber and Lyft, or ban them altogether. Suits have been filed in Berlin, London, Chicago, Los Angeles, Boston, and New York City, among other places, all with varying degrees of success. Obviously with all of this litigation, taxi service apps like Lyft and Uber are used to being in the spotlight, both with lawmakers, and various courts worldwide. Recently however, the app Lyft has come under fire from a new source, the Federal Communications Commission, or FCC. While Lyft has previously only faced push back from taxi companies, the FCC has now gotten involved with a beef that comes from a very different issue.
In a recent article on bulletinleader.com, it was reported that the FCC has just cited Lyft for a violation of the Telephone Consumer Protection Act, due to the fact that the app has reportedly forced some users to accept unsolicited and unwanted marketing phone calls and text messages as a precondition for using the app. The FCC maintains that consumers have the right to determine whether or not they want unsolicited texts and calls to their phones, and states that Lyft’s practice of forcing app users to accept such advertisements puts it squarely in violation of federal communication laws. While a Lyft spokesperson stated that the company only just learned that it was in violation and was reviewing the facts of the allegations, its purported ignorance of any wrongdoing may not stop the FCC from imposing fines, or even filing a lawsuit to enjoin the practice altogether. This renewed legal scrutiny on Lyft’s business practices does not bode well for the app, which has also been the target of calls by lawmakers all over the country for increased background checks on its drivers, and tighter regulation on the services it offers.
While the new violation is certainly not good news for the app, it may be even worse news for the consumers who love it so much. After all, the companies paying Lyft for the privilege of calling and texting its users are helping to subsidize the company’s business model, which allows it to keep rates low for its rides. Although clean cars and well-mannered drivers are a plus, the real reason behind Lyft’s (and Uber’s) successes, is the fact that they can offer the same service as a taxi cab, at in many cases nearly half the price. However without the revenue it receives from allowing its users to be solicited, Lyft may have to turn to other methods of staying profitable, the most obvious of which would of course be to raise fare prices. The app could also impose a minimum price on rides, or even begin imposing flat rates on rides longer than a certain distance, rather than continuing its current “pay as you ride” business model. The situation then becomes a curious catch-22, where, in its efforts to protect consumers, the FCC actually takes away Lyft’s method of keeping its prices so low, ultimately hurting consumers in the long run. Although the FCC has taken no legal action beyond issuing Lyft a citation, users of the app may want to begin looking for a new means of getting to that chic new bar on a Friday night in the city. While Lyft had previously been poised to bring about a paradigm shift in transportation with its extremely low fare rates, this new citation and its potential consequences may force the app to take its service in a different direction entirely. The ultimate irony here is that, with potentially increased fares, Lyft may become the very thing it was created to oppose in the first place, just another taxi service.
Phil is the Lead Articles Editor for the Journal of High Technology Law. He is a 3L student who hopes to become a federal prosecutor after he graduates. He holds Bachelor’s Degrees in History and English from the University of Vermont.
