Disruptive technology that brings innovation to established business practices is generally recognized as an engine of modern progress. It is, however, disruptive, which is evidenced by how authorities in Salt Lake City and elsewhere are grappling with the new high-tech ride-sharing services that are becoming a popular alternative to taxicabs.
A service run by a company called Lyft has recently entered the Utah market, prompting city transportation officials to issue fines and warnings to dozens of Lyft drivers on grounds they are not licensed under city statutes. The company matches volunteer drivers with passengers through technology that allows a person to summon a Lyft car through a smartphone app and take them to their destination for a pre-arranged price.
Salt Lake City’s decision to take a strict regulatory posture with Lyft may seem like a harsh and curmudgeonly response to a new form of grass-roots commerce fueled by healthy market demand. But from another point of view, the action may be the quickest way force the issue into a discussion as to how ridesharing can be accommodated and allowed to expand transportation alternatives in the Salt Lake Valley and, eventually perhaps, beyond.
From a policy perspective, the city has a duty to ensure drivers who transport paying customers are competent and their vehicles safe. The rideshare companies have overcome those concerns in other cities by vetting their drivers and paying for substantial amounts of liability insurance.
What’s trickier, particularly in Salt Lake City, is the impact the services may have on the city’s desire to maintain a healthy taxicab industry, which has been something of a regulatory challenge. Salt Lake is not known as a taxi town on the level of a New York or a San Francisco, which, by the way, have welcomed the advent of peer-to-peer ridesharing.
The city in the past has acted to limit the number of taxicabs operating in the city to make sure they are financially healthy enough to maintain reliable, around-the-clock service. And taxi companies — which have opposed the advent of peer-to-peer ride sharing in virtually every market — argue the public interest is served by policies that protect cabs. Should taxi companies be driven out of business, they argue, what guarantees will there be that conventiongoers can get a ride from the airport to their hotel? Will a person needing a late-night lift in a snowstorm be able to hail a friendly peer driver?
Those questions are legitimate, and they offer a reason for city leaders to take some pause before they approve ridesharing service. But approve it they should, because regulatory policy should not stand in the way of innovation. In the short-term, companies like Lyft will disrupt the existing market, but in the long run, they have the potential to expand that market, bringing more competition, reducing costs, creating efficiencies and offering consumers more choice in how they get from one place to another.