Tuesday, March 5, 2013

My Reply Comments to the CPUC on Lyft, Sidecar & Willie Brown

Former San Francisco Mayor Willie Brown, representing Tickengo, has joined Lyft and Sidecar in their relentless attempts to square the circle of taxi and insurance regulations through the deliberate misuse and disingenuous re-definition of ordinary words. To give you some idea of what you’re in for if you read through Sidecar’s 25-page tome:

“ ... the ridesharing exemption does not apply if the ‘primary purpose of those persons is to make a ‘profit’ but there is no definition or any guidance on how to interpret the term ‘profit.’”

This reminds me of the old Bill Cosby routine where he dates a philosophy student who keeping asking him questions like, “What is air?”

The Facts

Lyft, Sidecar and Tickengo are commercial enterprises that profit (i.e. make money) from licensing phone apps to drivers and their customers. The way it works is that a customer uses an app to hail a driver. The driver accepts the hail, picks up the customer and takes him or her to a destination. The customer pays. The driver gets 80% and the companies get 20% of the payment.

Ten major auto insurers that I contacted, as well as the Personal Insurance Federation of California (PIFC), describe such business as either taxicab or livery services that are required to carry business or commercial insurance. The problem for Lyft, Sidecar and Tickengo is that they don’t want their drivers to have to pay commercial insurance rates and they don’t want to be regulated. Among the reasons why: 

  1. Commercial insurance is more expensive. The rate on my 2009 4-door Camry with $150,000 - $300,000 personal liability is $580 every six months. The quote I got for business use was $1,480.
  2. The California Highway Patrol's Motor Carrier Safety regulations require that charter party carriers, (i.e. cabs and limos, among other things), inspect and maintain the vehicles to ensure that they are in safe operating order.  (13 CCR § 1232.)  The CPUC requires charter-party carriers to maintain proper documentation of such inspections.  (CPUC Gen. Order 157-6 §4.02.) 

Since Lyft and Sidecar allow cars dating as far back as 2000, many of the vehicles would most certainly fail these inspections. This failure rate and the cost of these inspections, coupled with the high price of commercial insurance, would drastically reduce the available pool of drivers.

Denying that People Work for Money

Sidecar went into some detail on its strange concept of  “profit” with the following:

By its enforcement actions and policy, the CPSD (Public Utilities Commission's Consumer Protection Safety Division) has apparently chosen to interpret essential and undefined terms such as “profit” as narrowly as possible. The CPSD’s position is that only “incremental” or “variable” profit (i.e., on a per-trip basis) should be considered; however ... a reasonable and practical construction of profit and a commercial enterprise is the total expenses of operation (i.e., the fixed and variable or aggregate costs). Simply put, there’s no profit where total costs exceed income ...

Brilliant! Nobody has ever thought of that before.

Sidecar, then, is desperately trying to redefine “profit” into some murky arcane concept that nobody can understand. Common sense provides the obvious rebuttal to this self-serving re-definition . How many people would spend twenty or thirty hours a week running passengers here and there if they didn’t make money doing it?  

In addition, Lyft, Sidecar and Tickengo advertise for drivers by telling them that they will make money.   A Lyft ad says:

 "Make $22/hr With Your Car - Have A Car? Give A Lyft - lyft.me."  

The Sidecar driver application opens with:

"You drive every day. Why not get paid for it? Make extra cash and meet some awesome people by driving with SideCar! ... Some SideCar drivers are earning $22+ per hour."

Tickengo’s website is a little subtler and doesn’t mention money until the end of its driver page when it writes:

"Get Paid When you accept a ride, your passenger receives an electronic ticket with a PIN. Ask for this code once at destination to get paid. If the ride goes well, you'll get a good review, which means more requests and more money... Enjoy!"

Given that these are their own advertisements, no one should be surprised if the arguments that Lyft, Sidecar and Tickengo put forward to prove that their drivers don’t make a “profit” tend toward the esoteric.
The “Who Can Read Minds?” Denial
Sidecar writes:
"The ridesharing exemption under section 5353(h) provides for “[t]ransportation of persons between home and work locations or of persons having a common work-related trip purpose in a vehicle having a seating capacity of 15 passengers or less…and/or transportation that is “incidental to another purpose of the driver.... It is ... important that the phrase “the purpose of the driver” not be read too narrowly. A focus on driver’s state of mind would be so difficult to discern that it would create uncertainty and be impossible to enforce."
This was thought to be so profound that it was echoed by Willie Brown who wrote: 
“It would be impossible to read drivers’ minds and differentiate between people just helping out other people trying to recoup their vehicle expenses.”
Impossible to read drivers’ minds? Wouldn’t the fact that Lyft, Sidecar and Tickengo drivers transport customers for an average of $22 per hour be an indication of what’s going on in their heads?
“Work-related” means driving around while thinking about working.
Sidecar asks that the CPUC: 
“Clarify and ensure reasonable and practical guidance and commercially reasonable interpretations of certain vague and undefined ridesharing terms and phrases including “work-related” and “work locations.”  Such terms and phrases should not be construed narrowly based on outdated historical or traditional principles of an employer-employee relationship and a traditional “9-5” home- work commuting routine. ... Rather, the terms and phrases should be construed for the varied circumstances of the current California labor force and market. The CPSD has narrowly defined these terms through its enforcement policies and actions in a manner that is impracticable and unwarranted (i.e., suggesting that a driver or passenger must be an “employee” of an entity, thereby disqualifying independent contractors, freelancers, or full time moms/caregivers from the “work-related” element of the rideshare exemption).
If the rideshare exemption is not actually intended to refer to the act of sharing a ride between common destinations, as opposed to offering paid, on-demand transportation, and if the CPUC proves capable of accepting this kind of self-serving obfuscation of common language from the mouths of for-profit businesses -- from whom the CPUC is supposed to be protecting the public -- then I think I’ll start looking for housing in some neighborhood that is nowhere near a PG&E gas line.
Innocence by Association 
Willie Brown keeps lumping Tickengo together will a true, government-run ridesharing site, 511.org, in hopes that the reader will get the expression “ridesharing sites such as 511.org or Tickengo” stamped on his or her brain. In fact, Brown links Tickengo with 511.org at least seventeen times in eight pages.  But a quick glance at the 511.org website proves this connection a lie. Instead of advertising for drivers that get paid, a 511.org add says:

 “Carpooling can save you money by dividing the driving expenses between members of the carpool. You can split the costs evenly between people in the carpool or you can split expenses by how often you rotate driving duties. If everyone drives equally, no money needs to change hands. If you are strictly a passenger, you can pitch in your share for gas and other expenses.”

Indeed, in the carpooling situations that I’m familiar with, passengers usually will offer to pay a dollar for the bridge or the gas. The drivers certainly don’t make $22 per hour before or after expenses.

The Magic of Numbers

Lyft, Sidecar and Tickengo all propose that the AAA annual cost of vehicle ownership ($8,776 per year) be used as a standard to judge whether or not a driver should be considered to be doing ridesharing. In the words of Willie Brown: “It would be impossible to calculate the exact expense of every trip so this limitation guarantees that ridesharing drivers are not ‘driving for a living’ as commercial drivers.” Brown is saying, that until drivers make $8,776 a year they are doing ridesharing. Over that amount, they are considered cab or limo drivers.

What’s wrong with this sophistry?

The main thing wrong with Brown’s logic is that the law was set up for actual carpooling operations, not taxi or livery services that are pretending to be carpools like Lyft, Sidecar and Tickengo.  The purpose of the carpooling law was to help the environment by taking cars off the street, not by putting thousands more cars on it as Lyft, Sidecar and Tickengo are doing.

The figures being thrown around by Lyft, Sidecar and Tickengo bear no relationship to a real carpooling situation. Let’s look at what a real carpooling situation would look like, given that AAA estimates 2012 California driving costs for 2012 as $0.596 per mile driven, and using a real carpool ride from San Francisco to Oakland as an example:
    1. For a 15-mile trip across the Bay Bridge, according the AAA standard, the mileage and toll costs to the driver per year would be $2974.
    2.   This is a difference of $5802 from the AAA total annual vehicle costs.  If this is used by the CPUC as a measure of “ridesharing”: 
  • This hard-working carpool driver, who goes into the office on every weekday of the year without taking a sick day or single state or federal holiday, can earn some extra income by driving up an additional 9,735 miles after work (about 185 miles per week, every week of the year, or about one standard taxi shift per week) driving people around with a pink mustache on the front of the car without violating the concept of “ridesharing”; or
  • This carpool driver will have to collect $5.71 from every casual carpool “customer” to recoup their annual vehicle expenses at the AAA rate.  This is exactly $4.71 per person more than the going rate at every transbay carpool stand.
    1. In a real transbay casual carpool, the passengers will sometimes (not always) contribute a dollar each toward the toll.  This custom only developed when the Bridge District recently started charging toll for use of the carpool lane.  This vehicle owner who drives to the City might hope, then, to collect $520 from two daily passengers.  In that case the difference between what this driver might collect and the proposed annual vehicle cost standard is $8256.
  • This tireless hypothetical vehicle owner, by Sidecar, Lyft and Tickengo’s standards, is free to drive an additional two standard taxi shifts per week, every week of the year (266 miles per week) in order to earn back their vehicle expenses for the year.   
If Lyft, Sidecar and Tickengo drivers were to work eight hours per day with a 15 mile per hour average, vehicle expenses would be ($8.94 * 8 hours) or $71.52 per day. Using the AAA yearly limit of $8,776 as a measure, the illegal taxicabs of Lyft, Sidecar and Tickengo would be allowed to operate five days a week for twenty-four weeks (nearly six months per year), or half-time during an entire year before they reached their “ridesharing” limit.  At $22 per hour promised returns, these drivers would actually make $21,120, or $12,344 more than the cost of all of their annual personal vehicle expenses.  A free personal vehicle and $12,000 a year in cash for working  (i.e. “ridesharing”) part-time.  Not bad.

Now that is what I call a good working definition of the difference between illegal taxicabs like Lyft, Sidecar and Tickengo and a real carpool.

Another good definition of a real carpool would be a non-profit like 511.org that can't afford to pay Willie Brown $500 an hour to represent them.


  1. Brilliant analysis Ed but why, with vast resources including 23 million stripped from the cab industry is MTA not doing this analysis and doing something more than sending Ms. Hayashi to CPUC to argue?
    They should have a team of Lawyers filing lawsuits and or going to Sacramento and leaning on legislators.
    CPUC is nuts. They don't care that the passengers may well become a taxpayers liability when there is an uninsured accident.
    It will be interesting when a driver sues Lyft et.al. for Workers Comp. if they get hurt. They can have a thousand contracts but they may not be enforceable.
    My prediction is the value of the medallion is headed for a steep decline. I would not recommend buying one that is for sure

  2. Hi Richard,

    Actually the MTA did send in a good piece of analysis to the CPUC. They are definitely against Lyft etc running amok. From what I understand the problem is Mayor Lee who has publically come out saying that Lyft and Sidecar are A-Ok. From the standpoint of the City is a stupid position for a Mayor to take (considering lost medallion revenue) but, if there is one I have learned at City Hall during the last 3 years it is that, intelligence is not a requirement for public office.

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  4. The MTA is flooding the market with expensive medallions that will become cheap medallions unsellable at anywhere nearly the price they were purchased for.

    Since they are the regulator, this is something they are supposed to think to avoid. Therefore, their behavior is unfeasible and obviously predatory.

    No amount of "spin" can change the fact that is it wrong, wrong, wrong that the administrator should be the beneficiary. It is just as wrong that rather than spend money to create the dispatch system that would really fix the problems, the MTA spent even more money to commission the Hara report, which is probably going to recommend more medallions.

    So, the MTA is spending money to be told what it wants to be told.

  5. Everyone know that Willie Brown is the "dude" started the limo problem. He is the guy for hire and the worse crook that I can think of. He is still messing around until these days and the Feds need to investigate him on corruption, unethical and lots of criminal activity. Now he is being hired by sidecar, lyft and other companies to lobby for them. Getting worse as he grow older.
    SFMTA only care about generating revenue and never talk about centralized dispatch that will solve the issue. They are keeping the companies that we don't need alive at the expense of the drivers and the public.

  6. I think u cab drivers give yourselves too much credit for being able to "drive" . It's not that hard. Ask any 16 year old

  7. I used to teach driving. I'd give the 16 year olds 3 two hour lessons. They be terrified (and trying not to show it) during the first lesson. On the second lesson they'd be cool. By the 3rd lesson they thought they already knew more than I did and rarely listened to anything I had to say.

    Two things i harped on were: not to tailgate and not to use cell phones while driving. One week after one of my students got her license, she almost hit me backing out of her driveway while texting. I passed by another student of mine sitting with a dazed expression on his face behind the wheel of car with a burst airbag that had smashed into the back of a truck.

    Thanks for proving my point.


    Driving is like playing basketball. Anybody can do it but not everyone does it well. It takes training, practice intelligence and concentration.

    Only those with a 16 year old's mind think otherwise.

  8. And the hundreds of millions of people who drive to work daily without incident. Have u ever taken any of these services you are bashing? They are awesome and the customers love them. I never took cabs before, and I'll use these services all the time. World is better off with them.

  9. I can see that you're a genius but, no - I have not taken any of these services because: 1. They don't carry the commercial insurance required by insurance companies - meaning that I'm not covered if I ride with them and 2. many of their former customers who get in my taxi tell me that the drivers are NOT always awesome because the drivers don't know where they are going, overcharge the customers, and drive badly.

    May I suggest that you toss away your prejudices and ride a taxi before you give me any more lectures on what I should do.

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