Ride-sharing companies like Uber and Lyft have completely revolutionized transportation over the past several years, hindering business for taxi companies and impacting people’s decisions to purchase cars. Despite their popularity with consumers, the New York City Council made a move in early August to stop their growth, halting the issuance of new for-hire vehicle licenses for 12 months.

Stopping the issuing of licenses prohibits new individuals from using their own personal vehicle as a hailable car. The only thing that the cap does not limit is the granting of licenses for wheelchair accessible cars since there is a shortage of accessible cars in both services. This means that the number of available options, in the city, will either remain stagnant or decrease (if/when drivers decide to stop driving).

 

rideshare

The New York City Council said that they made their decision not because they want to get rid of the services in the city.

Instead, they said their decision was motivated by a desire to study the service and how it works. Since they have limited understanding of Uber and Lyft, and have not done a deep dive into the data surrounding it, they want to take some time to look at how the apps work–then regulate them better when they start issuing new licenses again. 39 members of the city council voted in favor of the cap, while 6 members voted against it.

The city council is currently considering another bill regarding ride-hailing companies, and it would require Uber and Lyft to hand over their data to be analyzed by the city. If they fail to provide the data, they’ll have to pay a $10,000 fine.

While the city council members claim they made their decision so that they could study the services more closely, there may be other reasons that they chose to limit the expansion of ride-sharing services.

First, the city council says that they believe that limiting Uber and Lyft will help ease traffic in NYC (have you ever been in NYC when there wasn’t traffic–even before Uber and Lyft existed?).

Also, Lyft and Uber have impacted the taxi medallion services that serve New York, since many people prefer the convenience of arranging a car from their smartphone, rather than having to stand on the street and hail a cab; ultimately this will force the medallion holders to provide better service(s) to their customers in order to remain competitive. The same forces may also be impacting subway and bus ridership; again, forcing those providers to rethink the convenience factor in favor of their riders. The city council should indeed take the time to study and understand the market forces behind this move by the consumers to do what is in their own intelligent self-interest. It is not Uber or Lyft that have been disruptive, it is the consumers that have elected to do what is best for them.

I applaud the New York City councils’ approach by making the cap temporary so that they can gather more information in advance of setting additional policies. I think even in the short term we will see a number of negative results, here are some of the most significant:

First, Uber and Lyft both think that riders will experience longer wait times since supply will dwindle, I agree. Additionally, service will become less reliable and costs will go up. Because there will be fewer cars the price of a ride will rise, and this will hurt consumers (voters) because it will cost them/us more money to get around.

Next, sadly, this cap will impact minority riders disproportionately. Uber and Lyft have all but eliminated the discretionary selection of passengers based on their appearance. Are we prepared to go back in time to an era when drivers had the discretion to select who they will pick up, and from which neighborhoods?

Also, the city government has elected to (albeit for a limited time) impact market forces by trying to regulate supply and demand. I believe, that the free markets should make that determination.

Finally, Uber and Lyft provided a great service to the consumers by giving the consumers shared control of the process. Consumers get to pick the type of vehicle, the driver, the time, and the location of pickup. Consumers get to select their driver by evaluating the experience of other consumers, this again allows the market force of customer satisfaction to weed out drivers that do not provide good service.

Ultimately, this decision hurts consumers and new drivers alike, by limiting options for consumers, and eliminating employment for those seeking this as their profession. It will be interesting to see the results of the market study one year from now…