Prop 1, the City of Austin ballot initiative that would have overturned the city council’s regulations on ridesharing services like Uber and Lyft—the chief component being that the companies require drivers to pass a fingerprint background check—failed spectacularly at the ballot box on Saturday. By a twelve-point margin, Austinites rejected the ordinance, which answers our question about the cost of local elections: It may cost $8.6 million (or more) to make voters care, but it also costs that much to incite 56 percent of the electorate into voting against you. People were certainly aware of the Prop 1 vote, but all of the direct mailers and unsolicited text messages in the world are apparently not enough to get people to vote the way that you want, as Uber and Lyft learned on Saturday night.
Both companies announced that night that they’d cease to offer services in Austin on Monday morning—Lyft at five in the morning, and Uber three hours later (giving them that crucial pre-rush hour window to make some extra cash before bailing). But the consequences of the failed proposition go way beyond Austinites’ commutes: the state and, indeed, the nation could feel the ripple effects. You have questions? We have (some) answers:
How does a local ballot proposition in Austin affect people in El Paso or Dallas or Houston?
Just in case you think no one outside of Austin’s city limits cares about Prop 1, ask State Representative Matt Rinaldi (R-Irving), who tweeted on Sunday morning that he’s champing at the bit to get Austin in line.
— Matt Rinaldi (@MattRinaldiTX) May 8, 2016
“Tyranny” may be a strong word, but Rinaldi ain’t wrong—the Texas legislature will almost certainly be looking at statewide regulations for ridesharing services in 2017. The Lege considered such rules in 2015, though they didn’t get far out the gate. Now, though, the issue is ripe for enhanced lobbying. The battle over Prop 1 fell among fairly predictable party lines—the celebration at Austin’s Scholz Garten after it failed was hosted by the Travis County Democratic Party—and the Republican-dominated Lege is likely to join Rinaldi in seeing this as a stand worth taking. Texas Land Commissioner George P. Bush seems to think so too:
Liberalism has consequences–ATX always claims to be progressive–instead it voted for the past on Prop 1–Gov't won and the people lost
— George P. Bush (@georgepbush) May 8, 2016
It seems probable, at this point, that Uber and Lyft will take their case to the Lege in the 2017 session. The bill they tried to pass in 2015 would have nipped Prop 1 in the bud by preventing Austin from passing its own regulations. Texas under Governor Greg Abbott has shown little compunction about overturning local control (or is it “local tyranny”?) when it comes to things that he doesn’t think should be regulated—the state blocked fracking bans last year, and Abbott also targeted city ordinances that ban plastic shopping bags. If language similar to Prop 1 crops up in the Lege, it won’t just be Austin that has to comply.
So why did Uber and Lyft fight this battle in Austin at all?
This might have taken place in Austin, but it’s not really about Austin. As other cities around the country are considering their own regulations—which, like in Los Angeles, may include fingerprinting—the companies sure seemed like they wanted to send a message about the futility of trying to pass rules they consider too onerous to comply with. If Prop 1 had succeeded, they would have had a bargaining chip they could present to L.A. Mayor Eric Garcetti—”if you pass fingerprinting restrictions, we’ll just spend enough to get your own constituents to overturn it.”
That chip doesn’t exist, but it’s obviously not for lack of effort. At the raucous Scholz Garten party on Saturday night, political consultant David Butts declared that “Uber wanted to make an example out of Austin—instead, Austin made an example out of Uber,” a statement that was met with such rapturous enthusiasm that the crowd soon burst into a seemingly spontaneous chant of “Whose City? Our City!” while poor Austin Mayor Steve Adler tried to give a TV interview in the corner. But Butts wasn’t wrong—it’s definitely going to be harder for Lyft and Uber to threaten to spend their way out of any future regulatory holes they may find themselves in in other cities.
So the Austin City Council won, right?
Sorta, but it’s worth looking at what all of this means in the bigger-picture sense. If last night’s vote was a referendum on “Does Austin City Council have the right to make law,” the voters turned out in force to declare that they do. But Uber and Lyft have two big cards left to play: One of them is the 2017 legislative session, and the other is just leaving town.
That part isn’t good, and it shouldn’t be considered a victory for Austin’s city council. Part of the problem with Prop 1—and with the heated rhetoric around it—is that there were two very different ways of looking at it; depending on which of those things you saw as the primary issue, you could have a very different perspective on what makes sense.
“Does Austin City Council have the right to make law” is good policy, and voters turned out for it. “Should Lyft and Uber have to comply with fingerprint background checks” isn’t really good policy, and the city should be looking at alternatives.
How much did Lyft and Uber pay you to type that sentence?
Pretty sure they’re done spending in Austin right now.
That’s not an answer.
See, this is the thing about the issue that made the conversation around it so difficult. Either you were opposed to Prop 1, and you hated innovation and didn’t care about the countless ridesharing drivers who were going to lose their job when Uber and Lyft stopped operating in Austin—or you were in favor of Prop 1, and you wanted to see city government run by big-spending corporations from out of town who could bully their way into ensuring that the only regulations they had to comply with were regulations they wrote themselves. That’s no way for adults to have a conversation about how to govern themselves, and this issue definitely needed more nuance than it got. That’s to be expected in electoral politics, especially when there’s so much money involved, but it’s a disappointment.
What should happen now, then?
Fingerprint-based background checks aren’t great. The FBI’s database is known to be flawed with outdated and inaccurate information. It’s kind of like taking your shoes off before you get on an airplane—it provides the feeling of security while also inconveniencing a bunch of people for show. Still, it might turn out to be the best option—more on that in a second—but as the city considers what regulations are in everybody’s best interest, now that it has ensured that it has a full complement of options at its disposal, it should be looking beyond fingerprinting.
Isn’t Austin stuck with fingerprinting now that people voted down Prop 1?
Nope. If Prop 1 would have passed, the city would have been prohibited from passing fingerprint-based regulations. But now the city is allowed to create whatever regulations it deems appropriate. City council can—and should–be looking to tweak the current ordinance with one that, for example, doesn’t prove discriminatory against drivers of color the way that fingerprint checks do. Although we doubt that Uber and Lyft are particularly passionate about that issue when it doesn’t directly concern them, the Austin chapter of the NAACP and the Urban League certainly are, and the objections they raised deserve to be considered and taken into account.
So what sort of background check should Lyft and Uber do?
That’s the zillion dollar question here. The problem is that most jobs have a process that screens out people who raise red flags. For most companies, you go through an interview, meet the people you’ll be working for, and get offered the chance to interact with the public based on the judgment of someone who is responsible for making sure that the company is represented well. (Depending on the job, it can also come with more formal background checks.) Because the “hiring” process for Lyft and Uber is more of a “sign up” process, the system relies on computer checks to do all of that work. That’s going to result in a process that has definite flaws—and it’s going to take creativity beyond just “run a fingerprint check” to address them. What that specifically looks like is hard to say, but between Austin’s leaders and Lyft and Uber, you’d think there would be enough brainpower to consider some viable options.
Austin’s a big tech town. Couldn’t some start-up just replicate what Uber and Lyft do?
The short answer: “Probably, yeah.” The longer answer: Uber and Lyft are well-funded global companies, but they don’t bring much in the way of value to the transaction that happens. The most expensive part of a ridesharing operation is getting a bunch of cars on the road—but Uber and Lyft don’t own their fleets, so that’s a responsibility borne by the drivers. So are things like insurance and fuel, which means that the actual overhead to running one of these companies is pretty low. Routing is done with map services like Google Maps that are free to use. Mostly, if you’re running a ridesharing service, you need money to build up your app so that it works properly, doesn’t crash, etc, and to market yourself so that drivers and passengers actually sign up and find each other.
That can be a big challenge in a crowded market where two titans of the industry—Uber and Lyft—dominate the bulk of the business. But if those companies aren’t operating in Austin, then you can imagine what a unique opportunity that presents to someone who wants to get into the business without having to compete with the big guys. If you have drivers and passengers—and somebody is gonna get drivers and passengers in Austin—you could likely replicate the bulk of Lyft and Uber’s functionality pretty cheaply.
But won’t these hypothetical new companies have to comply with onerous city council regulations?
The regulations that Austin City Council passed regarding fingerprint background checks—if they don’t get re-written once the No On Prop 1 forces stop celebrating—don’t fully go into effect until February 2017. So they’ll have to comply—GetMe already promises that they will—but they’ll have the better part of a year to scale up in the meantime.
Wait, Uber and Lyft don’t have to fingerprint all of their drivers until next year? Why did they say they had to stop operating in Austin immediately after the vote, then?
Come on, man.
Remember, this isn’t just about Austin. They don’t want to be seen as making empty threats, or it’ll be that much harder to negotiate in L.A. or other cities around the country that are considering fingerprint background checks.
Don’t these companies face really strict regulations in New York and make it work there? Can’t Austin keep these regulations in place and get these companies crawling back?
The regulations regarding ridehailing services in New York City are much more strict than just fingerprint backgroung checks. Those drivers need a license from the Taxi & Limousine Commission and corresponding plates on their car, plus commercial insurance. But—not to put too fine a point on it—Austin isn’t New York. It’s not as important to these companies in terms of market or marketing. You don’t hit a $40 billion valuation (which Uber enjoys) if your company doesn’t have a presence in New York. That’s not the case with Austin, obviously.
So what would make Uber and Lyft come back to the table, if they can just lobby for new rules in the legislature in 2017?
A couple of things: One, they don’t want to give up market share if a competitor picks up steam here over the next year. Two, it’s hard to keep growing a company that’s opted out of too many markets. Investors who see that Lyft doesn’t operate in Austin or Houston, and who know that they may have to make some threats about leaving L.A., have to give some thought to the growth potential of the company.
So what’s the best case scenario here for everybody?
Smart regulations that don’t rely on fingerprinting would be a good place to start. Austin should want Uber and Lyft operating in the city. Uber and Lyft should want to operate in Austin. Austin should want to create regulations that keep people with a history of DWI arrests, or violence against women, or other red flags like that, from driving people around for money—but it shouldn’t enforce regulations that would, say, keep drivers of color (who are disproportionately arrested for minor infractions that don’t put passengers at risk) from working. That system may not exist yet, but creating it ought to be a priority for everybody.
More than anything, a lot of ego is gonna need to be checked. The people who fought against Prop 1, which had a sort of David and Goliath quality to it, need to recognize that the support they received on Saturday was at least as much of a response to the tone of the campaign Uber and Lyft were running as it was a show of support for the specifics of the current regulations. Drawing a hard line around those specific regulations just because they won the vote would be a short-sighted, wrongheaded move.
Uber and Lyft, meanwhile, definitely need to approach Austin City Council with some humility, and consider not just what makes it easiest for them to add drivers to their ranks, but also that there are legitimate safety issues at stake here that the current regulations fail to address.
All of that may happen, or it may not. If it doesn’t, it’s going to be unfortunate, at least in the short term—there are people who need to get around town who deserve more options than Austin currently provides, and even growing the one new company that replicates Uber and Lyft’s services is probably not sufficient to meet the demand (plus, competition would be good for prices). There are certainly a whole lot of people who’ve made their living driving for those companies who are gonna be scrambling to make rent this month, and that’s not good for anybody.
So probably the real best case scenario here is for Austin to make some overture to renegotiating the regulations in good faith—to create room for Uber and Lyft to save face as they say, “OK, we’ll continue operating in Austin in the short term.” Then, everybody involves needs to calm way down and recognize that an unprecedented number of Austin voters were engaged on this issue, and it’s incumbent on both the city council and the companies that offer these services to respond to that engagement. Now that we’re not in the middle of a deeply contentious election, maybe that can actually happen.