Transportation network company

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A transportation network company (TNC) is a company that uses an online-enabled platform to connect passengers with drivers using their personal, non-commercial, vehicles.[1] Examples include Lyft, Uber X, Sidecar, Wingz, Summon, and Haxi.[2][3]

These platforms have sometimes been called "ridesharing", but transportation experts prefer the term "ridesourcing" to clarify that drivers do not share a destination with their passengers.[4] (The term means the outsourcing of rides.) Unlike ridesharing, TNCs do not reduce vehicle trips, traffic congestion, and automobile emissions.[citation needed]

The definition of a TNC was created by the California Public Utilities Commission in 2013, as a result of a rulemaking process around new and previously unregulated forms of transportation. Prior to the definition, the commission had attempted to group TNC services in the same category as limousines.[5] Taxi industry groups opposed the creation of the new category, arguing that TNCs are taking away their business as illegal taxicab operations.[6]

The commission established regulations for TNC services at the same time as the definition. These included driver background checks, driver training, drug and alcohol policies, minimum insurance coverage of $1 million, and company licensing through the Public Utilities Commission.[7]

Business model[edit]

Transportation network companies develop a computing platform which creates an online marketplace in which a driver and car owner registered with the company may offer their own labor and car to people who request a ride in the marketplace.[citation needed] The services offered by such companies include the maintenance of the marketplace where fare-paying customers can meet drivers for hire, vetting of drivers to ensure that they meet the standards of the company's own marketplace, and delivery of payment from customer to driver in their own financial transaction.[citation needed]

The services of transportation network companies can be in demand because of the convenience of requesting a ride by a mobile app, the satisfaction of being able to have experience monitored by the company as a third party, and because of competitive pricing for services.[8] Taxicabs can provide similar services, but while most cities require companies which provide taxicabs to meet requirements for business, transportation network companies may be exempt from such requirements due to their only providing a marketplace and not actually employing drivers or keeping automobiles.[8]


  2. ^ Geron, Tomio (9 Sep 2013). "California Becomes First State To Regulate Ridesharing Services Lyft, Sidecar, UberX". Forbes. Retrieved 23 Oct 2013. 
  3. ^ Yeung, Ken (19 Sep 2013). "California Becomes First State To Regulate Ridesharing Services Uber, Lyft, Sidecar, Wingz and InstantCab". TheNextWeb. Retrieved 19 Nov 2013. 
  4. ^ Rayle, L., S. Shaheen, N. Chan, D. Dai, and R. Cervero. App-Based, On-Demand Ride Services: Comparing Taxi and Ridesourcing Trips and User Characteristics in San Francisco. University of California Transportation Center, 2014.
  5. ^ Ride-Sharing Startups Get California Cease-And-Desist Letters - Forbes
  6. ^ In California, They're Not Taxis, They're "Transportation Network Companies" - WNYC
  7. ^ California PUC Proposes Legalizing Ride-Sharing From Startups Lyft, SideCar, Uber - Forbes
  8. ^ a b Rott, Nate (August 8, 2013). "California's New Rules Could Change The Rideshare Game". Retrieved 22 August 2014.