Transportation network company
A transportation network company (TNC), sometimes known as a mobility service provider (MSP) or ride-hailing service, is a company that matches passengers with drivers via websites and mobile apps. TNCs are examples of the sharing economy and shared mobility.
TNCs have been noted for providing service in less populated or poorer areas that are not regularly served by taxicabs, and charging lower rates than taxicabs, since taxicab rates are often set by local jurisdictions.
Studies are inconclusive on whether TNCs reduce drunk driving rates in cities where they operate, with some studies showing that it depends on the city.
TNCs are regulated in most jurisdictions and have been banned in a few jurisdictions. Regulations can include requirements for driver background checks, fares, the number of drivers, licensing, minimum wage, and insurance. For more information, see Legality of TNCs by jurisdiction.
- 1 Definition and terminology
- 2 Criticism
- 2.1 Criticism by the taxi industry
- 2.2 Driver criticism of classification of independent contractors
- 2.3 Driver criticism of compensation
- 2.4 Dynamic pricing
- 2.5 Increased traffic congestion
- 2.6 Reduced usage of public transportation
- 2.7 Lack of wheelchair accessible vans
- 2.8 Drivers using their phones while driving
- 3 Notable companies
- 4 References
Definition and terminology
In 2013, the California Public Utilities Commission defined, for regulatory purposes, a transportation network company as a company that uses an online-enabled platform to connect passengers with drivers using their personal, non-commercial vehicles. The Virginia Department of Motor Vehicles defines a TNC as a company that "provides prearranged rides for compensation using a digital platform that connects passengers with drivers using a personal vehicle."
In January 2015, the Associated Press Stylebook, the collective that sets many of the news industry's grammar and word use standards, officially adopted the term "ride-hailing" to describe the services offered by Lyft and Uber, claiming that "ridesharing" doesn't accurately describe the services since not all rides are shared and "ride-sourcing" only is accurate when drivers provide rides for income. While the Associated Press recommended the use of "ride-hailing" as a term, it noted that, unlike taxis, TNCs cannot pick up street hails.
Criticism by the taxi industry
The taxi industry has claimed that TNCs skirt regulations that apply to passenger transport and TNCs are therefore illegal taxicab operations. This has resulted in additional regulations imposed on TNCs and, in some jurisdictions, certain TNCs are banned from operating.
Effect on values of New York City taxi medallions
In New York City, use of TNCs has negatively affected the values of taxi medallions, transferable permits or licenses authorizing the holder to pick up passengers for hire. After soaring in value after the Great Recession due to their perceived safety, New York City taxi medallions were again trading for around $170,000 each in 2018. Annual rental rates were $30,000. A couple of credit unions that lent money secured by medallions suffered from bank failure.
Driver criticism of classification of independent contractors
Unless otherwise required by law, TNC drivers are independent contractors and not employees. This designation may affect taxation, work hours, and overtime benefits and lawsuits have been filed by drivers alleging that they are entitled to the rights and remedies of being considered "employees" under employment law. In response, TNCs say they provide "flexible and independent jobs" for drivers.
In O'Connor v. Uber Technologies, a lawsuit filed in the United States District Court for the Northern District of California on August 16, 2013, Uber drivers pleaded that according to the California Labor Code they should be classified as employees and receive reimbursement of business expenses such as gas and vehicle maintenance costs. In March 2019, Uber agreed to pay $20 million to settle the case.
On October 28, 2016, in the case of Aslam v Uber BV, the Central London Employment tribunal ruled that Uber drivers are "workers", rather than self-employed individuals, and are entitled to the minimum wage under the National Minimum Wage Act 1998, paid holiday, and other normal worker entitlements. Two Uber drivers had brought the test case to the employment tribunal with the assistance of the GMB Union, on behalf of a group of drivers in London. Uber appealed the decision. In December 2018, Uber lost an appeal of the case at the Court of Appeal, but was granted permission to appeal to the Supreme Court of the United Kingdom.
In March 2018, the Federal Department of Economic Affairs, Education and Research of Switzerland, gave the legal opinion that under the conditions that bind drivers to Uber that they should be classified as employees.
Driver criticism of compensation
Driver's have complained that in some cases, after expenses, they earn less than minimum wage. As a result, in some jurisdictions, such as New York City, drivers are guaranteed a minimum wage.
TNCs use dynamic pricing models; prices for the same route vary based on the supply and demand for rides at the time the ride is requested. When rides are in high demand in a certain area and there are not enough drivers in such area, fares increase to get more drivers to that area and to reduce demand for rides in that area. The rate quoted to the rider reflects such dynamic pricing.
TNCs were criticized for extreme surcharges during emergencies such as Hurricane Sandy, the 2014 Sydney hostage crisis, and the June 2017 London Bridge attack, especially when taxis offered to transport riders for free; however, in many cases, the surcharges were refunded by the TNCs and TNCs later agreed to either not charge surcharges, or in some cases, offer free rides, during certain emergencies.
Increased traffic congestion
TNCs were criticized for increasing traffic congestion in New York City and San Francisco. A report published by Schaller Consulting in July 2018 showed that traffic congestion increased as a result of TNCs.
However, some reports say TNCs reduce traffic congestion; since their cars "can't accept street hails, they do much less unnecessary driving-around than either government-licensed/regulated taxi cabs (who are cruising for hails) or individuals (who are looking for a parking spot)." A March 2016 study by Judd Cramer and Alan B. Krueger of the National Bureau of Economic Research showed that a ride via a TNC uses capacity more efficiently than traditional taxicabs as TNC drivers are more likely to have a passenger than a taxicab.
Reduced usage of public transportation
Studies have shown that TNCs have led to a reduction in use of public transportation.
Lack of wheelchair accessible vans
In some areas, TNCs are required by law to have a certain amount of wheelchair accessible vans (WAVs) on the road at any given time. This can be a difficult requirement for TNCs to meet because TNCs don't provide vehicles and most drivers do not own a WAV, causing a shortage.
Drivers using their phones while driving
When a customer makes a pick-up request, a driver is notified via mobile app and is provided the customer's location. The driver has approximately 15 seconds to tap the phone to accept the request. In many jurisdictions, tapping a phone while driving is against the law as it could result in distracted driving.
- McArdle, Megan (July 20, 2015). "Uber Serves the Poor by Going Where Taxis Don't". Bloomberg News.
- Hawkins, Andrew J. (October 4, 2017). "Does Uber lead to less drunk driving? It's complicated". The Verge. Vox Media.
- "DECISION ADOPTING RULES AND REGULATIONS TO PROTECT PUBLIC SAFETY WHILE ALLOWING NEW ENTRANTS TO THE TRANSPORTATION INDUSTRY" (PDF). California Public Utilities Commission. December 20, 2012.
- "Virginia DMV: TNC Frequently Asked Questions". Virginia Department of Motor Vehicles.
- Warzel, Charlie (January 8, 2015). "Let's All Join The AP Stylebook In Killing The Term 'Ride-Sharing'". BuzzFeed.
- FREED, BENJAMIN (June 30, 2015). "Why You Shouldn't Call Uber and Lyft "Ride-Sharing"". Washingtonian.
- Dickenson, Greg (June 26, 2018). "How the world is going to war with Uber". The Daily Telegraph.
- Berger, Paul; Gottfried, Miriam (January 17, 2018). "Hedge Fund Bets on Beaten-Up New York Taxi Business". The Wall Street Journal. (Subscription required (help)).
- Tansey, Bernadette (July 17, 2015). "Sharing Economy Companies Sharing the Heat in Contractor Controversy". Xconomy.
- "The gig-economy: Uber good or Uber bad?". Canadian Labour Congress. May 12, 2015.
- Hawkins, Andrew J. (March 12, 2019). "Uber settles driver classification lawsuit for $20 million". The Verge.
- Griswold, Alison (October 28, 2016). "A British court rules Uber drivers have workers' rights in the "employment case of the decade"". Quartz.
- Between (1) Mr Y Aslam (2) Mr J Farrar & Others and (1) Uber B.V. (2) Uber London Ltd (3) Uber Britannia Ltd (PDF) (Report). Employment Tribunals. 28 October 2016. Case Nos: 2202550/2015 & Others.
- "Uber loses latest legal bid over driver rights". BBC News. 19 December 2018.
- "Swiss authorities say Uber drivers should be treated as 'employees'". Swissinfo. March 19, 2018.
- Newcomer, Eric (May 15, 2017). "Uber Starts Charging What It Thinks You're Willing to Pay". Bloomberg News. (Subscription required (help)).
- Kerr, Dara (August 23, 2015). "Detest Uber's surge pricing? Some drivers don't like it either". CNET.
- Carson, Biz (June 23, 2016). "Uber will stop showing the surge price that it charges for rides". Business Insider.
- Bosker, Bianca (October 31, 2012). "Uber Rethinks New York 'Surge Pricing,' But Doubles Driver Pay". The Huffington Post.
- Mazza, Ed (December 15, 2014). "Uber Raises Fares During Sydney Hostage Crisis, Then Offers Free Rides". The Huffington Post.
- "Uber has refunded passengers after London Bridge terror attack". BBC News. June 5, 2017.
- Fitzgerald Rodriguez, Joe (December 11, 2016). "SF blasts Uber, Lyft for downtown traffic congestion". The San Francisco Examiner.
- Fitzsimmons, Emma G.; Hu, Winnie (March 6, 2017). "The Downside of Ride-Hailing: More New York City Gridlock". The New York Times. ISSN 0362-4331. (Subscription required (help)).
- "The New Automobility: Lyft, Uber and the Future of American Cities" (PDF). Schaller Consulting. July 25, 2018.
- Wolfe, Sean (July 27, 2018). "Uber and Lyft are creating more traffic and congestion instead of reducing it, according to a new report". Business Insider.
- Salmon, Felix (July 30, 2015). "New Yorkers love Uber. But is Uber good for New York?". Splinter News.
- Cramer, Judd; Krueger, Alan B. (2016). "Disruptive Change in the Taxi Business: The Case of Uber". American Economic Review. Papers and Proceedings. 106 (5): 177–182. doi:10.1257/aer.p20161002.
- Badger, Emily (October 16, 2017). "Is Uber Helping or Hurting Mass Transit?". The New York Times. (Subscription required (help)).
- Said, Carolyn (February 27, 2018). "Uber does not have enough wheelchair-accessible vehicles, new lawsuit says". San Francisco Chronicle.
- Jacks, Timna (January 11, 2019). "Uber drivers complain they are forced to break the law to do their job.So that means that the drivers put the passenger in danger to which is against the law". Sydney Morning Herald.