Uber, Lyft Are Rolling in 5 Texas Cities, but the Road Ahead Has Some Bumps

Texas has emerged as a key battleground in the fast-growing universe of vehicle-for-hire apps, with Uber and Lyft battling each other for market share across the state’s biggest cities, while local officials struggle with whether to embrace the companies or ban them.

In the past two weeks, both Uber and Lyft launched their services in Austin. Both companies were already doing business in Houston, San Antonio and Corpus Christi. The companies are also operating in Dallas, where city officials are set to consider a complete overhaul of their taxi regulations to bring Uber and Lyft into compliance.

The two transportation networking companies, or TNCs, allow people to connect with freelance taxi drivers via a mobile app. Payments are made entirely through the app. Drivers with Lyft and Uber’s UberX service use their own vehicles. (Lyft vehicles are denoted with a pink mustache across the grill.)

While TNCs have gained acceptance and popularity in cities like San Francisco, where both Uber and Lyft are based, they have hit a bumpier road in Texas. As Uber and Lyft promote their services in Texas markets, their drivers are technically breaking local laws, according to statements by officials in each Texas city.

“As the current city of Austin code is written, you still have to be a permitted ground transportation service to operate in the city of Austin,” said Samantha Alexander, a spokeswoman with the city of Austin’s Transportation Department. “As of right now, they are not permitted.”

Lyft and Uber drivers in Austin are at risk for a Class C misdemeanor ticket and possibly having their car impounded, Alexander said. She noted that in some cases, Austin police have ticketed Uber or Lyft drivers who were unaware that they were in violation of any city rules.

“Our big message right now is to make sure people aren’t breaking the law accidentally,” Alexander said.

Drivers have also been ticketed in Houston and San Antonio. In Corpus Christi, a 30-day grace period for Lyft and Uber drivers ends Tuesday, according to a recent statement from Corpus Christi Police Chief Floyd Simpson.

“There will be a dedicated enforcement effort following with intent to persuade compliance and ensure public safety,” Simpson said last month in an editorial for the Corpus Christi Caller-Times. Police officials did not respond to a request for comment for this story.

Both Lyft and Uber insist they are operating legally in all of their markets. Officials with the two companies describe the firms as technology companies connecting drivers with passengers. Both Uber and Lyft officials took issue with efforts to characterize them as unpermitted or illegal taxi services. They also argue that they go to great lengths to ensure the safety of their services. Both Uber and Lyft require their drivers to have auto insurance but provide insurance coverage of up to $1 million on top of that.

Cab Drivers Raise Concerns

Yet the companies do not meet some of the local regulations that traditional taxi company drivers in many cities are required to follow, such as paying permitting fees and charging standardized fares. Cab and limo businesses in some Texas cities have argued that allowing TNCs to operate under more relaxed guidelines creates an uneven playing field that will drive them out of business. In April, a coalition of Houston and San Antonio cab drivers filed a request for a federal injunction against Uber and Lyft, arguing that the companies are violating local ordinances.

Texas cities are at varying stages of re-evaluating city regulations overseeing vehicle-for-hire services to see if there’s a way to allow the popular services to co-exist with traditional taxi services. In some cases, the debates have been hotly contested.

“Cities are recognizing they have to change, and that it’s a great thing if people have more options,” said Joseph Kopser, CEO of Austin-based RideScout, an app that provides real-time information about transportation services in different cities.

In Dallas, city officials drew howls of outrage last year after an interim city manager defied the usual protocol and placed an item on the City Council agenda without prior council discussion that would have effectively shut down Uber’s efforts in the city. The item was never approved and drew a city investigation.

In recent months, Dallas officials have been working with various stakeholders, including Uber and Lyft, to update their regulations. Next week, Councilwoman Sandy Greyson is planning to propose a new vehicle-for-hire regulation system that removes the current cap on taxi and limo licenses and allows companies to charge whatever fares they want. TNCs would have to abide by some new regulations, including paying for permits.

“What we’ve done is pretty much scrap all our current regulations and come up with an entirely new model where we will regulate all vehicle-for-hire providers the same way," Greyson said. "This is a free-market proposal."

TNCs are part of a growing menu of transportation options emerging in urban areas to make it easier for residents to get around without a personal car.

“I sold my car last year,” said Tony Delisi, an economic development consultant in Austin. “I use Car2Go, the bus and my bike.”

Last week, Delisi pulled up his Uber app to request a drive from Scholz Garten in downtown to South Austin. A friendly Uber driver in a pickup quickly arrived and took him to his destination. Under an ongoing promotion that Uber launched upon its entrance into the Austin market, the company paid the driver's fare. 

“It was nicer than most cabs I’ve ridden in,” Delisi said.

Equity Issues

Along with questions about safety and fees, equity issues are also drawing debate, such as whether companies like Uber and Lyft should be required to provide reliable taxi service to a city’s disabled residents. In many Texas cities, the city code requires traditional taxi fleets to include some wheelchair-accessible vehicles. Last week, a group of disabled people, including two in Houston and one in San Antonio, sued Uber and Lyft for violating the Americans with Disabilities Act.

Greyson, the Dallas councilwoman, said her proposal will require that a certain portion of a provider's fleet be handicap accessible.

Chris Nakutis, an Uber general manager who oversees its Texas market, said the company partners with a wheelchair-accessible taxi service in Chicago. He did not rule out the company partnering with such services in Texas, but he took issue with the idea that the company should be required to in every market.

“We don’t own any vehicles. We don’t hire any drivers,” Nakutis said. “To the extent that there are wheelchair-accessible vehicles, we partner with them. Even if we don’t have wheelchair-accessible vehicles in a community, those people have the exact same opportunities they had before we entered the market.”

Companies like Uber and Lyft are choosing to not wait for cities to update their regulations. In cities around the country, TNCs are launching service without permission in hopes of gaining market share as well as pressuring local officials to update their regulations.

“We look forward to working with local leaders to craft new rules for this new industry, as we’re currently doing successfully in more than sixty cities across the country,” Lyft spokeswoman Katie Dally said of the company’s challenges in the Texas markets. “We truly believe that if we approach situations like this positively and collaboratively, we can work together with local officials to greatly improve transportation access, safety and affordability.”

Last July, Sidecar, a TNC similar to Uber and Lyft, shut down its service in Austin after the city deemed it an illegal taxi service. The company had hoped for the suspension to be short-lived, as city officials were discussing updating its regulations to allow ridesharing services to operate legally in some form in the future.

Sidecar is still waiting, but, like Uber and Lyft, the company is planning to bring its service back to Texas, one way or another.

“I can confirm that Sidecar plans to launch in Texas soon,” Sidecar spokeswoman Margaret Ryan said in an email. She declined to provide any more details.

Uber and Lyft are also expected to continue expanding their offerings in Texas. Though neither company would comment on its future plans, Uber is looking for drivers in Amarillo, El Paso, Lubbock and Waco, according to its website.