The Reminger Report: Emerging Technologies

Ridesharing Regulation: Breaking the Mold with Karen Moury

May 26, 2021 Reminger Co., LPA
The Reminger Report: Emerging Technologies
Ridesharing Regulation: Breaking the Mold with Karen Moury
Show Notes Transcript

In part two of our Ridesharing Regulation series, Kenton Steele continues his conversation with Karen Moury of Eckert Seamans law firm. Kenton and Karen discuss how ridesharing TNCs (Transportation Network Companies) disrupted the industry and broke the traditional mold of transportation regulations. 

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KHS:   Kenton H. Steele, Esq.

KOM:  Karen O. Moury, Esq.

 

 

Kenton H. Steele, Esq.

            On today’s episode of the Reminger Report Emerging Technologies Podcast, we will be continuing our discussion with Karen Moury regarding how regulations that are put in place to regulate how transportation network companies operate, how those came to be and what the purpose and effect of some of those regulations are.  Karen, could you please introduce yourself for our listeners?

 

Karen O. Moury, Esq.

            Sure.  I’m Karen Moury, and I’m an attorney with the law firm of Eckert Seamans Cherin & Mellott, and I’m based in the Harrisburg, Pennsylvania office.

 

Kenton

            For our returning listeners, they’ll know that you were also our special guest who joined us on our last episode of this podcast, and we discussed your involvement in the Pennsylvania process of the first set of regulations for transportation network companies (TNCs) that were put in place in that state and some of the concerns that were at the forefront of the minds of those regulators at the time they were putting that first set of rules together, and I’d like to continue that discussion with you today and dive into some of the other concerns that were at play.  One of the things that we’ve touched on in the past on this podcast is the way that consumer demand plays into the way in which emerging technologies are considered by the law and the way that they’re regulated.  Can you tell us a little bit about what impact consumer demand had on the promulgation of TNC regulations?

 

Karen

            Sure.  Because, as has been pretty well disseminated across the country that as TNCs entered markets without licenses or without any legal authority to operate, regulators tended to want to shut them down and drive them out of their jurisdictions, but by the time that had happened, by the time the regulators caught up to them and made their official statements and started enforcement actions, the consumers had already gotten a glimpse of what TNC could mean to them, what TNC services could mean to them.  They responded pretty loud and clear to local elected officials, to regulators, that they wanted access to TNC service.  They realized from their even just limited experience that TNCs offer them the ability to easily arrange transportation through an app, be aware of when to expect that driver to arrive and then to be able to pay for the app, so especially in areas that didn’t have adequate or reliable taxicab service, this was a whole new framework for consumers that they just didn’t want to lose out on.  They urged the legislators and the regulators to let them stay.  Either exempt them from regulation or give them the authority they need to operate, and they also heard pleas from consumers that they lightly regulate TNCs.  You don’t have to regulate them the way you do taxicab companies, and the message was the same from consumers as it really was from the TNCs, and that is, let competition work.  Instead of placing onerous regulations on these TNCs, rely on us.  Rely on the consumers.  We’re gonna let them know when they’re not giving us what we want, and we’re gonna demand it, and it’ll be up to them to respond and do what we’ve asked for if they wanna stay in business and be successful.

 

Kenton

            Can you tell us about how the role that consumer demand for ridesharing services, how that was different than with respect to other industries that are subject to regulation?

 

Karen

            For me, because of such a lengthy career in PUC, at PUC and even litigating before the PUC, I really look at it from the perspective of a regulatory utility commission, and the industries that they traditionally and typically regulate provide essential services like electricity, natural gas, water.  We don’t find individual consumers necessarily being very vocal in PUC proceedings unless there’s some particular issue that they’re having with their utility service or maybe a poor quality of water or that they’re aware that this is an extremely large proposed rate increase that they want to weigh in on.  But they are represented, their interests in general are represented by government entities like the Office of Consumer Advocate, so although the consumers might go out to a public input hearing and weigh in against a proposed rate increase, they’re mostly relying on those government entities, and even when they do participate, the regulator certainly considers their concerns, but at the end, the decision has to be based on long-standing legal principles of what are the utility’s financial needs so that it can stay viable and keep providing these services.  And you also see individual consumers filing complaints against utilities, but I think the, what I see is that almost anytime that consumers are participating in utility matters on other, for other industries, it is really specific to one particular utility.  It is not about a whole industry or a new service that they wanna access.  One area where there is somewhat of an exception to that is when states are looking to open up energy markets to choice.  You will see consumers as a group express an interest in being able to choose the supplier that provides their electricity or natural gas, but even then, they haven’t experienced this new alternative yet, so they’re maybe not quite as vocal or passionate as consumers who have already experienced TNCs, and I’m certainly not aware of any situations where consumers have urged regulators to take a more light-handed approach in regulating an industry as they were with TNCs.

 

 

Kenton

            That’s certainly one of the interesting and unique things about TNCs and is one of the frequent themes that we talk about is how society and the law responds when these new technologies come up and are introduced for public use.  One of the other frequent themes that we see again and again when we are talking about emerging technologies is a tension between what the prior framework was for how things were done vs. the disruption, which is the frequently used term that the new technology is bringing to the table.  On that topic, can you tell us a little bit about what the response was from the taxicab industry to the introduction of TNCs and TNC regulations?

 

Karen

            The taxicab industry was very resistant to the whole idea of TNCs entering their markets.  They had been regulated for over a century and they had gone through a lengthy application process where they had to show very specific public needs for their proposed service, and once they got their authority to operate, it was not even just TNCs that they wanted to keep out.  They wanted to keep all competitors out of their little market, and even until fairly recently, the regulatory framework in Pennsylvania actually allowed existing carriers to protest the entry of a new carrier based on the adverse impact it might have on their business, so they were accustomed to challenging any carrier who wanted to come in and compete against them, so when they saw TNCs entering markets and they saw them offering so many features that were attractive to consumers and they saw how the consumers were reacting to them, they protested their applications, perhaps even, probably more vehemently than they had each other, and they, the one common theme that we heard from them is to hold TNCs to the same requirements and standards as are applicable to taxicabs, and that went from getting into a market, entering it, and to operating in it.  They thought that they should have the same regulations imposed on them.

 

Kenton

            And obviously there ended up being some differences between those two industries.  Let’s talk a little bit about those and what are some of the differences you’ve seen in the way that TNC fares are regulated vs. taxicab fares?

 

Karen

            Taxicab fares have traditionally needed the approval of the regulator.  They must get the fares approved.  They must have them on file with the PUC.  They need to post them in their vehicle, and they are required to charge the passenger exactly the rate that has been approved by the PUC.  It cannot be higher or lower.  It must be what is on file, and the TNCs were explaining to the regulators that that model just could not be applied to them because their fares are going to vary all the time, and that is because the pricing method that they use is based on supply and demand.  That is to make sure that they can keep enough drivers on the road and busy to respond to the passengers who need transportation.  Then there is another concept that TNCs rely on that taxicabs would have never been permitted to do, is something called surge or dynamic pricing, and that is when there is a temporary need for increased transportation, like after a sporting event or concert or during a sudden downpour.  And I do hear people say, even my friends say that TNCs really take advantage of people in those times because they know they will pay it because it is a sporting event or a severe weather event, and I always tell them it’s not that they’re taking advantage of it.  What they are doing is they are setting a price that incentivizes their drivers to get out there on the road and transport people where they wanna go.  They don’t, the TNCs don’t schedule the drivers to work on shifts the way a taxicab company would, so using this supply and demand method is an effective way that they can ensure that the supply meets the demand, and if it’s a really congested post-sporting event areal, a driver needs to be offered some incentive to be willing to come out of his house and go out there and drive people around, and so, the way I understand it, they just keep adjusting it upwards until they find enough drivers out there to do it.  Now there are some states that put limitations on the amount that it can go up, like say a percent or whatever that it can go up during, say a state of disaster or emergency, but the TNCs obviously were able to convince the regulators and the legislators that they needed this flexibility, so what the regulators demanded in exchange was that there be transparency so that you as TNCs, you have to let the consumers know what the applicable rate is up front.  Give them an advance notice that it’s gonna be a surge price, and maybe they wanna go back in the bar for an hour and wait it out ‘til the surge comes down, and then if they want an estimate, they request an estimate, you have to give it to them, and then at the end of the trip, you need to provide receipts that show, are transparent and show exactly what the consumer paid for.

 

Kenton

            Continuing on that topic, are there other big differences that you see in how these two industries are regulated?

 

Karen

            Yes, in recent years, really almost since the TNCs came into the markets, some of the more stringent requirements that had previously been placed on taxicabs have been eased a bit, and it’s largely been in response to their pressure on legislators and regulators to make sure they’re able to compete with TNCs and really be on a level playing field with them, because if they have a way more burdensome regulatory framework, it’s gonna be hard for them to in a cost-effective way provide transportation services to the public.  Looking at the two sides, when you have traditional passenger carriers as I mentioned, it’s still a pretty lengthy application process if you receive protests, and you’re not allowed anymore, as an existing carrier, to file an anti-competitive protest, but there are lots of ways that, you’re not able to say, oh, this would harm my business, but there are a lot of was to file protests that aren’t quite that blatant.  You can raise concerns about the carrier’s fitness, and on the traditional taxicab side, you have limitations on the service territories, that they only operate, say, in a five-county area, and their rates are still regulated.  So then on the other side, with the ridesharing companies, you have, they need an expedited application process.  They cannot wait for a year and a half.  I mean, that is just not going to work for them, and you must be willing to rely on competition as improving the services, and they obviously need statewide authority.  They cannot be limited to just a few counties, and you cannot regulate our rates.  We need to use our supply and demand approach.  Some of the areas, so some of the traditional areas where the regulators really backed down from their traditional framework is they did agree that the TNCs did not have to own or control the vehicles.  They did not have to control the drivers.  They did not have to show this public need for the service.  They heard that from the consumers, and they did not have to break it down by service territory, but what they did not give in on were the basics, like the drivers need to be vetted, the vehicles need to be safe, and the insurance has to be adequate.  And one final observation I have is that despite the differences in the way that they’re regulated and the very loud protests of the taxicabs, it doesn’t appear that there’s been quite as much impact on their businesses as they were concerned there would be.  It just, it’s a fact that some people just prefer traditional taxicab service.  That is one reason I think, and the other is that taxicabs, in a lot of areas, have stepped up their game so that they’re using apps and they’re improving their vehicles and their overall customer service, so I think that in a lot of the parts of the country, the riding public has access to innovative transportation solutions that probably wouldn’t have been developed without the advent of the ridesharing industry.

 

Kenton

            Well, thank you for that, Karen, and I want to thank our listeners for joining us on this episode of the Reminger Report Podcast on Emerging Technologies.  Please join us for our next episode where we will continue our discussion on regulatory issues affecting ridesharing and cover more of the general areas where ridesharing regulations are put in place and what those regulations look like and their effect.