IN FOCUS

by Matthew W. Daus, Esq. President, International Association of Transportation Regulators • Distinguished Lecturer, University Transportation Research Center, Region 2 Contact: mdaus@windelsmarx.com • 156 West 56th Street, New York, NY 10019 T. 212.237.1106 • F. 212.262.1215



DAUS RELEASES REPORT ON SMARTPHONE APPS; FORMS INTERNATIONAL COMMITTEE OF TRANSPORTATION REGULATORS TO DRAFT MODEL REGULATIONS


The Smart Phone App war has been heating up considerably in recent months. From many angles, I have been thrust into the middle of it. New technology and Smartphone applications (Apps) may and should be used to more efficiently hire and deploy for-hire ground transportation vehicles. However, as with anything, the devil is in the details as “all Apps are not created equal!”

Right now it’s the “Wild West” out there, with private equity backed start-ups and established industry companies alike scrambling to have the next “big App” that will revolutionize for-hire transport internationally. Some Apps operate within the rules by identifying their own licensed transportation companies or affiliates for the consumer, but other 'rogue' apps do not operate on a level playing field. They do this by cutting established dispatch companies out of the picture to deal directly with drivers.

Some of these 'rogue' Apps have been and are being investigated by regulators in the U.S. (e.g., Washington D.C. and San Francisco) for operating within legal loopholes, and may run afoul of laws designed to protect consumers. For instance, some Apps calculate fares like virtual taximeters, and have not undergone the rigorous national testing required to ensure that passengers are not being overcharged. Another problem is the use of passenger data of prior trips by drivers who may illegally refuse service to certain persons based on prior gratuities or destinations.

One of the most serious issues is the lack of accountability that comes with the licensed business being identified on the Smartphone itself. “Rogue” Apps that refuse to obtain a business license and which do not identify the licensed transportation provider or driver have already lead to passengers being transported by vehicles without sufficient insurance, or by drivers who are unsafe or unqualified (e.g., drivers who have not undergone drug testing or criminal background checks). This danger will most certainly continue.

I recently authored and released a white paper report with my law firm, Windels Marx, and its Transportation Practice Group that I Chair, entitled "Rogue" Smartphone Applications for Taxicabs and Limousines: Innovation or Unfair Competition?: A National Regulatory Review of Safety, Accountability and Consumer Protection Legal Issues. To view the report, access the following link:

www.windelsmarx.com/news_detail.cfm?id=127

The report is a primer on the different types of technology “start-ups” have been using in terms of Smartphone related applications that allow for the hailing or arranging of a vehicle, removing the dispatch or taxi/limo company from identification when technology companies interact directly with drivers, sometimes without obtaining proper licenses. Many jurisdictions are struggling to understand the operations of these Apps while they roll out into their communities. The report examines how these apps operate, reviews the regulations within several cities across the nation. The following legal issues have been identified as a result of this review:

• Prearrangement or Electronic Street Hail? There are jurisdictions that only allow for taxicabs to be "hailed" by passengers. Today, some Apps allow users to request for-hire vehicles on demand. Although this may seem attractive to the riding public, such Apps may potentially run afoul of industry regulations since many communities have yet to answer whether on-demand service is an "electronic street hail" or prearranged service.
  
  
  
• Safety Concerns. Most apps are technology start-ups and many are not associated with a specific livery or taxicab business license. If apps continue to operate without regulations or are under regulated, the public may be riding in vehicles that do not meet the vehicle license requirements, or may be assigned
  a driver who has not satisfied the licensing requirements for the community.
  
  
  
• Use of "Taxi" or "Taxicab" in the App Name. Communities will include restrictions on the use of the term "taxi" or "cab" to prevent consumer confusion and enforce the distinctions as to how taxicabs operate. In one instance, an App was required to remove "cab" from its name because the App functioned to dispatch livery vehicles, and those vehicles did not meet with what the public expects from a "cab."
  
  
  
• Illegal Service Refusals. Many jurisdictions have local laws that expressly prohibit a licensed transportation service from refusing potential fares. Apps may allow a driver to accept or decline potential dispatches. In addition to the possible violation of driver rules, possible discrimination against consumers may occur by such actions.
  
  
  
• "Fair" Fares. Fare regulations can have two purposes: 1) consumer protection, and 2) the ability to easily distinguish different types of transportation services. Numerous cities will require the fares to be published and filed with a local agency. Yet, some Apps operate by charging passengers at the end of the trip. The consumer has no assurance as to the final fare, or whether the charge is "fair."
  
  
  
• Is it a taximeter? Generally, taxicabs must have a taximeter, and only taxicabs may charge fares based on distance and time. Taximeter specifications are regulated by the National Institute of Standards and Technology (NIST) and various state agencies. Among the requirements, the taximeters are calibrated, sealed, and inspected. Some Apps may use their own technology, including GPS, to calculate the fare based on time, mileage and demand which does not meet taximeter standards, and may or may not be consistent with the fare charged to each passenger using the same application, or passengers using any other application.
  

Attending and participating in the New York Taxi & Livery Legislative Forum at Baruch College on June 26, 2012 (hosted by Windels Marx, UTRC and IATR) are, from left to right, TLC Board Commissioner Elias Arout, Former TLC Chairman Matthew W. Daus, UTRC's Acting Director Camille Kamga, State Senator Marty Golden, City Councilman James Vacca and Assemblyman Micah Kellner. Photo: David Pollack, Taxi Insider.

The report’s release followed a June 26, 2012 announcement made at the New York Legislative Forum "Taxi & Livery Issues of Today & Tomorrow", at which New York State and City legislators discussed the potential benefits and dangers of “rogue” smart phone Apps. The forum was sponsored by Windels Marx, the City University Transportation Research Center (Region 2, NY & NJ) and the International Association of Transportation Regulators (IATR), and was held at Baruch College (NYC).

I moderated a panel discussion including:

• New York Senator Martin Golden (a client of my law firm);
  
  
• Assemblyman Micah Kellner; and
  
  
• NYC Council Transportation Committee Chairman James Vacca.
  

The webinar, including the chapter on "Smartphone Apps" (see 63:48 of the recording), is available by accessing the link above. Many issues were discussed including the potential regulation of Smartphone Apps, and panel members indicated they would consider and possibly enact a version of the IATR model regulation to be developed.

Senator Martin J. Golden expressed concerns about public safety and indicated that the legislators and the TLC should look into best practices around the world and incorporate provisions that work to allow the use of these Apps in NYC taxicab and livery for-hire industry.

Council Member James Vacca expressed his view that, without the proper oversight, smartphone Apps could potentially endanger riders by matching ridership demand with unlicensed drivers or vehicles which is already a concern. Chair Vacca further stated that since smartphone technology is here for the longevity, the proper authorities, including the TLC and the City Council Transportation Committee, should work towards bringing these Apps into compliance with current and new legislation that protects the safety of passengers.

Assemblyman Micah Kellner criticized the TLC’s decision to issue a Request-For-Proposal (RFP) for developers of smartphone Apps and commented that the TLC’s action could lead to the introduction of an App that would end up being defunct; however, he agreed that the TLC should wait for the IATR to complete a model regulation and decide if it is still preferable to issue the RFP.

There are serious legal and policy issues that must be addressed by regulators. As IATR President, I have asked our government taxicab and limousine regulator members from around the country and the world to join a working group or “IATR App Committee” to help develop a model regulation to ensure ground transportation Smartphone technology can exist fairly, safely and with proper accountability to protect the consumer. I will Chair this regulator only committee which is in the formation process and which so far includes Commissioners and/or high-level government technical staff from the following key cities:

Washington, DC;
Philadelphia;
San Francisco;
Los Angeles;
Boston;
New York;
Seattle; as well as
international participation from Toronto and
Australian regulators.

We will be moving quickly to ensure that our regulations keep up with and/or “catch-up with” evolving technology which can allow environmental benefits as well as convenience and efficiency improvements for the consumer. However, this job must be done right – and “Right Now!”

On June 26, 2012, the good government group known as NED, and its Board Chairman Matthew Daus (far left), Public Advocate Bill DeBlasio (far right), John Orlando and NED Founder Mary Sansone (second and third from left), join Congressional counsel and Windels Marx partner Charles Simpson (second from right) in presenting a Public Service Award to retiring Congressman Ed Towns (center).
	NED Board Chairman Matthew Daus (far right), joined NYPD Commissioner Ray Kelly (second from right) and NED Founder and Mary Sansone (second from left) in presenting the Man of the Year Award to Windels Marx client John Catsimatidis (far left), the owner of Red Apple Group & Gristedes Supermarkets.