2015-06-11 / Front Page

Uber Under Scrutiny

By Olga Enger

A California-based digital car service that state regulators claim is operating illegally is expanding its offering to Newport customers. Uber, which connects riders with cars through a smartphone app, recently introduced uberSELECT, which allows customers to upgrade their car. The company launched in Providence in 2013 and began providing services in Newport last June.

“You can live the high life in the back seat of a BMW, Mercedes, or other high-end vehicle without breaking the bank,” an Uber representative posted on a blog about the new feature.

But state regulators warn that Uber and its drivers are breaking the law and may pose a risk to public safety.

“They are providing an illegal transportation service,” said Terrence Mercer, with the Motor Carriers Division of Public Utilities, the regulatory body for taxicabs and car services. Under state law, individuals operating an unlicensed car service may face a year in jail and/or up to a $1,000 fine.

In a whirlwind five years, Uber has exploded into a $40 billion company, providing services in 300 cities and 58 countries. Uber does not own cars, but uses a phone app to process payments and connect riders to drivers, who work as independent contractors.

Rhode Island is not alone in its concerns. Several cities across the globe have seized cars or fined drivers of car-hailing apps such as Uber. To provide clarity in Rhode Island, a commission was established to review the issues.

Rep. John Edwards (D-Portsmouth, Tiverton), who co-chaired the commission, said the final report has been handed over to the Senate, and will be made public within a few weeks. Edwards said after studying the issue, he shares in concerns that Uber, and its competitor, Lyft, are operating illegally while not paying taxes.

“Insurance is a big problem,” stressed Edwards. “As soon as the drivers turn on that app, they are no longer covered by their personal insurance company. What if they hit a pedestrian in Newport?” Edwards asked.

Last year, Uber came under fire after a San Francisco driver hit and killed a 6-year-old, and the accident was not covered by Uber’s insurance policy. Although the driver's personal insurance policy covered the accident, Uber acknowledged that other policies may not. Uber claims they have increased their coverage since that incident.

“Everyone says we are in limbo, but we aren’t,” said Edwards.

Mercer hopes the report will provide direction about enforcement and regulation.

“The enforcement gripe that my agency has is with licensed carriers,” explained Mercer. “If someone is driving a personal car for hire without a certificate, then it is a criminal matter to be enforced by local and state police departments.”

Edwards said safety concerns extend beyond insurance. Uber claims they conduct background checks, but it is not verifiable by the state. “There is no proof. We have no idea. They could be doing a quick Google search,” he warned.

Until recently, Uber failed to pay taxes the company collected from Rhode Island customers. Lyft does not collect taxes from its riders, citing what they call “ambiguous laws.”

Edwards said although Uber claims they paid back taxes in April, he has been unable to verify the payment or amount.

State lawmakers and regulators are not the only ones irked by the company. Newport Taxi Company Orange Cab and Newport Pedicab claim the lack of regulation has created an unfair playing field.

“Uber is operating illegally and is not regulated,” said Daniel Moriarty of Orange Cab in Newport. “Nothing they do or anyone they employ is vetted by the state or any other motor vehicle agency.”

Michael Kowalczyk of Newport Pedicab said there is a “lapse in regulation” for these companies, which has “flooded the market” with unfair competition.

“We have definitely been impacted by Uber,” said Kowalczyk. “To ride a pedicab, we have to be licensed in city. Each cab has to be permitted and insured. So it’s an open door to outsiders.” Newport pedicab companies are ¬≠¬≠capped at 18 bikes by the city, according to City Clerk Laura Swistak. Taxi companies are regulated by the state.

Despite vocal opposition, there is one group that rallies behind the company– its customers.

Middletown resident Nick Minior, a regular Uber customer, said he enjoys Uber because of the level of service and the price.

“It is approximately half the cost of Orange Cab,” explained Minior. “I obviously don’t want to drink and drive when I go downtown in Newport, and the cab company never answers. The Uber app shows me where the car is, what kind of car will pick me up, and what the driver looks like,” he said. “They are nicer and cleaner cars than the taxis.”

A trip from Providence to Newport cost Minor only $38, compared to a fare that would be well over $100 by a taxi company.

“If the state got caught with their pants down, it’s not Uber’s fault that they can’t regulate them,” argued Minior.

Newport resident and Uber customer Juan Roldan said although he has read about safety concerns, their driver review system makes him feel secure.

“Based on experience of other people, you aren’t getting into a car with a stranger,” said Roldan. “It’s like texting a friend, only you pay them.”

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