DMV headquarters -- just doing its job... of snuffing out innovation.
DMV headquarters — just doing its job… of snuffing out innovation.

by James A. Bacon

Upstart transportation companies Uber and Lyft, which link drivers and passengers by means of a smart phone, have run into resistance from taxicab companies and municipal regulators around the country. But Virginia is the first state to crack down on the two companies, contends Ken Cuccinelli, former attorney general, in a Sunday op-ed in the Richmond Times-Dispatch. That fact should give pause, he suggests, to anyone who fantasizes about Virginia staying in the vanguard of technological progress.

“For all the talk in my home state about being an innovative and inviting place to do business, when the rubber meets the road — literally in this case — it doesn’t always play out that way,” Cuccinelli writes. “Virginia holds the dubious distinction of being the first entire state to join the Luddite parade.”

Remarkably, while the Virginia code permits automobile ride-sharing it does so only for “those which do not involve transporting passengers for profit.” Earlier this month the Department of Motor Vehicles issued cease-and-desist letters against Uber and Lyft to halt their “illegal” operations until state law is modified and urged them to participate in a study group that will issue a report before the 2015 General Assembly session. The two companies assert that they are operating legally and have refused to shut down their Virginia operations.

Anyone who wonders why Virginia has tumbled from a No. 1 rating in CNBC’s Best State to do Business rankings to No. 8 need look no further for an example why. The state code literally discriminates against for-profit enterprises. While DMV deserves a modicum of credit for opening up the issue for study, any recommendations contained in the report are likely to be influenced by participating “stakeholders”… such as the taxicab lobby, the limousine lobby and other transportation providers who feel threatened by the superior technology of the Silicon Valley upstarts.

But there are larger issues at stake than Uber and Lyft. Cuccinelli makes some valuable points:

Starting with Virginia, governments need to change how they react to new and innovative (even disruptive) businesses that don’t fit neatly within traditional regulatory structures. Their first reaction must be to question the relevancy of their regulatory structure rather than immediately attempt to crush the new entrant. …

We need our governments and regulatory systems to accommodate innovation and new providers, not crush them — which is the current knee-jerk reaction of many governments and regulators. …

If Virginians want to be able to use Uber or Lyft to get a ride within 10 minutes instead of calling a taxi and hoping one arrives in an hour, then we need a government that doesn’t put the taxi owners in charge of regulating Uber.

Governments need to rethink their regulatory models, Cuccinelli writes.

Otherwise the rest of us aren’t just going to be denied more convenient and cost-effective transportation, we will be denied an infinite number of other goods and services in the future as well, because other companies that would make our lives better for less money will never come into being.

On this point, Cuccinelli is absolutely right. I have written repeatedly about the coming transportation revolution, of which Uber and Lyft are only a small part, that could bring extraordinary benefits to Virginia (See “Virginia Transportation in the Slow Lane.”) We can lead this revolution by creating the conditions for it to take place here first, or we can cling to old ways and fight the inevitable. The banking banking deregulation of the 1980s is a useful point of comparison. North Carolina was faster out of the gate to deregulate its banks, with the consequence that its banking industry consolidated more rapidly than Virginia’s. North Carolina became a national banking center surpassed only by New York, and Virginia’s major banks were all swallowed up. The Old Dominion suffered a dramatic loss to its business leadership.

Virginia missed a once-a-generation opportunity then. Let’s not miss the next one.

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32 responses to “The First to Join the Luddite Parade”

  1. LifeOnTheFallLine Avatar

    Something else happened with bank deregulation in the 80s, oh what was it…right there on the tip of my tongue…unfettered growth and prosperity, no that isn’t it…greater choice and protection for consumers, no that doesn’t sound right…that’s it! The S&L crisis, the subsequent bank meltdown and the ensuing government bailout! I knew I’d remember it! I wonder how many of those banks that consolidated in North Carolina were able to do so with the dual help of government deregulation and infusions of government cash.

    But it’s nice to see the RTD giving some page space to electoral losers. I remember all those editorials Creigh Deeds wrote when he became not governor.

    As to the main point, as long as Lyft and Uber can ensure the same level of insurance and safety inspections as cabbies and buses I say go for it and if they compete and win then great. Otherwise they’re just tech savvy crooks winning the game by breaking the rules. Shame on thenDMV for trying to referee.

  2. Peter Galuszka Avatar
    Peter Galuszka

    Cooch has some points — that regulation is not keeping up with technology. If Uber and its brothers can be safe and not ripoffs, go for it. I live in the suburban exurbs where a taxi must be ordered hours in advance and the minimum fee is $85 or something.

    You also could argue that Virginia is being unfair to Tesla by screwing them over on having an auto “dealers” designation. That’s pure protectionism.

    But before we go too far on the government overregulation riff, remember there is need, otherwise you end up with an upside down China bus on I-95

    1. Can you imagine VA car tax on a Tesla in NoVA? (I show the calcs in a BlueVirginia diary) We also have tax deterrents to, for example, new auto technologies.

    2. Tysons Engineer Avatar
      Tysons Engineer

      Lol, oh cooch you hypocrite

      1) The law on the books was on said books when Cooch was in office… I saw no harrumph from him then to take it off, nor any of his republican pals as they watched, under a republican, our #1 status for business friendly go to #8. Blaming 1st year governor MacAuliffe is asinine, what the right will do to avoid acknowledging mistakes, I swear.

      2) It was republicans, with their friends in the dealership business, who thwarted the free market with regard to Tesla, arguing that dealerships protect the consumer… yes because middle men always have the interest of the end user at heart.

      But keep blaming progressives for that slide in business friendliness… whatever the hell that means or how its measured *eye roll*

      1. TE, I didn’t see Cuccinelli cast partisan blame anywhere in his piece. You made that assumption. Cuccinelli simply blamed the regulations without saying who was responsible for enacting them.

    3. DJRippert Avatar

      Let’s see … a winery can’t sell a substantial amount of wine directly to retailers. Washington State has abolished this clear bit of crony capitalism but not Virginia. You can’t buy a car directly from a manufacturer. You have to go to a state owned store to buy alcohol. Uber and Lyft have received their first state-sanctioned cease and desist orders. I am guessing that you can’t buy beer directly from a brewery (in any quantity) without going through a distributor. Orion Air has a special tax exemption. Company and industry specific tax breaks never expire. The companies which have state granted monopolies that are regulated by the state are always the biggest contributors to state politicians.

      Virginia is a crony capitalist dreamland and the Tea Party could care less.

      Good for Cuccinelli for making one of those points. It seems like a politician could develop a winning campaign on nothing more than a call for better ethics laws and limiting crony capitalism and win.

      Did a read that one of our worthies has now been arrested for having sex with a minor and kiddie porn? Wow.

      This state is a political disaster at the state level.

      Throw the bums out. Throw them all out. Don’t vote for incumbents.

      1. Virginia is a rent-seeker’s paradise!

  3. Ghost of Ted Dalton Avatar
    Ghost of Ted Dalton

    Cuccinelli proves once again why he is a detestable human being. He is of the philosophy that despises gov’t bureaucrats and judges for “deforming the law” with their interpretations.

    Yet, here is a clear instance of the bureaucracy actually abiding by the written law. And here is the reptilian Cooch with his usual forked tongue criticizing these same “bureaucrats” for following the statutory language.

    Oh, and let’s not forget that a certain someone was more than willing to personally re-write abortion clinic regulations to make it harder for them to practice. Hmmmmmmm……..

    Oh to see those same “bureaucrats” interpret a regulation that Cuccilunatic doesn’t like….he’ll be back to “bureaucrats are perverting the law!”

  4. larryg Avatar

    Traditional Taxi’s use smartphone technology also so it’s not the technology that is being “disruptive”, it’s their business model and basically uber and lyft want to compete against traditional taxi service without meeting the same standards – what has been, until now, considered the minimum standards.

    This is the taxi version of the dollar bus business model.

    So, where we’re going with this – on a best case basis – is a reexamination of the purpose and necessity of regulation.

    and to a certain extent of why when we first started to have taxi’s they operated initially without regulation…and then regulation came – and some people today believe that the regulation was never justified in the first place and that now technology has all but made the regulation obsolete.

    Have you ever wondered why – when you use your cellphone to find the best prices on a flight – if all the airlines have to meet the same basic regulations or that some airlines will use different qualified pilots or planes with differing maintenance protocols or are you expecting any airline to have to meet the same basic safety and qualification standards ?

    Or do you think that those regulations are onerous and keep out lower priced competition?

    Do you think we should have some airlines operated like Dollar Bus lines or Uber or Lyft?

    is there such a thing as minimum standards and regulations that all competitors have to meet – or should we do away with that regulation and let the companies compete on a wider variety of standards and let the customer decide the trade-off between price and safety?

    Will we see some day – Uber and Lyft bus lines and airlines?

    1. Yes, I think there should be minimum standards affecting the safety and welfare of the passenger. Every driver should have auto insurance, either personally or through his employer/contractor. And drivers should be subject to criminal background checks. Employers should be allowed to test drivers for substance abuse. Perhaps there should be a limit on the number of hours a driver can work — 6o hours, maybe? We don’t want drivers falling asleep on the job! But I don’t think any of those are an issue in the case of Uber and Lyft.

      1. Ghost of Ted Dalton Avatar
        Ghost of Ted Dalton

        You’re correct. I think there should be some minimal regulation, and let them compete.

        But…..”Mr. Constitution” himself, Cuccinlunatic, is doing what he does best: create a strawman. The law on the books does not permit this service. If Cuccilunatic really means what he says about a regulatory framework that can adapt quickly, then if he was a serious man he would advocate either, A.) Greater discretion given to regulators in a state with a 2 month legislature (hahahahahahaha, yeah, go see if Cuccilunatic favors that) or B.) A full-time professional legislature rather than the clown show that we currently have that convenes for 2 months out of the year.

        Cuccilunatic favors neither. Rather, he wants to just complain.

      2. virginiagal2 Avatar

        Personal insurance does not cover commercial activities – you can’t use your personal car insurance if you’re moonlighting as a taxi driver. Uber and Lyft consider their drivers contractors, not employees. I don’t think they can monitor how much sleep they get.

        To the best of my knowledge and belief, neither one does drug or alcohol testing, and they do not do fingerprint background checks.

        In my personal, chicken opinion of who I want to get into a car with, these are issues. And if you deregulate, you’re not deregulating just for Uber and Lyft, you’re deregulating for everyone.

        1. Virginiagal, If you’re so concerned about your personal safety — and you have every right to be — then don’t patronize Lyft, Uber or the other no-name start-ups you worry may enter the market. Stick with a regulated taxicab. But don’t impose your risk profile on other travelers.

          1. virginiagal2 Avatar

            Jim, I’m sorry, but to me, keeping drunken registered sex offenders from driving people around is a societal concern. To me, it’s a stretch to refer to it as ” imposing my risk profile on other travelers. ”

            The reason these rules are in place is because really bad things have happened when people have impersonated taxi drivers. Really bad things have happened before taxi drivers were regulated. Google “impersonated taxi driver” for a list. It’s not a happy list.

            Protecting people from getting raped, robbed, and murdered is probably a societal good, not regulatory overreach.

          2. larryg Avatar

            I still think this is not only about insurance – it’s a fundamental misunderstanding what insurance is.

            The biggest customers and supporters of Uber and Lfyt find the whole concept of insurance to be troublesome so for instance, they are just fine with the driver having “pretend” insurance…especially if some sham insurance company will sell it cheap.

            Let’s be honest here. Yes.. I know that’s a novel concept sometimes but let’s presume that both traditional and non-traditional cab services have to have the same exact insurance and standards.

            what would keep the traditional cab companies from also having a Smart Phone type service?

            At that point, what would be the specific competitive advantages of Lyft and Uber?

            so – what is really mean by “risk profile”?

            is it really an advocacy for lower standards and less insurance?

            How long do we think those kinds of services would continue to operate that way once a few high-profile crimes occur?

            Again – this is the problem I have with what is purported to be “conservatism” these days.

            where is the solution? is it the role of govt to protect citizens from dangerous and unscrupulous people who are acting in predatory ways?

            a different “risk profile” is one thing – but how does the public know the difference?

            If you daughter or son took an Uber and ended up dead at the hands of someone who knew the dangers but your son/daughter did not – would you advocate for regulation?

            honest answer. if you or your family was harmed by someone providing services to the public and had no assets or just disappeared.. what would you do? Would you say – “too bad, my son/daughter engaged in risky behavior and paid the price”?

      3. DJRippert Avatar

        Why? Uber is a limo service. I can’t hail an Uber car from the street. I can call for a pre-arranged ride with my phone. Same as every limo service since Christ was in high school.

        Uber should be regulated like a pre-arranged limo service because that’s exactly what it is.

        If I stand in my house and call Carey Limo for a ride to the airport does it matter whether I use my home phone or my cell phone? Of course not.

        A taxi is regulated in a certain way because there is no basis for the buyer to know the purveyor when they wave at the taxi from a street corner. I have every opportunity to make an informed decision with Uber – just like I do with any other limo service. I can also elect to not use Uber or a limo service.

        Uber should face the same regulations as other pre-arranged ride services (i.e. limo services).

        1. virginiagal2 Avatar

          Uber has announced that it plans to explore doing ride share, like Lyft – announced by the CEO at TechCrunch Disrupt in 2012.

          Remember, you remove the regs, you remove them for all comers, not just Uber and Lyft, and not just what Uber and Lyft are doing today.

          I would agree that their business model currently is primarily like limos. Limo drivers need to have insurance, a license, and a clean driving record. That’s not much to ask. So why the big push back? Seems like this would be a very simple thing to include under current regulations.

          The regulations are more stringent for taxis and taxi-like services because the amount of risk is higher. Those can include things like a drug and alcohol test, fingerprint background check, etc.

          I am suggesting keeping the risk reduction rules, not the ones that limit market.

          1. DJRippert Avatar

            I gotta agree with you on this one. Uber should be regulated as a limo service. I am not sure about the exact regulations on limo services but I do know that every Uber driver that has ever picked me up was a limo driver trying to earn a bit of extra pay. So, from a driver’s perspective, they must have already passed whatever regulation was required.

  5. larryg Avatar

    this is the problem I have with the likes of Cucinelli and others who hew from the right these days.

    are there no ways to move the ball forward from a Conservative perspective?

    is the only option to make it a wedge issue?

    we can have differing perspectives on the need for regulation – but why do some players seem to purposely seek political contests?

    Virtually no one who is a sane human being is going to agree to no regulation but Cucinelli and others argue the point as if they’re not satisfied until the current paradigm is essentially destroyed.

    I don’t see Cuccinelli as a principled advocate for change – I see him as a bomb thrower – one who really does not have a defined agenda to advocate for – but rather impose changes based on ideology not practical change.

    there is a great frustration on the right these days – and their basic premise is not to reform or compromise – but to tear down and start over.

    Cuccinelli had abundant opportunity to show voters he was a reasonable person who would seek change but not in a destructive way – and he just totally blew that who idea off.

    Unfortunately, we have a General Assembly full of these same fools with enthusiastic support from the voters in their districts.

    and what this proves – is that voters are truly stupid and the elected in Richmond – know it – so they operate with virtual impunity.

    You WANT to find a WAY for uber/lyft to operate .. to even compete strongly as participants in the current system – and you can do that – with reasonable fairness and objectivity… without turning it into yet another political kabuki theater.

    we need leaders who are seriously interested more in what is best for their constituents – from their constituents viewpoints, – than throwing red meat to the whacko-birds who see the current political environment as a jihad.

  6. virginiagal2 Avatar

    Maybe it’s because I’m a woman, but I’ve found the whole series of discussions of Uber and Lyft here and at the RTD pretty horrifying.

    My mental image, when people talk about deregulating taxis, is what happened to that couple in India – with the unregulated bus driving around while the drivers took turns gang raping the girl, then threw her and her fiance off the bus, naked. She died, of pretty horrific internal injuries.

    That’s a deregulated transport industry. Is that something we aspire to?

    Getting into a car with a stranger is inherently dangerous. Issues include, is the driver crazy and dangerous? Is the driver drunk or high? Has the vehicle been properly maintained? Does the driver have commercial insurance – since your private car insurance almost certainly does not cover you becoming an informal taxi? Has the driver gotten any sleep?

    I am sure a review of taxi regulation would show rules that could be junked. I’m all for an expeditious review of them. But sober, non-pervert drivers that have gotten some sleep, in insured, safe cars are a good thing, not an evil symbol of regulatory oppression that must be conquered so we can march into a Randian future.

    Right now, Uber and Lyft don’t meet the current laws. I am not against either, BUT. From what I understand, issues with Uber and Lyft include that they do not do the fingerprint background checks as are required for taxis, they do not do drug or alcohol testing, and in all other ways they go to great pains to make sure their drivers are contractors, not employees.

    That last distinction is important. A non-employee driver has to have his or her own commercial car insurance – personal insurance is not designed to cover being an unlicensed taxi. The total number of hours worked aren’t available – just hours contracted – so you have no way to know how much sleep the driver got. I suspect the lack of drug and alcohol testing, and the lack of fingerprinting, may have the same root.

    There’s also an interesting article over at Valleywag on how some drivers are sharing identities, so in some cases you don’t know who’s driving you.

    Finally, while Uber and Lyft at least appear to be trying, deregulating does not mean that other competitors will do things the same way. You can’t just deregulate for one or two specific companies – when you deregulate, you deregulate for everyone. What Uber and Lyft do voluntarily isn’t binding on anyone else.

    Part of why industries regulate is so that competitors can’t cut corners to reduce costs and compete dangerously. Why not just change the rules instead of ignoring the laws? If the DMV doesn’t come up with good rules, the GA can do it on their own and tell the DMV what to do. For heaven’s sake, it’s not like the DMV can keep the GA from doing anything.

    We do need some basic sensible rules so “Death Cab for Cutie” stays the name of a song and a band, not a headline.

    1. DJRippert Avatar

      If you don’t want to purchase a pre-arranged ride, don’t purchase one. Don’t call Carey Limo and ask for a car to pick you up and take you somewhere. Don’t call Uber and ask for a car to pick you up and take you somewhere.

      Uber is not a taxi, it is a pre-arranged ride.

      Maybe I am missing the point but why is it OK to call Carey Limo and get a ride but not to call Uber and get a ride?

      1. virginiagal2 Avatar

        See above. Uber has publicly announced it plans to get into ride share like Lyft, not just limo-like services. AFAIK it has never disavowed those plans.

        I’m fine with you or anyone calling either of them to get a limo ride, as long as they have applicable insurance (personal insurance does not normally cover business activities), a valid drivers license, and a clean driving record. However, if you remove all the regs – as was rhetorically suggested more than once – the choices are not just going to be Carey Limo and Uber – it can also be Bob’s Online Limo Service and Bait Shop, don’t worry about the five convictions for drunken driving.

        If a company offers taxi-like services, then the risk goes up, and the applicable regs go up.

        Most important, changing or removing all rules does not just change it for Uber and Lyft and what they are doing now. It changes the rules for whatever they decide to do in the future, and every other market entrant. You can have a ride share service for the cost of a website – not a major service, but an operating one. Google has map services that can be used commercially with very little cost. Anyone can play.

        You need to frame this as, what is reasonable and needed, not assume that any particular business or businesses will be the only ones operating. For that matter, if you remove the taxi rules, it will affect current taxis and how well they behave.

        I’m not suggesting grandfathering rules designed to limit market. I am suggesting safety rules should be considered carefully rather than being randomly discarded.

        1. DJRippert Avatar

          But the “cease and desist” wasn’t ordered for what Uber might plan to do. It was issued for what Uber actually does – provide limo service.

  7. DJRippert Avatar

    Here’s a help wanted ad for a limo driver at MGM Grand …

    You see any requirement for no criminal record, a drug test or background test?

    1. larryg Avatar

      re: “pre-arranged”.

      maybe not so much. The idea with Uber and Lyft is that you can – at the spur of the moment – get a taxi – there is no “pre-arrangement”.

      The issue is – are they going to operate like the Dollar buses in terms of the fitness of the vehicle and driver?

      The libertarian types seem to think if you get a bad experience – then telling others will affect their reputation but with the dollar buses – the driver and even the bus line with that name just goes away – and reappears as a different name.

      This is like a new service – with no initial regulations – then over time – as different types of abuses and incidents occur – the public demands restrictions.

      I think that if Uber and Lyft have to meet the same insurance standards as other services – their competitive advantage is going to evaporate so it really boils down to whether consumers should have a choice of insured services – and I’ll be honest – I don’t think the average person understands their own insurance policy much less a common carrier.

      Oh – one more thing – people should think about

      Commuter Van pools.

      tell me how the insurance works with them. Do you know?

      1. virginiagal2 Avatar

        My understanding is that Uber and Lyft have the drivers carry the insurance – not the company – drivers are contractors.

        I believe Uber has an excess liability policy for liability beyond that. I dont’ know about Lyft.

        My understanding was this was added after a driver ran over and killed a little girl while logged in to their app, and the subsequent lawsuit and bad publicity. A complication was that the driver had a previous reckless on his record.

        1. larryg Avatar

          re: the difference between voluntary insurance minimums and other standards and mandatory regulatory ones.

          I’m all for competition including disruptive innovations that challenge our current thinking – but most regulations were not regulations to start with and once they are called for – usually the underlying reason for them – does not go away.

          a truly innovative business model does not rely on getting rid of a regulation for which there is still a need or claim such.

          Young folks – and older ones fundamentally do not understand – insurance.

          they take it for granted as if it’s just a guaranteed part of the landscape.

          you can take the regs off of Lyft and Uber – but the insurance companies will not insure them without the standards for an affordable cost – so it’s already obvious that had the govt not stepped in that Lyft and Uber’s response to this was to side-step the insurance and say that they – Lyft and Uber or not providers – just facilitators and the drivers – independent contractors who have such responsibility – and those “drivers” – like a LOT of younger drivers and some older ones – would never buy insurance to start with or buy minimal insurance.

          Jim B says it’s up to customers to decide if they want to ride in a car that may not be maintained – but you have no idea to what level or not, that you don’t know if the driver is qualified or not or has been on duty for 30 hours or has insurance.

          I had asked the question in a prior post. Do folks know how commuter vans in Virginia are insured?

          here – take a look:

          the reason Virginia did this – is that the Van Pools would not be able to provide an affordable service without the state pool.

          I do wonder about the role of the state – but what this points out is the insurance issue with for-profit, passenger-carrying services.

          If Virginia commuter van pools cannot offer an affordable service without a state pool – how can Uber and Lyft?

      2. DJRippert Avatar

        LarryG – Have you ever used Uber? You need an account. You can’t see an Uber car and hail it down. You agree to terms in advance. You give them your credit card in advance. It is a pre-arranged ride by any reasonable definition of the term.

        1. larryg Avatar

          re: credit cards, on-call from smartphone and “pre-arranged”.

          tell me why this won’t work with ordinary cabs…. also…

          here –

          how does this differ from Uber/Lyft?

          1. larryg Avatar

            here – let me answer for you:

            ” Developed in cooperation with MTData, HAIL A CAB™ is a product of Yellow Cab, an industry-leading, full-service transportation company providing the Greater Houston, Austin, Galveston and San Antonio areas with taxi dispatch service 24 hours a day, 365 days a year. When you use HAIL A CAB™ you’re getting an inspected and licensed taxi driven by an official city approved driver in a clean and comfortable sedan or minivan.”

            okay now – that we have both the traditional cab and the Uber/Lyft available on call from a smartphone – tell me what the other differences are.

            how about this: “… inspected and licensed taxi driven by an official city approved driver”

    2. virginiagal2 Avatar

      I checked MGM Grand’s website – they require drug tests for all jobs. Look under FAQs.

      I also Googled for the general casino hiring rules, and casinos do criminal background checks for all jobs, including hotel jobs for hotel/casinos. Apparently for some business/regulatory reason, they are opposed to hiring criminals to work around people with large stacks of cash. Go figure.

      A quick review of posts from MGM grand job applicants on hiring and interview forums, indicates the MGM Grand does credit checks, background checks, and criminal history checks.


  8. larryg Avatar

    Folks may or may not realize that the Virginia Dept of Health inspects every food preparation facility in Va whether it’s a catered event or an elementary school or a McDonalds or a street vendor.

    Now , my question for the Jim Bacon types – is

    do you think people should have the same “options” with regard to whether restaurants are inspected by VDH or not?

    would you make the inspections voluntary and let people decide their own “risk profile”?

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