When the car-service network Uber debuted four years ago, the San Francisco-based company became an urban phenomenon, picking up executives burning the midnight oil or ferrying millennials to parties and restaurants. It spread to New York City a year later, and it now operates in more than 30 countries. In the process, Uber has entered the ranks of business disrupters, roiling taxi and limousine operators, and prompting a cabbie strike in London in May.
Uber is trying to make its business model work in the less-densely populated suburbs. The car-service network started operating in the north New Jersey environs about six months ago. It is recruiting drivers on Craigslist and luring passengers, mainly by word-of-mouth.
Take Fort Lee High School student Michael Zhadanovsky. When his mother couldn’t pick him up after school during the spring, sometimes he walked the mile or so to his house. But if the weather was bad, or he didn’t feel like walking, he went to his iPhone and summoned an Uber driver, and there were five or six Uber drivers cruising in the neighborhood, he said. The app lets him see their locations on his phone. He paid $14 to $20 for the rides. “It’s not cheap, but it’s convenient,” said Zhadanovsky, 17, who learned about the service from his older brother, who lives in Washington, D.C. “I wouldn’t normally call a taxi, but this is on your phone,” he said. Now some of his friends are using it, too, he said.
Once an Uber customer downloads the app and enters a credit-card number, the customer simply presses a touchscreen button on his or her phone, and within seconds sees the locations of Uber vehicles in the area. Customers also can punch in their destination and get an advance estimate of the fare.
Riders receive a text confirmation when their ride request is accepted, and pickup is in less than 10 minutes, on average, Uber says. The fare is charged to the card, tip included.
While the introduction of Uber’s UberX ride-sharing service in New Jersey in November found customers among airport-bound travelers and young people without cars, it also attracted the immediate attention of the Limousine Association of New Jersey, which made lobbying against it a top priority. Uber and other so-called transportation-network companies have an unfair cost advantage over limousine operators, because drivers are not always properly licensed or insured, said Jeff Shanker, the executive vice president of A-1 Limousine in Princeton, N.J., who is also vice president of legislative affairs for the trade group. “We recognize that it’s a new era,” he said “But there are people being picked up in personal vehicles, and they do not have commercial insurance,” he said.
The 85-member association has been urging the state Departments of Labor and Motor Vehicles to take enforcement action against Uber and its drivers, and has lobbied for legislation that would subject it to the same regulations that govern limousine operators. The measure would require Uber and other ride-sharing drivers to have chauffeur licenses, chauffer plates and $1.5 million in liability coverage for bodily injury and property damage, or face fines of up to $2,500 for a first offense. Like their traditional limousine-driver counterparts, the drivers would have to get criminal background checks through the state police.
“We want to make sure we get everybody on a level playing field,” Shanker said. “The way many (Uber drivers) are operating is illegal. There are no background checks; there are no bona-fide license plates. They don’t have the correct insurance.”
Much of the legal and regulatory conflict has been over the lower-fare UberX drivers, one of several Uber services. UberX drivers can qualify if they are 21 years old, have a personal driver’s license and personal auto insurance, and if their car is a mid- or full-size four-door passenger vehicle “in excellent condition,” the company says on its web page where drivers sign up. Drivers can qualify to provide high-priced UberBLACK service only if they are professional chauffeurs with commercial licenses and commercial auto insurance. They, too, drive their own cars, which must be black and either a sedan, town car or SUV.
Uber, which did not respond to repeated requests for comment for this report, claims on its website that its insurance is “best in class” and it does “rigorous” criminal-background checks of its drivers, through county, federal and “multi-state” records. The company says it has purchased commercial liability insurance that supplements UberX drivers’ personal policies.
New Jersey Gov. Chris Christie’s administration and the state Department of Banking and Insurance on May 27 issued a consumer alert saying drivers who haul passengers through networks such as UberX, Lyft and SideCar may not have adequate insurance coverage. If there is an accident, auto insurers may be able to deny coverage if the driver did not disclose to his insurance company that he uses his personal car as if it were a taxicab, the agency said. The regulator said New Jersey consumers should be aware that the agency has not reviewed the ride-sharing policies and that having different policies for different vehicle-uses is a “new concept that has not been tested under our state’s laws and in our courts.”
“Consumers need to use caution when weighing whether to pay for transportation or to make their personal vehicles available to others for a fee through these companies,” Ken Kobylowski, commissioner of the Department of Banking and Insurance, said in a statement.
Amid widespread legal and regulatory contentions, Uber continues to grow. It said recently on a company blog that about 137.5 million Americans are now within range of Uber drivers’ services.
The company says on its website that its service is cheaper than a taxi fare, on average. However, Uber fares are based in part on demand, like airline-ticket prices, and can vary quite a bit. The company has been accused by customers of price gouging during peak periods of demand.
The company polices driver behavior in part through a rating system. Riders can rate their drivers on a scale of one through five, and drivers can rate their passengers.
Passenger ratings are a safety feature for drivers, said an UberX driver from Washington Township, N.J., who goes by the name of “Sem.” Riders who behave badly or are drunk and obnoxious get bad ratings, and drivers can avoid them, he said.
Bekir Tastekin of Hackensack, N.J., left a job with a big New York City limousine company a year-and-a-half ago to work with UberBLACK, and drives his own Lincoln MKT, a luxury sport utility vehicle.
“It’s better,” he said of the newer arrangement. At limousine companies, “you work more and make less,” he said.