The
city beat back peer-to-peer ridesharing. Now it’s coming for the companies that
sprang up to fill the resulting vacuum. Last month, voters in Austin, Texas,
rejected Proposition 1, which would have overturned a city ordinance passed
back in December requiring fingerprint background checks for drivers employed
by ride-sharing services. The campaign was contentious: Proposition 1 was
backed by Uber, Lyft, and a band of free-marketers, but it earned scorn from
local media who feared a corporate takeover of city law. More citizens were
persuaded by the latter case. Afterward, Uber and Lyft, saying they were unable
to abide by the new requirements, promptly ceased operations in Austin.
Uber,
like most of the other ride-sharing companies founded in its wake, strikes a
balance between decentralization and top-down control. Drivers set their own
hours, can accept as many or as few fares as they like, and are given the
opportunity to rate their passengers and be rated by them in turn. But in other
ways, Uber maintains control over its own marketplace. Fares are determined
according to an Uber-designed algorithm. The infamous system of “surge pricing”
motivates drivers to meet spiking demand by jacking up prices. And the company
has its own background-check protocol for drivers, slipshod though Austin might
think it is. The departure of Uber and Lyft naturally left a vacuum in Texas’s
capitol that new services have begun to fill. None is more interesting than
Arcade City, whose mission is to completely decentralize ride-sharing. Arcade
City does not involve itself at all in negotiations between rider and driver.
It is simply a platform — currently a Facebook group, with an app still to come
— on which mutually consenting adults can arrange a trade of money for
services.
Arcade
City defies the traditional ride-sharing arrangement. And Austin is trying to
stamp it out. Supreme Court will allow Trump's latest travel ban to go into
effect 00:15 00:43 Powered by The city launched a sting operation on June 17,
citing Arcade City drivers and impounding their cars. In a statement, the
city’s transportation department explained that the drivers were cited “for
operating without a valid operating authority and operating without a valid
city chauffeur permit.” Under city law, if a driver seeks reimbursement from a
rider beyond the “mileage reimbursement rates established by the U.S. General
Services Administration,” a modest 54 cents per mile, then they are officially
in need of proper registration. Without it, they violate the law.
This
means the city government is regulating economic activity at a remarkably
granular level. Suppose someone in desperate throes late at night calls up a
friend, asks for a ride to some place ten miles away, and, feeling guilty,
hands his buddy a bill with Hamilton’s face on it. Upon receipt of the money,
that friend will be in violation of city law, the Austin transportation
department confirmed. So long as the reward exceeds the federal reimbursement
rate, and regardless of whether the driver sought to obtain it, Austin retains
regulatory authority — and is clearly not afraid to use it. The city government
is regulating economic activity at a remarkably granular level. Christopher
David, Arcade City’s CEO, is skeptical of Austin’s motives. “They want to force
everything that walks and talks sort of like an Uber into the regulatory
structure that they have created.
They
want to make their revenue.” Indeed, per city regulation, all Transportation
Network Companies (TNCs) must pay the city 1 percent of their own revenue, or a
comparable percentage of driver earnings. But David says that his company
isn’t, hasn’t been, and never will be a standard TNC. “We bill ourselves as a
Craigslist-style open marketplace. So the punishments fall heavily on the
individual drivers.” Thus, in its efforts to control Arcade City, Austin put
itself in the odd position of claiming authority over all sorts of ride-sharing
arrangements. Austin challenged Uber and Lyft for not taking safety seriously
enough, eventually forcing them out. David, however, envisions a world in which
the city government doesn’t have to police peer-to-peer interactions for
safety. “Like most bureaucracies,” David says of Austin, “They’ll seize on some
platitude like public safety to enter the marketplace. But we believe that we
are going to provide a superior way of doing business.” It might be hard to
convince people of that. For one thing, the professed goal for Arcade City’s
app is technical to the point of inscrutability. It will use Ethereal, a
platform that employs block chains — the technology used in Bit coin — to allow
secure interactions between users without the need for third-party oversight.
The New York Times wrote that Ethereal is “complicated enough that even people
who know it well have trouble describing it in plain English.” Meanwhile, if
you want to catch a ride on Uber, you just punch in an e-mail address and a
credit card number.
And
what if Arcade City actually finds success? The more the company flourishes,
the more it will inevitably appear involved in the interactions between its
users. David envisions an interface where “drivers have a profile, and they can
upload verifications like background checks, insurance documents, and
fingerprinting.” It will be “a true marketplace,” he says, “where the
information is transparent and people can filter by it.” It’s an admirable
goal, but the regulatory state will surely accuse Arcade City of facilitating
these market interactions. Consumers might not understand block chains, but
Austin regulators, motivated to exercise control over the market, won’t even
want to. Centralizing an entire set of reputational data on its own app will
seem to contradict Arcade City’s claim of decentralization. Without resorting
to technical jargon, it will be hard for the company to draw a clear distinction
between itself and standard TNCs. This is a fascinating moment for the nascent
sharing economy. The sale of services on platforms such as Uber and Airbnb
still goes through channels of regulation, both governmental and corporate.
The
governmental side is far more burdensome, of course, but it can be justified by
Uber’s involvement in setting its own prices. Even if, as Uber argues, its
drivers are contractors rather than employees, they’re still associated with
the service. And in efforts to control that service, cities such as Austin will
dictate the terms of economic activity. But when it comes to Arcade City, that
activity is distributed. Riders know how much they are willing to pay, and
drivers know how far they are willing to go. The association between the
service itself and its users’ activity — especially if David’s envisioned
technology pans out — is much weaker than it is in the traditional Uber model.
This
takes away one of the chief justifications for government regulation of peer-to-peer
ridesharing. Arcade City is in a precarious spot. Even as the company attempts
to remain totally decentralized, the city has shown it will pounce. If it grows
— if the plans of an app come to fruition and the company becomes a household
name — the city will surely seek to subject it to the more stringent TNC laws.
But Christopher David is undeterred: “We will be proceeding full speed ahead,
regardless of whether they give us a green, yellow, or red light.”
