California's reputation as a hub of innovation isn't limited to the rise of digital technology and Silicon Valley. The counterculture movement of the 1960s and '70s disrupted social norms in lasting ways. That scene was itself catalyzed by UC Berkeley's Free Speech Movement, which ushered in a new era for civil liberties on college campuses. Decades earlier, the San Francisco general strike of 1934 galvanized the West Coast labor movement.
Out of California's progressive legacy has emerged a political culture unafraid of government regulation and intervention, a culture that views government as a tool for forging the public good. In that light, the decision by state regulators to fine upstart ride-sharing services Uber, Lyft, and SideCar comes as no surprise. What's truly surprising is how California's innovation culture and its intervention culture have emerged alongside one another, and how seldom they've clashed in the way they are now in this particular fight.
The California Public Utilities Commission's announcement Wednesday that it was fining the three San Francisco-based companies $20,000 each comes after more than a month of public feuding. The CPUC says the companies are operating what amount to limousine services, which the agency has the authority to regulate statewide. The companies say they're merely acting as platforms that connect riders and drivers, and that regulators are willfully ignoring the distinction to protect their own interests and those of the industry's entrenched players.
San Francisco transportation officials are also reportedly investigating the three companies, and a San Francisco attorney has sued Uber on behalf of the city's taxi drivers. While Uber in particular has clashed with regulators in other cities, the ruckus in San Francisco contradicts the current popular image of the city in a way that's different from other places. In Chicago for instance, it's easy to picture the political machine cracking down without a second thought on a "disruptive" businesses. But in San Francisco, playground of earnest startup millionaires whose only crime is trying to change the world? If you can't disrupt the urban transportation infrastructure by leveraging the superior efficiencies of the mobiles-based sharing economy here, then where can you?
In a blog post titled "SideCar Gets $20K Ticket For Innovating Over Speed Limit," SideCar CEO Sunil Paul writes that the CPUC's allegation "is like saying Airbnb is a hotel chain, that Travelocity is an airline, or that eBay is a store."
"SideCar is not just a company, but part of a large movement to use smartphoness to enable owners of assets to share and collaborate with others for greater efficiency," he writes. "These technologies and ideas are new to government, so it’s no surprise that early reactions are to force us in a box that is convenient for regulators to understand."
Lyft co-founders Logan Green and John Zimmer strike a similarly defiant tone: "This is a case of regulators trying to put us into a box that doesn’t fit. Lyft operations will continue as normal."
In an email to WIRED, Uber CEO Travis Kalanick says his company is different because the drivers who use its app are already licensed by the CPUC to operate limos. "The question from the PUC with regards to Uber is only whether Uber should be licensed as well, double-regulating us on top of our already regulated transportation partners," Kalanick writes. He continues:
The CPUC's answer is essentially "yes." From its citations, the agency clearly considers the drivers to be these companies' employees, which means the companies are subject to the same laws and requirements as any other traditional limousine service. The violations of which Lyft, SideCar, and Uber stand accused include operating without evidence of liability, property damage, or workers' compensation insurance; not enrolling drivers in a Department of Motor Vehicles program that lets employers monitor their driving records; and not enrolling drivers in the state's drug and alcohol testing program.
“This is a matter of public safety,” Jack Hagan, director of the CPUC’s consumer protection and safety division, said in a statement. “If something happens to a passenger while in transport with Lyft, SideCar, or Uber, it is the responsibility of the CPUC to have done everything in its power to ensure that the company was operating safely according to state law."
All sides are making noises that they're willing and eager to work together to resolve the dispute. But a $20,000 fine � which falls well below the $5,000 per day the agency has the legal authority to impose � gives California the kind of leverage that entrepreneurial idealism alone can't match. Uber critic Paul Carr argues these companies set themselves apart because, rather than merely seeking to upend a hidebound industry, they're taking aim at the state itself and the regulations they say prop up that industry. Innovation becomes civil disobedience, a form of protest that the Bay Area typically treats as sacred.
But if you've ever been to a San Francisco Board of Supervisors meeting, you know that San Franciscans also have no problem with using government intervention to create the very specific kind of world they want to live in. San Francisco is a city of early adopters, but it's also a city that also regulates what can go in a Happy Meal. In a city like that, disruption won't come from sticking your tongue out at City Hall. To survive in this bluest of blue cities and states, companies like Uber, Lyft, and SideCar will have to learn to navigate the corridors of power � or else get used to taking the bus.
