LANSING — A proposal to create statewide rules for upstart ride-hailing companies like Uber and Lyft in Michigan has reopened an old story: the fight between technology’s disruption and regulations that protect revenue streams threatened by it — and how to maintain a level playing field.
It’s playing out this time at the Capitol between Michigan’s airports, including Detroit Metropolitan Airport in Romulus, and backers of a business model that has altered the way people get from one place to another.
The legislation to create a statewide licensing system for the ride-hailing companies, which let customers summon rides through smartphone apps, has the airports fighting back to protect revenue streams from taxis and other transportation and what they say is a need for local control to respond more quickly than lawmakers can to changes wrought by technology.
The rapid rise of ride-hailing companies is confronting statehouses and city council chambers across the country debating how to regulate the services. Airports from Atlanta to Albuquerque are dealing with similar choices when it comes to setting rules for companies like Uber Technologies Inc. and its main rival, Lyft Inc.
Lansing’s Capital Region International Airport recently signed its first agreements with the San Francisco-based companies and said the one-year deals will be evaluated once data are available to show how they worked. In Michigan, action on legislation that helped to stall contract negotiations with Uber at Detroit’s airport has resumed in the Senate after idling for more than a year. It’s possible the Legislature could vote on the bills after the Nov. 8 election and before the two-year term ends in December.
The latest incarnation has airports across the state lobbying for an exemption to rules they say would prevent a local government from enforcing its own ordinances on not just ride-hailing companies, but also on taxi carriers and limo services.
A provision that would ban local governments from imposing a tax, fee or license or imposing regulations appears in revised bill language that a Senate committee chairman said was presented less than two hours before his panel met this month to consider the bills.
Airport executives consider the language too broad, arguing it wouldn’t distinguish between municipalities that regulate taxi stands and local airport authorities that are subject to federal aviation rules. They believe a provision that says local governments “may” enter into an agreement with Uber or Lyft, taxis or limos, would not require the transportation companies to join an airport at the bargaining table and, in essence, give them the ability to operate as they please.
That raises a host of security concerns, from loitering vehicles to traffic congestion at curbsides, said Brian Sadek, vice president of legal and authority affairs for the Wayne County Airport Authority, the governing body for Metro Airport and Willow Run Airport in Ypsilanti Township.
It’s also about money: Detroit Metro routes taxis, limos and other for-hire vehicles through its ground transportation centers at McNamara and North terminals, where the airport charges a $10 access fee each time a vehicle arrives to meet a passenger. Ground transportation is a roughly $5 million operation at the airport each year, and Sadek said the airport could lose revenue if it no longer can execute the rule for transportation companies.
“We’re talking millions of dollars,” he said. “Any significant decrease in revenue runs the risk of making us less competitive to airlines ... in a very competitive industry.”
Atlanta-based Delta Air Lines, Metro’s largest carrier, also opposes the new bill language. In a statement, the airline said it “fully supports the ability of Uber and Lyft to operate” at Metro and other airports, but not at the expense of an airport being able to enforce its own ground transportation rules or collect local revenue.
Delta and other airlines are required to cover the operating budget gap that remains after the airport collects all revenue from ground transportation, parking, concessions and other non-airline sources, so more ground transportation revenue collected would mean less money that the airlines have to pay.
Both Delta and Metro Airport say any decrease in local revenue, such as from ground transportation, could make the airport less competitive when it comes to such things as flight schedules, connections and fares.
Supporters of the bills, including Uber and Lyft, say airports’ concerns are overblown.
The revised legislation doesn’t prevent airports from making deals with ride-hailing companies, said Funsho Owolabi, Lyft’s public policy manager, who testified before the Senate committee.
Lyft says the company benefits from deals with airports because it can negotiate staging areas or signs marking pickup points.
Sen. Tory Rocca, R-Sterling Heights, said members of the Senate’s regulatory reform committee have had concerns about the legislation. The panel could amend the legislation when the Senate reconvenes after the election.
Lyft has operating agreements with more than 70 U.S. airports, Owolabi said; it says the only Michigan airports it serves are in Lansing and Grand Rapids. The goal of Michigan’s legislation is to avoid a patchwork regulatory system, he said.
“As a company, we’re always willing to work with our regulators in coming up with sensible language” that works for all sides, Owolabi said. “At the end of the day, we’ll all have to negotiate still.”
Level playing field?
The bill package would require transportation network companies to get state permits to operate in Michigan and spells out requirements for background checks, vehicle inspections and insurance. A version that passed the House in June 2015 would require a driver to display a state-approved decal or sign on his or her vehicle while driving on behalf of the company.
“I’m trying to bring Michigan into the world of Uber, and thus far we’ve been opposed,” said Rep. Tim Kelly, R-Saginaw Township, who sponsored the lead bill in the package. “I keep telling people: Whether or not you want to pass this law or not, it’s not going to stop Uber.”
Ride-hailing companies generally employ drivers who use their personal vehicles to transport passengers, which has generated criticism about insurance protection and security. Uber and Lyft also won’t operate in markets with fingerprinting requirements; both companies recently pulled out of Austin, Texas, when voters supported a city ordinance that requires fingerprinting as part of drivers’ background checks.
Michigan airport administrators argue that the proposed state legislation doesn’t create a level playing field for all transportation operators, regardless of whether they’re ride-hailing companies or other for-hire providers.
Jonathon Vrabel, acting president and CEO of the Capital Region Airport Authority that oversees Lansing’s airport, testified that the legislation could cause airports to run afoul of requirements for airports that receive federal grants, including that airports be self-sustaining and not charge discriminatory fees to vendors.
Vrabel and other airport administrators say that if they aren’t allowed to enforce their own ground transportation ordinances — particularly the ability to collect fees from taxis, limos and transportation network companies — then they also would have to eliminate fees for such services as rental car agencies and parking.
At Detroit Metro, Sadek contends any company that moves passengers should use its ground transportation centers and pay an access fee. That is fair to all operators, reduces congestion and keeps drivers from loitering curbside, he said.
He added that airport police have reported seeing passengers get into the backseat of a vehicle with a smartphone clipped to the dashboard, which could suggest it’s a ride-hailing service, but it’s difficult to catch drivers who don’t follow the rules.
“They say this (is) for security purposes,” said Kelly, who questions how airports would be able to determine who is driving for Uber and who is driving a passenger vehicle to pick up a relative or friend. “I think that they use this cover of security to obfuscate the mere fact that it’s dollars that they want more than anything.”
Kelly believes much of the consternation about this issue is held by other industry players — taxi and limo carriers, public transportation — worried about new competition.
“The airports have said that the language here would impact their operations negatively,” Sagar Shah, a general manager for Uber in Michigan, testified this month before the Senate committee. “The language here is critical to ensuring that ridesharing actually remains an option at Michigan airports across the state.”
Deals being struck
Delta Air Lines, in a statement, said recent agreements at other airports it uses as hubs show “it is possible to create a level playing field so all forms of ground transportation can compete while ensuring safe, efficient and fiscally smart airport operations.”
One example is Minneapolis-St. Paul International Airport, a connecting airport for many Michigan travelers flying out of regional airports such as Lansing, Grand Rapids and Flint. The airport’s board two weeks ago unanimously approved new contracts for ride-sharing companies, along with agreements for taxi operators and other commercial transport.
Contracts with transportation network companies at Minneapolis’ airport include $500 annual license fees and a $3 per-trip fee to be charged for each pickup or dropoff. Uber and Lyft won’t have to fingerprint prospective drivers when conducting background checks, airport spokesman Patrick Hogan said.
“It’s really our responsibility to ensure the best possible customer service to the people who want to use (the airport) and, to me, that means having this choice,” said Steve Cramer, a member of the Metropolitan Airports Commission that manages the Minneapolis airport, before voting Oct. 17. “I happen to be a cab guy. My daughters are Uber and Lyft people.”
Deals are being struck close to home, as well. In Lansing, airport executives signed their first deals with Uber and Lyft within the past two months, said Nicole Noll-Williams, marketing and passenger development director. Uber is charged a flat rate of $800 per month, while Lyft pays $1.50 for every passenger picked up or dropped off.
In contrast, taxi companies pay a flat monthly rate of $525. Noll-Williams said she believes the higher rate for Uber anticipates that the company will generate more traffic than taxis.
When the one-year deals expire, airport administrators will determine how much activity the companies generated and, for instance, whether a flat-rate or per-trip fee makes more sense.
“For us, it was necessary,” Noll-Williams said. “We just need to make sure we’re adapting and providing those types of services at the airport. We feel this is a positive change.”
Sadek and other administrators at Detroit Metro say they aren’t opposed to working with Uber and Lyft; they would like to have the authority to adapt to more changing technology, such as automated vehicles, as it emerges.
They’ve gone down the path before. Last year, airport administrators sat down with Uber to negotiate a deal that would allow the ride-hailing company’s drivers to pick up inbound airline passengers at its terminals.
The talks didn’t bear fruit. By then, state lawmakers had introduced legislation to regulate companies like Uber, and the airport’s board chose to wait for Lansing to decide to avoid signing an agreement that later could be voided.
That didn’t sit well with Uber: The company was blocked from operating at the airport, its Michigan general manager recently told lawmakers. Yet Uber lists Detroit Metro among the roughly 400 airport destinations at which it says its drivers accept rides, despite the fact that it has no formal standing at the airport to do so, and despite the fact that the state ordered the company to stop doing business in Michigan three years ago because it wasn’t licensed — an order that stands today, though one the state says it can’t enforce.
Uber declined comment beyond its Senate committee testimony, but in a statement, a spokesperson said: “We have always welcomed the opportunity to work with the Wayne County Airport Authority on regulations specific to ride sharing. Our goal is to keep ride sharing as an option at Detroit Metro Airport, allowing Detroit drivers earning opportunities and Detroit residents and visitors access to a convenient, safe, reliable and affordable transportation option.”