Ride-Sharing Services Get Green Light in California

Score one for the cars with the silly pink moustaches. The California Public Utilities Commission (CPUC) gave its blessing to ride-sharing services including Lyft, Uber and Sidecar, saying it will allow them to operate as regulated businesses. (If you’re not familiar with the service, Lyft cars have large, fuzzy pink mustaches on their grills.)

However, the commission decided the services must adhere to a strict set of guidelines, including criminal background checks and training for drivers, mechanical inspections of their autos, and proof that each vehicle is covered by insurance policies worth at least $1 million per incident.

The ruling is only effective in California, but the decision is likely to influence regulators in other states. Ride-sharing services are currently available in a number of cities, including Boston, San Diego, Austin, Chicago and San Francisco. They have been challenged by traditional taxi and limousine services who claim ride sharing represents unfair competition and can’t guarantee passenger safety.

The CPUC’s ruling addresses those points pretty well, I think, and it certainly makes me feel a lot more comfortable about using one of those upstarts.

In case you’re unclear on the concept, most of the services work like this: You download an app on your smartphone, open an account and tie it to a credit card. When you want a ride somewhere you simply open the app and take a look at a real-time map that shows you where the nearest driver is. Lyft “suggests” a fare and a tip when you reach your destination, where you simply click OK and the ride is charged to your credit card. The drivers are contractors who split the fare with the company.

In theory, a rider could simply not pay the “donation” and get away with a free ride. But if you stiff the driver, the company could blackball you and you’ll never get picked up again.

Here in San Francisco, a city where many people don’t own cars, it can be very difficult at times to find cabs. Even calling for a cab can result in a frustrating wait on hold and some uncertainty that a driver will actually show up. So it’s no surprise that tech-savvy people like the idea of using an app to immediately determine if a driver is nearby.

I admit, I worried that the drivers didn’t carry enough insurance or that they simply couldn’t be trusted to drive safely. Now that the CPUC has mandated rules that ensure passenger safety, traditional cab and limo services will simply have to be more competitive and offer better service if they want to stay in business. And that’s definititely a good thing.