When Uber and Lyft left Austin last month, they thought they were sending a message to the Austin City Council and other local governments looking to regulate them. Instead, their departure may pave the way for a revamp of ride-hailing in Austin that could draw the notice of other cities.
At least six new companies have launched in Austin, all emerging from the ashes of
the Proposition 1 election that left the capital city without the two industry giants in vehicle-for-hire apps, which are also sometimes referred to as transportation networking companies.
"What [Uber and Lyft] have left us with appears to be the only open TNC market in a major city in the world, maybe," said Austin Mayor Steve Adler. "In the marketplace, when you have a monopoly, or in our case a duopoly, that leaves town, what you would expect to see in the market is innovation and competition. And that's what we're now seeing happening in Austin."
Uber and Lyft left Austin last month after a citywide vote killed Proposition 1, an ordinance the companies supported. The election came after a $9 million ad campaign from Uber and Lyft that littered the city with signs and mailers but didn't yield an election outcome in their favor.
Two days after the proposition was defeated, both Uber and Lyft closed up shop and urged supporters to express their unhappiness to their city council member.
“I believe the next big rideshare (company) is going to be the one that wins Austin. ” — Christopher David, Founder of Arcade City
"Due to regulations passed by City Council, Uber is no longer available within Austin city limits," the Uber app now reads. "We hope to resume operations under modern ridesharing regulations in the near future."
And for a moment, the city held its breath.
What would become of ride-hailing in Austin? While other companies offering similar services had operated alongside Uber and Lyft, none had seen anywhere near the same level of success. An estimated 10,000 drivers found themselves out of work after the two companies ceased operations.
Newer faces have quickly flooded the market.
There's Arcade City, getme and Fare. There's also Fasten, Wingz, zTrip and RideAustin. And InstaRyde will have its official Austin launch later this week.
Many of these companies, most of which have business models similar to those of Uber and Lyft, are still finding their footing, rushing to get drivers on the road and apps on Austinites' phones in the race to emerge as the face of peer-to-peer transactions in the city. Some sprouted roots in Austin before Uber and Lyft left but have seen a recent boost in business.
Yet all of these firms still
operate in the shadow of the two ride-hailing giants, struggling to distance themselves from their competitors while still offering comparable services. Even now, it's unclear if any of these new companies will be able to offer the same level of coverage or see similar success.
Before Uber and Lyft exited Austin, one or both of the companies had previously left other cities for instituting fingerprint-based background check requirements, including Galveston, Corpus Christi and Midland in Texas. (Uber
recently returned to Midland after the city council voted to modify the city's ordinance.)
Houston remains the only Texas city with a fingerprint requirement for drivers where Uber still operates — but in April, the company said it
plans to cease operations if the city council does not change what it has called an overly burdensome ordinance. Lyft left the city over a year ago over the fingerprint requirement.
In Austin, all of the firms now battling for market share are aware that either Uber and Lyft may return to Austin. Christopher David, the founder of Arcade City, said he is assuming both companies will eventually relaunch here.
"I think they'll come back," he said in an interview last week. "I think they will regret leaving. I think they miscalculated Austin, and I believe the next big rideshare [company] is going to be the one that wins Austin."
An Uber representative declined to comment for this piece but said the company welcomes the competition.
The free-for-all prompted
Tom Dickman, a 26-year-old software engineer in Austin, to create a website for riders to sift through the new options available and learn how much each would charge for a given ride. The current version includes data about Fare, Fasten, getme, Wingz and Lyft, which still offers rides outside of Austin.
"I was struggling a little bit with Uber and Lyft leaving and then all of these different companies coming in," he said. "And they all have different pricing models and it's hard even to just know which ones are available where you're standing. So it's just a way to collapse them all together."
Nearly all of the companies are looking to get all of their drivers in compliance with the Austin's ordinance, meaning they all must pass fingerprint-based background checks — the crux of Uber and Lyft's frustration with the city.
As it is currently written, Austin's ordinance does not include any explicit penalties if companies fail to comply.
"The ordinance we passed in January was incomplete," Adler said. City officials had planned to come back later that month to approve penalties and make other changes, he said, when a PAC backed by Uber and Lyft submitted a petition to the city which prompted the Proposition 1 election.
Now that the proposition has been defeated, Adler said the council must revisit the ordinance.
Wingz CEO Chris Brandon said the company was already planning to launch in Austin prior to Uber's and Lyft's exit and is looking to take "fingerprinting to the next level" by having all of their drivers in compliance long before the Aug. 1 deadline set by the city.
Wingz currently only offers scheduled rides to and from the airport, but the company recently launched a beta version of "WingzAround" in Austin. The new expansion brings its services beyond the airport and allows riders to schedule rides anywhere in the city.
Both Fare and Fasten said they plan to start fingerprinting their drivers in compliance with the ordinance by the deadline.
RideAustin, a first-of-its-kind ride-hailing nonprofit, has also emerged as a competitor, although it is still in testing mode and is not yet available to the public. Spokesman Joe Deshotel said its creators supported Proposition 1 but that the company will follow the ordinance and have their drivers fingerprinted. He added that RideAustin plans to keep its money in Austin because its goal is not "world domination like Uber."
Arcade City officials say their company is technically not a transportation network company and thus not subject to the city's regulations. Currently, Arcade City operates through a private Facebook group and bills itself as a ride-hailing "community" as opposed to a "middleman" like Uber and Lyft.
David, Arcade City's founder, said
drivers can choose to undergo fingerprint-based background checks, which they can then use as a selling point to secure rides.
Despite the turmoil from the election, Adler said he stands by the council's decisions, even as the fallout has captured national attention.
"I have talked to mayors from around the country about this issue," Adler said. "My position on this is that cities need to be as innovative and creative as are the industries and businesses and economies that it intersects with ... There's a suggestion that what's happened here demonstrates that Austin is not an innovative city, and I don't think what happened here indicates that at all ... Austin is where ideas go to become real."
Adler said it was unclear what the ride-hailing environment will look like down the line, but he said he is certain there will be "choices operating at scale in the city."
The future could depend on whether the Legislature decides to take action on the issue next year. Immediately following the departures of Uber and Lyft, Sen.
Charles Schwertner, R-Georgetown, said he will file legislation on the issue next session that emphasized a free market. Other GOP lawmakers expressed similar concerns on social media after the election.
Adler said while statewide regulation is "certainly an option" the Legislature can use, the atmosphere in Austin has already significantly shifted since the election.
"I think that when some of the legislators initially spoke, it was uncertain as to whether or not Austin had adopted something that would prevent the market to function," Adler said. "I would say the evidence at this point would at least suggest that the market is working well."
There's little the Legislature can do until the 2017 session, but the House Committee on Business and Industry is holding an interim hearing on Wednesday to discuss "how Texas can support shared economy growth in the state." Uber General Manager Sarfraz Maredia has been invited to testify.
In the meantime, the future of Austin ride-hailing will be determined by the market, Adler said, "as opposed to government deciding."
"There's going to be a battle for Austin," David said. "It's going to be fierce, and it's going to be fun."
Disclosure: Uber, Lyft and Austin Mayor Steve Adler have been financial supporters of The Texas Tribune. Adler is also a former board chairman of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.