The Seattle City Council unanimously voted Monday to limit the number of drivers that Lyft, UberX, Sidecar and other similar companies can have on the road to 150 at a time, but it left the door open for the council to revisit or lift that cap after one year.

In a compromise that no one loved, council members said the plan allows the popular smartphone-based upstarts to operate legally in the city—unlike actions that other jurisdictions have taken to to ban them. They also said it puts key provisions in place to protect consumers, expands the number of legal vehicles-for-hire in Seattle, and gives the existing taxi industry a limited period of time to innovate and catch up.

The council also resolved concerns about insurance gaps by requiring “Transportation Network Company” (TNC) drivers to carry commercial insurance or have the TNCs prove to the city that their drivers have equivalent or better than state-mandated coverage under company umbrella policies.

In a statement issued after the vote, Lyft said the city had disregarded the voices of thousands of customers who opposed the restrictions and was crushing new economic opportunity. However, it also said Lyft “will continue operating in Seattle, will continue to stand behind drivers, and will continue to offer a safe, affordable and friendly transportation option to the great city of Seattle.”

UberSeattle general manager Brooke Steger was non-committal about the company’s plans but did say “we will continue to fight. Stay tuned—there will be more coming from us shortly.”

  • Steger said the new caps would make it difficult or impossible for the company to continue providing the high level of service that its wildly loyal customers have come to expect. Last week, UberX said it “regularly” has 300 drivers on the road in Seattle at any one time, which is double what the new regulations would allow.

    Last week, UberX and Lyft abandoned previous objections and agreed to cover drivers whenever they are actively driving on the companies’ platforms. That appears to come close to what the new city legislation requires, but it remains to be seen whether it will entirely meet the letter of the law.

    Tough Love

    After more than a year of contentious and passionate debate, council members had stern advice for all sides of the industry. Sally Clark, chair of the City Council’s Taxi, For-Hire and Limousine Regulations Committee said the council’s experience in dealing with the popular smartphone-based dispatch companies, which began operating illegally and kept the council in the dark about driver numbers until last week, had not been as wonderful as that of their riders and drivers.

    You are doing so many things right, and you have a lot of things to teach regulators…If only you could communicate and collaborate a bit more. How you can raise this much money and have battalions of lawyers and not have a better plan for how to engage with regulators and policymakers is amazing. How many wars can you wage at one time?

    Committee member Bruce Harrell, arguably the fiercest advocate for taxi and for-hire owners and drivers, made clear on Monday that the industry needs to fix its customer service and reliability issues—and fast—if it expects to survive. He said he expects that the city will move towards lifting caps and let the market decide which companies survive.

    I say to taxi owners that the industry is changing and my guess is that in a couple of years you’re all going to be competing without caps and consumer choice will dictate who stays in business…This bill sets up the conceptual framework for the city stepping out of the regulatory market, but we are not there yet.

    The council made relatively minor tweaks on Monday to legislation that had already passed out of committee. An amendment to lift the caps on TNCs failed once again, despite disclosures late last week from Lyft, UberX, and Sidecar that each company had signed up roughly 1000 drivers. That was intended to show the council how much the new caps would constrict their businesses, but it apparently came too late to influence the legislation.

    The council also voted to revisit the TNC cap themselves after one year, rather than delegating that authority to city staff. Other successful amendments aimed to prevent companies from cloning themselves to get around the 150-driver cap, and to allow drivers to obtain insurance from a wider pool of providers.

    The council had previously settled on other provisions designed to level the playing field between the unregulated TNCs and the existing for-hire industry, such as making them undergo the same driver training requirements, requiring vehicle inspections, and requiring TNCs to provide insurance coverage whenever a driver is “live” on the system.

    And It’s Not Over

    The council repeatedly stressed that this is not the end of its work on for-hire vehicle regulations. They unanimously passed a resolution laying out remaining issues to tackle:

    • Updating training for drivers to ensure it is relevant and focused
    • Looking at whether it makes sense to consolidate the taxi and flat-rate, for-hire segments of the industry
    • Exploring phasing out vesting of for-hire and taxi licenses so that the industry evolves into an occupation for owner-operators rather than license holders
    • Working with King County on eliminating polluting and inefficient “deadheading”
    • Recommending worker protection provisions for TNCs
    • Streamlining unnecessary regulations that existing taxi and for-hire drivers have to follow
    • Exploring changes to taxi licenses to allow for co-ownership

    In framing up the legislation, Clark pointed out that for years, the laws of the taxi universe in Seattle were fairly constant. Taxi drivers were mad at the for-hire drivers, for-hires were mad at taxis, and both groups were mad at the limousine industry. Once the TNC companies arrived on the scene, the laws of the universe completely changed, she said, which made it even more clear that a regulatory overhaul was needed:

    Every few years something about taxi regulations gets to the point…that we can’t dodge the problem any longer. Government performs a quick band-aid fix…and we avoid acknowledging that the regulatory system is old and heavier than needed.

    Avoiding a comprehensive fix is no longer possible, and what we are doing today isn’t a complete fix, but it’s a start.