SACRAMENTO — Ride-sharing companies that connect passengers to drivers via smartphones should be allowed to continue operating in California if they comply with basic safety rules, state regulators proposed Tuesday.
The recommendation now goes to the five-member Public Utilities Commission as early as its Sept. 5 meeting. Commissioners can accept or deny the recommendations or offer alternatives for regulating such increasingly popular ride-sharing companies as Lyft Inc., Sidecar and Uber Technologies Inc.
The three companies provide transportation for a fee or donation, connecting paying passengers with drivers who use their own vehicles.
The proposed decision gives a "greenlight " for ride-sharing in California and should set an example for cities and states across the country to provide consumers with a new way to get around, said Sunil Paul, Sidecar's chief executive and co-founder.
"Today, we have a new roadmap for smartphone-enabled services like Sidecar that we hope will set the stage for transportation innovation nationwide," Paul said in a blog post Tuesday afternoon.
The proposal would be a victory for consumers if it becomes regulatory law, said James E. Moore, director of the transportation engineering program at USC's Viterbi School of Engineering. "It reduces the barriers for entry into the market for transportation services and that's going to provide consumers with more options," he said.
Under the proposal, the PUC would have jurisdiction over ride-sharing under a new category of businesses called transportation network companies. The agency would also issue licenses to the services.
A decision, once endorsed by the commissioners, is expected to preempt efforts by California cities to oversee or even ban ride-sharing under their authority to license taxi cab firms.
Regulators would require drivers to undergo criminal background checks, receive driver training, follow a zero-tolerance policy on drugs and alcohol and carry insurance policies with a minimum of $1 million in liability coverage.
In its ride-sharing case, the generally ponderous PUC bureaucracy has moved with unusual speed to deal with a new industry. Controversy over ride-sharing comes as local governments seek to encourage new business models. Meanwhile, the highly regulated taxi industry is howling at the prospect of losing fares to new and typically cheaper competitors.
If the decision goes through as it is, it will hurt the taxi and limousine transportation industry, said William Rouse, general manager of Los Angeles Yellow Cab.
"We have a city-mandated price that we have to set," said Rouse, who also is president of the Taxicab, Limousine & Paratransit Assn. "They're undercutting our price by providing essentially the same service that we provide, so of course it's going to affect us."
He said regulations should be changed to level the playing field for cabbies. He also said that if the decision goes through as it is now, it will undermine local and cities policies and regulations.
The commission, by law, has jurisdiction over all intrastate charter-party and passenger motor vehicle carriers, though not cabs, which are licensed by cities and counties.
The PUC began enforcement action against these transportation companies in October 2010 when it issued a cease-and-desist letter to Uber Technologies. Similar orders went out to Lyft and Sidecar in August 2012. All three companies are located in San Francisco. Uber has operated since 2010, while Lyft and Sidecar launched last year.
In December, the PUC said it would begin evaluating "the safety of ride-sharing businesses that utilize the Internet, social media and location services to arrange transportation of passengers over public highways for compensation."
In late January, the commission reached a temporary operating agreement with the three companies, allowing them to operate while the rule-making process was underway. It also suspended previous $20,000 citations issued to each of the companies.
Lyft, Sidecar and UberX, a service by Uber Technologies, began operating in Los Angeles early this year. Things went smoothly until June 24, when they received cease-and-desist letters from the Los Angeles Transportation Department. The city accused them of violating codes and threatened drivers with arrests.
The next day, about 300 cabbies circled Los Angeles City Hall, honking in protest of what they called "high-tech bandit cabs."
None of the three services stopped operating, and argued that their agreements with the CPUC allowed them to operate across California.
Since then, the Transportation Department has backed off its threat to arrest drivers, saying it is working with Mayor Eric Garcetti to "address ride-sharing companies in the city."
"Companies with a state operating permit and utilizing state permitted charter vehicles and drivers can operate legally so long as they only offer pre-arranged trips and comply with state regulations," the Transportation Department said in a recent statement.