Cover Story: Atlanta’s taxi industry declares war on Uber, Lyft

What’s yellow and black, heavily regulated, and green with envy?

The Loring Heights headquarters of Atlanta Checker Cab is a taxi industry time capsule. A glass case inside CEO Rick Hewatt’s office holds the cab driver’s cap his uncle wore in the 1950s. Over his assistant’s desk hangs a photo of Hewatt’s grandfather, a former trolley operator and the 67-year-old company’s founder. Today, Atlanta Checker Cab owns more than 187 cars. Outside, behind rows of cabs and three garages where cars are washed, painted, and maintained, there’s a rusted early model of the tanker-like taxi that once rolled on Atlanta’s streets. For the last 50 years, Atlanta Checker Cab has operated out of this location, making it one of the city’s oldest taxi companies.

“Three generations have worked here and a fourth on its way,” Hewatt, 55, says as his son Calvin processes payments in an adjacent office building and Hewatt’s sister Kathy Shamblen works as an accounts receivable clerk in a room lined with servers, a backup generator, and computer terminals. “My grandfather founded it, my dad grew it, now I’m just trying to maintain it.”

Maintaining a taxi company in Atlanta has become increasingly difficult. For the past two years, Hewatt and his colleagues have watched startup car service Uber, and more recently Uber’s pink-mustachioed competitor Lyft, aggressively muscle their way into Atlanta’s ground transportation industry, gobbling up taxi business in the process.

There was a time when, if you needed a lift home from the bar, to the doctor’s office, or to the airport, your only private option was a cab company. Now you can just open a free app on your phone and instantly find a ride from a handful of companies. And not just any ride, but a clean, even fancy, and quick-to-arrive ride for roughly the same price as a cab.

Atlanta’s taxicab industry has been watching from the sidelines, waiting for the companies with the silly names but alarmingly similar business models to be forced to comply with the same regulations they’re legally required to follow.

A turf war between cabs and the flashy transportation upstarts has erupted in cities across the United States, including Los Angeles, Washington, D.C., New York, and, now, Atlanta. The taxicab industry is sick of the car services poaching its business, not paying the fees, and driving around town picking up fares without any oversight. These companies are to taxicabs what blogs were to newspapers, digital cameras to film, and Airbnb to hotel chains. Uber co-founder Travis Kalanick has built his career on creating such disruptive business ventures.

In response, Hewatt and his colleagues have started a behind-the-scenes push to do what other cities across the country have done: regulate companies that act like taxis but swear up and down they’re not. Uber and Lyft have hired high-powered lobbyists to defend their interests at City Hall and under the Gold Dome. So have the taxicab and limo executives. They’ve also found an influential state lawmaker who sees the merits of their arguments. If the Old Guard gets their way, the technology companies might have to follow some set of rules. If it doesn’t, the checker cabs and limos could face an uncertain future.

When Angela Walker quit her corporate marketing gig in Milwaukee and moved to Atlanta with her son nearly two years ago, she didn’t have a car. The Sandy Springs resident used to take MARTA from her home in North Fulton to the novelty shop she owns in Little Five Points during the week. On weekends, she’d rent a car to get around.

“I saw cars with empty seats,” Walker says, remembering those trips to and from work. “I thought, ‘I could have used a lift’ many times. Two buses and two trains from Sandy Springs to here, and I’d still have to walk from Inman Park. It was a minute. But that’s when I fell in love with this concept. A convenient ride and you didn’t have to pay an arm, leg, and a lung. What’s not to like?”

Now with a car of her own and wanting to supplement her income, she discovered Lyft on Craigslist late last summer and became one of the “peer to peer ride-sharing” company’s first metro Atlanta drivers. She shuttles passengers in her Pontiac Vibe — the “Fly Mobile” — decked out with pink LED lights that coordinate with the neon pink mustache Lyft’s drivers are required to display on the grills of their cars. Like other Lyft drivers, she invites passengers to sit shotgun and get to know her. When they leave she hands them a bag of treats including a discount code and a free sample of her homemade skin cream.

“You get to be your own personality, your own brand and not get penalized for it,” she says. “I couldn’t do this in my corporate job.”

Walker could never imagine driving a taxi. Neither could Kwame, an UberX (Uber’s lower-cost option) driver from Douglasville who started using his personal vehicle to pick up passengers three weeks ago. He’s already considering buying another car to grow his own personal fleet and moving inside the Perimeter to be closer to customer demand.

“This is the way forward,” he says. “Uber, Uber, Uber.”

Of the rideshare startups, Uber was first in Atlanta, arriving in mid-2012. UberX arrived in September. Last August, Lyft began linking drivers and passengers in Atlanta. The company’s business model is based more on the so-called “sharing economy” where there are no fares, only “donations.” And yes, you can give the person who just took you home from the bar no cash.

Uber and Lyft contend that they’re not transportation companies — they merely connect people with licensed commercial transportation providers or people with an open seat. The San Francisco-based companies are hybrid travel agents/taxicab services. Uber doesn’t own any cars used by drivers, which the company considers independent contractors. Both companies skim a 20 percent commission off total fares. On an average night, one driver says, a dedicated Uber partner could make $120 in Atlanta. On New Year’s Eve, it could be as high as $600. Drivers set their own hours and keep 80 percent of the total fares, which are all handled via the app.

For a passenger, Uber’s setup is simple, sleek, and jibes nicely with the lives of tech-savvy twenty- and thirtysomethings. Uber’s reliability and perceived exclusivity are big parts of its appeal. Download an app, upload a photo, enter your credit card information, and with the press of a button, you can get a ride. Uber’s rates are calculated from a base fare plus distance and time. When business picks up, it also factors in something taxis cannot: demand.

When demand is high, so are estimated fares, as some passengers famously discovered when they were charged hundreds of dollars on New Year’s Eve. Uber says the so-called surge pricing ensures cars are always available. If you want to be picked up pronto at the same time as other people, you’ll have to pay a premium for it. That’s in contrast to Atlanta’s taxis, which by law can only charge a set amount. Passengers will wait when it’s busy, but they will pay a set rate.

While neither Lyft nor Uber would release specific details on how the businesses have fared in metro Atlanta, “In the past few months alone, tens of thousands of Atlanta residents and visitors have used Uber,” company spokeswoman Nairi Hourdajian says. Anecdotally, things have been good. Walker says she’s referred as many as nine people to sign up as Lyft drivers. Open up either app at any time and you’ll see a car available.

For Atlanta’s taxi industry, the infusion of new, unregulated vehicles was a shock. The path to becoming an Atlanta taxi driver is not an easy one. Men and women who want to drive cabs must pay a $75 application fee and $20 for fingerprints and a background check to be approved for a permit. They must also complete an annual daylong training session that includes a review of the city’s taxi ordinance. On top of that, they must already be partnered with a city-recognized taxicab company that owns a Certificate of Public Necessity and Convenience, or what’s commonly known as a medallion. Basically, a license to operate a taxi.

The city has created 1,600 medallions, nearly all of which have been sold. The city possesses the final 46 and plans to hold them because it considers there to be an overabundance of taxis in Atlanta. You’re more than welcome to buy one on the open market. The current going rate is around $65,000, a steep price, albeit a fraction of what you’d pay in New York City where they can run closer to $1 million. Most people lease the medallions, which, depending on what type of company they choose to work for, can cost as much as $775 a month. Full-service companies, which provide and maintain the vehicle, can charge as much as $600 a week.

Cab drivers are required to get their fingerprints checked every year. Vehicles must be inspected twice annually. After expenses, Hewatt says his “worst driver can make $40,000 a year.” According to a 2012 Atlanta taxi industry study commissioned by Central Atlanta Progress, drivers that lease their vehicles from taxi companies can earn more $30,600. Drivers who focus only on the airport can earn $16,000.

While Uber’s town car service is restricted to licensed limo drivers with commercial insurance, potential UberX and Lyft drivers have it relatively easy. They must submit to in-person interviews as well as background checks, which are handled by a private firm, however, not the police. Insurance is verified by the companies, they say. But the taxicab and limo company owners of the world, who are watching some of their drivers and revenue jump to Uber and Lyft (and in some cases, not come back), are skeptical, as there’s no independent oversight.

In recent years, the cab companies have awaited an effort led by Mayor Kasim Reed to overhaul the ordinances that regulate the industry. Recommendations, including the long-overdue collection of basic data about Atlanta cab service, are now sitting on the mayor’s desk. In addition, the city’s entire regulatory scheme has been called into question in a lawsuit filed by a group of taxi drivers who claim it’s stifled competition and helped create a monopoly.

For more than a year, taxicab and limousine industry professionals have been quietly prodding elected officials on the city and state levels to pass legislation to regulate or start cracking down on the startups, which they claim are operating illegally. In their eyes, Uber and Lyft are no different than taxis.

“If you advertise for transportation and provide transportation, you are a transportation provider,” Hewatt says.

The only difference, they argue, is that Uber and Lyft don’t have to comply with the same fees and regulations as limousines and taxis. That includes everything from paying sales taxes and permit fees to requiring all company vehicles to look the same and post decals and information. Limos and taxis are also prohibited from offering loyalty programs or special promotions. More importantly, they allege, Uber and Lyft are public safety hazards.

Jeff Greene, vice president of the Georgia Limousine Association’s board and the president of the 26-year-old limousine and black sedan company Greene Classic Limousines, says he and others are concerned that the companies are simply operating outside of regulations that have been put in place to protect the public. “We’re not about putting them out of business,” he says, “but we go through a lot of expense and time to comply with federal, state, and local regulations. And we feel they should do the same that we do.”

The fact that Uber and Lyft are unregulated makes Fasil Muche, the owner of Crown Cab, which leases medallions to drivers, question the system.

“What are they?” he says, referring to the rogue app companies. “A taxi company? Driver referral service? Could I go get a helicopter and start transporting people? Would the city allow that? It just doesn’t make sense that you have so many people operating without the proper license.”

The startups are pushing back, even claiming that they go above and beyond what’s required of the highly regulated taxicab industry.

“What we do for safety far exceeds what is required of taxis and limos,” says Erin Simpson, a Lyft spokeswoman. “In Atlanta, the minimum liability insurance for taxis is $25,000. With Lyft, it’s $1 million. If safety is indeed a concern, you could argue that Lyft’s requirements are much more stringent.”

Not so fast, argues Hewatt. What insurance company in its right mind would provide coverage to a new company with a business model that relies on noncommercial drivers shuttling people to and from for “donations”? Simpson declined to name the provider, saying the insurance coverage was the first of its kind created specifically for the company. Lyft would share the proprietary information with local regulators if asked, she said, as the company has done in other cities and states.

These gripes you’re hearing, Uber and Lyft argue, are merely the death throes of an ossified industry, dinosaurs that still roam among us.

“Uber is injecting consumer choice and innovation into an industry that, to the detriment of consumers and drivers, hasn’t evolved in decades,” Hourdajian says. “Those who benefit from the status quo don’t want to have to compete and don’t want to have to innovate. In city after city, we’ve seen incumbent operators work behind the scenes — outside the light of day — to limit consumer choice and driver opportunity.”

Starting in mid-2012, Hewatt and other transportation professionals began sounding the alarm on the burgeoning industry, particularly Uber. Through an Open Records Request, CL obtained more than 500 pages of emails and other documents between Hewatt, Greene, and other ground transportation executives to Cedric Burse, the director of the Atlanta Police Department’s Vehicle for Hire division, which regulates taxicabs in the city.

On Sept. 24, 2012, 18 of Atlanta’s taxicab and limousine executives and Burse gathered at the Atlanta Police Department’s Vehicles for Hire division’s office south of Turner Field to discuss a threat to all their businesses: Uber.

In the weeks leading up the meeting, Hewatt and other ground transportation professionals regularly emailed each other and Burse links to articles about Uber’s entry into cities across the country. One subject line simply read: “Uber wants war.”

On Aug. 15, 2012, Rapid Taxi owner Bekele Solomon was encouraged when Massachusetts regulators issued a cease-and-desist letter to Uber. Solomon suggested “to prepare ourselves, soon, to take our case to fulton county sic court.” In mid-September, in reply to an email from one taxi company owner, Burse asked his department’s officer to step up enforcement of “illegal activity” during the late evening hours.

At the Sept. 24, 2012, meeting, the group of executives bandied about ideas on what city ordinances or state laws, if any, Uber was breaking, and how to address the car service that was sluicing away their business and avoiding all of the expensive and time-consuming regulation. The executives recommended calling the working group the Rogue Apps Committee. They wanted to turn their conversations into action quickly through legislation or enforcement before November 2012.

After the powwow, Johan DeLeeuw of local limo company Olympus Worldwide, wrote to Burse after visiting Uber’s Atlanta offices to return phones his company had used: “I was told they were blowing up, business is booming and they need all the help they can get. UBER is pounding the pavement and they are hitting it hard!”

In an Oct. 4, 2012, email briefing to then-APD spokesman Carlos Campos, Burse said that Uber was skirting regulations. He recommended that the city “acknowledge the benefits and widespread acceptance of the technology but demand that Uber (the company) comply with the city ordinance and cease and desist until this action is met.”

CL also requested emails to Burse from representatives at Uber and Lyft, including their lobbyists, as part of our Open Records Request. None were included in the packet of documents. According to City Hall sources, however, lobbyists from Uber and Lyft have also paid visits to Atlanta officials, ostensibly to argue the companies’ cases.

“We recognize the value and popularity of these services to our residents and guests,” Campos, now a spokesman for the mayor, said in a statement. “We are also keenly aware of the concerns the taxicab industry has raised regarding these services. Right now, the city has no purview over the offering of these services; regulation would need to be addressed at the state level.”

Campos did stress that the vehicles “remain subject to all current applicable laws” and will be cited “if they are found to be in violation of any existing ordinances. Our primary concern is the safety of our citizens, so we are monitoring the issue as it evolves.”

So driving tourists who hail a ride on Lyft for “donations” is fine. But if the driver lines up at a taxi stand, he or she will be cited.

To make progress on the state level, the taxicab and limousine associations have hired a lobbyist to plead their case under the Gold Dome. They’ve found an ally in state Rep. Alan Powell, who chairs the Georgia House of Representatives Public Safety and Homeland Security Committee. The Hartwell Republican’s first experience with Uber took place last year. He and a fellow lawmaker were picked up for dinner in a black sedan that Powell thought was a limo. Only later did he learn it was Uber.

After hearing from the taxi and limo industries, he began investigating and discovered a hole in the state code that, he says, allows practically anyone to apply for a limousine tag and place it on his or her vehicle. That loophole could allow untrained people to sign up for a car-share service.

“You can have all the good experiences with Uber, but what happens in that one damn ‘for instance,’” says Powell. “The wrong driver is behind the wheel and something catastrophic happens?”

Powell says he’s not interested in running anyone out of business. He even sees how UberX and Lyft could benefit his rural district where no taxis operate. But, the lawmaker says, “I can’t shirk my duty to protect public safety.”

Should elected officials decide not to regulate the companies, it’s likely that the Ubers and Lyfts and whatever follows could continue to grow. Worst case scenario, some cab companies could go out of business and be left with medallions that, once costing in the tens of thousands of dollars, are now worthless. The smart companies will evolve, which Hewatt says Checker Cab has been doing for decades.

To hear taxicab professionals describe it, the legislative fight is just the first. A class action lawsuit and other legal actions might come this year. Should lawmakers not step in and start regulating, Hewatt says he’ll have no choice but to start competing with Uber at its own game. He’ll paint his cars black, rip off the decals, and stop jumping through hoops. Drivers will use the Checker Cab app, which this month is supposed to start accepting credit cards, to find fares. He will continue paying for insurance coverage and training drivers.

“We’ll ignore the same rules,” he says. “Either we’re going to get everyone on the same level playing field or we’re going to make the decision we need to compete.”