BILL ANALYSIS                                                                                                                                                                                                    



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          Date of Hearing:  May 5, 2015


                ASSEMBLY COMMITTEE ON PRIVACY AND CONSUMER PROTECTION


                                  Mike Gatto, Chair


          AB 1360  
          (Ting) - As Amended April 29, 2015


          SUBJECT:  Charter-party carriers of passengers:  individual fare  
          exemption


          SUMMARY:   Authorizes transportation network companies (TNCs) to  
          charge split fares between multiple occupants for up to seven  
          passengers, provided that the individual fare for each passenger  
          is less than the fare that would be charged for the same ride if  
          a single passenger traveled alone.  Specifically, this bill:  



          1)Exempts a ridesharing program operated by a TNC from the  
            current law prohibition fare-splitting, which applies to  
            charter party carriers regulated by the California Public  
            Utilities Commission (CPUC). 
          2)Specifies that the exemption applies provided that:


          a)The vehicle seats no more than seven persons, including the  
            driver, 


          b)The driver is a participating driver, as defined, and 










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             c)   The individual fare for each passenger is less than the  
               fare that would be charged for the same ride to a single  
               passenger traveling alone. 
          3)Specifies that TNCs may not use vehicles to provide transit  
            service or to carry passengers over a fixed route, provide  
            school pupil transportation services, or provide public  
            paratransit services.
          EXISTING LAW:  


          1)Authorizes the CPUC to regulate various transportation  
            services, including charter-party carriers (CPCs) of  
            passengers, defined as persons engaged in the transportation  
            of others by motor vehicle for compensation on a prearranged  
            basis over any public highway, but not including taxicabs  
            regulated by local agencies.  (Public Utilities (PU) Code  
            Sections 5360 and 5360.5)


          2)Establishes the TNC as a new category of CPCs subject to its  
            jurisdiction and defines a TNC as an organization operating in  
            California that provides prearranged transportation services  
            for compensation using an online-enabled application or  
            platform to connect passengers with drivers using their  
            personal vehicles  (PU 5431 and CPUC Decision 13-09-045)


          3)Generally requires charges for transportation to be offered or  
            afforded by CPCs to be computed and assessed on a vehicle  
            mileage or time of use basis, or a combination thereof.   
            Charges may vary in accordance with the passenger capacity of  
            the vehicle or the size of the group to be transported.  (PU  
            5401) 

          4)Directs the CPUC to issue permits or certificates to CPCs,  
            investigate complaints against carriers, and cancel, revoke,  
            or suspend permits and certificates for specific violations.   
            (PU 5387)









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          5)Defines CPCs as every person engaged in the transportation of  
            persons by motor vehicle for compensation, whether in common  
            or contract carriage, over any public highway in the state.   
            (PU 5360)

          6)Defines a "transportation network company" to mean an  
            organization, including, but not limited to, a corporation,  
            limited liability company, partnership, sole proprietor, or  
            any entity operating in California that provides prearranged  
            transportation services for compensation using an app or  
            platform to connect passengers with drivers using a personal  
            vehicle.  (PU 5431)
          7)Prohibits CPCs from charging individual fares (i.e.,  
            fare-splitting) when more than one passenger is being  
            transported at one time. (PU 5401)


          8)Makes two exceptions to the prohibition on fare-splitting: 1)  
            Schoolbus contractors who are paid by parents of children  
            attending public, private, or parochial schools; and 2)  
            Round-trip sightseeing tour services conducted with an  
            authorized certificate or permit.  (PU 5401)


          9)Authorizes cities and counties to regulate taxicabs with  
            seating capacity for up to eight passengers that are operating  
            in their jurisdictions, including setting maximum fare rates  
            and permitting fare-splitting.  (Government Code Section  
            53075.5) 


          FISCAL EFFECT:  None.  This bill has been keyed non-fiscal by  
          the Legislative Counsel.


          COMMENTS:  











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           1)Purpose of this bill  .  This bill is intended to reduce the  
            fares consumers pay to TNCs by permitting TNCs to offer  
            individual fares, i.e., fare-splitting, to TNC carpool  
            customers.  This bill is sponsored by the Internet Association  
            and TechNet.



           2)Author's statement.   "Lyft has found that every day, 90% of  
            Lyft rides in San Francisco have someone else taking the same  
            trip within five minutes.  An MIT study has also found that  
            95% of cab rides could be shared.  By sharing rides, we  
            contribute to a greener economy by taking more cars off the  
            road and decreasing emissions." 


            "The primary cause of traffic congestion originates from  
            nearly 80% of commuters traveling to work alone.  Traffic  
            results in 5.5 billion hours of productivity at a cost of $818  
            to the average commuter, with increased congestion generating  
            nearly 4 billion gallons of excess fuel wasted and 56 billion  
            pounds of greenhouse gasses.  This contributes to California's  
            transportation sector functioning as the greatest source of  
            pollution, accounting for 40% of the state's greenhouse gas  
            emissions.  

            "TNC's such as Lyft, Uber, and Sidecar have been extremely  
            innovative in creating models that empower consumers and allow  
            more ease and access to transportation alternatives.  They  
            have recently started services that allow riders with similar  
            pick up locations and destinations to share a driver and  
            carpool for a decreased fare.  Shared rides such as carpooling  
            decrease traffic and congestion, and ultimately cut  
            pollution." 


           3)What are TNCs  ? A new model of transportation service has  
            sprung up in cities across the United States, including  
            California.  Patrons can prearrange transportation services  








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            utilizing an app on their smart phone device.  In doing so,  
            small start-up companies such as Lyft, SideCar, and Uber,  
            among others, have begun competing with traditional CPCs and  
            taxicab services in select cities in California.  TNCs  
            generally send drivers in either luxury vehicles or personal  
            vehicles to pick up passengers whose credit cards are  
            automatically charged flat fees or fares calculated by GPS.   
            Fares for are calculated based on distance or by the amount a  
            consumer wishes to pay. 


           4)How does the state regulate TNCs  ?  Prior to 2013, California  
            law recognized and regulated three modes of passenger  
            transportation for compensation: 1) taxi services, regulated  
            by cities and/or counties; 2) CPCs, i.e., limousines,  
            regulated by the CPUC; and 3) passenger stage companies, i.e.,  
            charter busses and shuttles, which are also regulated by the  
            CPUC.  Before 2013, TNCs operated without regulatory oversight  
            in California. 

          However, in December 2012 the CPUC initiated a rulemaking to  
            determine whether and how services arranged through apps might  
            affect public safety.  The CPUC sought comment on issues  
            including: how the CPUC's existing jurisdiction should be  
            applied to businesses such as Uber, SideCar, and Lyft; the  
            consumer protection and safety implications of these new  
            methods for arranging transportation services; whether and how  
            the new transportation business models differ from  
            longstanding forms of ridesharing; and the new transportation  
            business models' potential effect on insurance and  
            transportation access.

            In a September 2013 Decision, the CPUC established a new  
            transportation business model called TNCs and required those  
            companies to:


                     Register with the CPUC;
                     Meet safety requirements, including insurance,  








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                 background checks, vehicle inspections;
                     Meet CPUC regulatory requirements;
                     Only operate at airports with permission granted by  
                 the airport;
                     Submit a report on addressing services to the  
                 disabled community; and
                     Submit an annual report to the CPUC.



            TNCs currently permitted by the CPUC are Lyft, Uber-X (aka  
            Rasier), Wingz (formerly   Tickengo), and Summon (formerly  
            InstantCab).  The 2013 CPUC Decision empowers the CPUC to  
            exercise its safety and enforcement authority against TNCs  
            that violate any regulatory or safety requirements.


           1)Vehicle requirements for TNCs.   The CPUC only allows TNCs to  
            use street legal coupes, sedans, or light-duty vehicles,  
            including vans, minivans, SUVs, pickup trucks, as well as  
            hatchbacks and convertibles.  TNC vehicles must not be  
            significantly modified from factory specifications.  TNCs are  
            allowed to operate vehicles with a seating capacity of up to  
            seven passengers, including the driver, if they have a $1  
            million commercial liability insurance on file.  They are  
            allowed to operate a vehicle with a seating capacity of up to  
            ten passengers, including the driver, if they carry a $1.5  
            million commercial liability insurance on file.  TNCs are not  
            allowed to operate vehicles with a seating capacity of more  
            than 10 passengers, including the driver, which is legally  
            defined as a bus. 
           2)CPUC letter to TNCs regarding individual fares for carpools:    
            Current law prohibits CPCs from charging individual fares to  
            passengers with two exceptions: 1) school buses compensated by  
            parents of children attending public, private or parochial  
            schools, and 2) certified operators of roundtrip sightseeing  
            tour services.  










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          In September 2014, the CPUC sent letters to the three major  
            TNCs, Uber, Lyft, and Sidecar, regarding their intent to add  
            carpooling service to their transportation service.  The CPUC  
            stated that this model is in violation of existing law that  
            prohibits CPCs from calculating charges on an individual-fare  
            basis.  The CPUC found that CPCs "cannot change an individual  
            fare when carrying multiple persons in a vehicle, and  
            therefore, a person chartering a [CPC] vehicle must have  
            exclusive use of the vehicle."

          This bill would permit a rideshare program operated by a TNC to  
            charge individual fares, provided that the individual fare for  
            each passenger is less than the fare that would be charged for  
            the same ride to a single passenger traveling alone.  
           3)Consumers benefit from fare-splitting  .  This bill would give  
            consumers more ridesharing options and allow consumers to save  
            money by choosing to carpool, and therefore pay a reduced  
            fare, when they use a TNC to travel.  Some consumers may  
            prefer to carpool and save money rather than travel as a  
            single passenger in a TNC vehicle.  As ridesharing becomes  
            more convenient and inexpensive, more consumers will likely  
            turn to ridesharing instead of purchasing and owning vehicles.  
             Falling demand for new and used vehicles would then place  
            downward pressure on vehicle prices - another consumer  
            benefit. 



          TNC carpooling also benefits consumers, because carpooling  
            theoretically reduces the overall the number of vehicles on  
            the road, which in turn reduces traffic, overall travel times,  
            and air pollution.  However, a recent study conducted by the  
            University of California, Berkeley, found that the actual  
            impact of TNCs on overall vehicle miles traveled is ambiguous.  
             According to the study, of the consumers who participated in  
            the survey, 92% said they still would have made the trip even  
            if TNC services were not available, and of that number "39%  
            said they would have used a taxi, while 33% said bus or rail,  








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            and 6% drive."  ("App-Based, On-Demand Ride Services:  
            Comparing Taxi and Ridesourcing Trips and User Characteristics  
            in San Francisco," UC Berkeley, UC Transportation Center,  
            August 2014.)  If consumers choose a TNC over bus or rail in  
            significant numbers, and if TNC vehicles circulate on city  
            streets while waiting for customers, then consumers may not  
            ultimately see an overall reduction in traffic, travel times,  
            or air pollution under this bill. 
           4)The effect of "surge pricing" on TNC fares  .  While this bill  
            would reduce TNC fares for consumers who choose to carpool  
            when they use TNC services, there is a critical difference  
            between fare-splitting in the taxicab service industry and  
            fare-splitting in the TNC service industry.  Unlike TNCs,  
            taxicab companies are regulated by cities and counties, which  
            impose requirements such as workers' compensation insurance,  
            training, vehicle inspection, and vehicle safety rules, such  
            as requiring security cameras on taxicabs for the protection  
            of consumers.  Cities and counties also regulate taxicab  
            fares.  In San Francisco, for example, the City and County of  
            San Francisco have established maximum taxicab fares. 



          By contrast, TNCs are not regulated by local governments, and  
            are therefore not subject to the local maximum fare  
            restrictions placed on taxis.  The CPUC does not set maximum  
            fares on CPCs, and only requires passenger stage companies to  
            submit their tariffs to the CPUC.  As a result, some TNCs  
            charge consumers significantly higher fares at peak times and  
            locations, known as "surge pricing."  Surge pricing may  
            quickly erase any savings a consumer would achieve by  
            carpooling with a TNC, as compared to a taxicab fare. 

          According to a San Francisco Examiner news report, "Uber sent a  
            mass email warning riders that New Year's Eve would see a  
            spike in passenger demand, potentially skyrocketing prices to  
            over $100 for a ride after midnight. " ("Uber drivers say  
            rideshare surge pricing backfired on New year's Eve," The  
            Examiner, January 2, 2015.)  








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          This bill allows TNCs to use fare-splitting so that consumers  
            who carpool with a TNC pay a lower fare than the fare they  
            would pay if they rode alone in a TNC car.  However, neither  
            the Legislature nor local governments have imposed any  
            restrictions on TNCs that would limit the overall fares TNCs  
            charge consumers.  
           5)Recent amendments address labor union and insurance industry  
            concerns  .  The author recently accepted amendments to address  
            insurance industry concerns that the bill might inadvertently  
            change TNC insurance requirements established in current law.   
            As amended, the bill now clarifies that the bill does not  
            change TNC insurance requirements. 



          Amendments accepted in the prior committee addressed concerns  
            expressed by labor organizations that the bill could  
            ultimately reduce ridership on public transit.  The amended  
            version of the bill now clarifies that TNCs may not use  
            vehicles to provide transit service or to carry passengers  
            over a fixed route, to provide school pupil transportation  
            services, or to provide public paratransit services.  
           6)Arguments in support.   Uber Technologies, Inc. states in  
            support that "AB 1360 clarifies that TNC's may offer less  
            expensive ridesharing services to customers with similar  
            pick-up locations and destinations?Uber's carpooling service  
            "UberPOOL" which is currently available in San Francisco and  
            Los Angeles allows passengers?to share a ride and save money.   
            Because Uber does not involve any in-person payment, cash or  
            otherwise, passengers are billed through Uber's online  
            platform based on their individual share of the ride.  This  
            leads to cheaper rides and increased carpooling while  
            retaining the convenience and flexibility of ridesharing."



          According to the Internet Association, "this measure is squarely  
            in line with well-established California public policy that  








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            broadly encourages carpooling to reduce traffic congestion and  
            air pollution.  AB 1360 also furthers California's commitment  
            to the environment on other fronts, such as by enhancing our  
            State's greenhouse gas reduction efforts.  Consumers also  
            benefit from greater transportation options.  Multiple  
            passenger ride sharing services provide greater affordability  
            and flexibility for consumers."

          The Clean Coalition states in support of this bill that "new  
            technologies offer enormous promise to meet our energy needs  
            while addressing global and regional environmental problems  
            and creating new economic opportunities across California -  
            all at costs that continue to drop as these technologies are  
            brought to scale."
           7)Arguments in opposition  . According to the San Francisco Taxi  
            Workers Alliance, "AB 1360 (Ting) would allow transportation  
            network companies (TNCs) to charge passengers on an individual  
            (split-fare) basis, while other charter-party carriers are  
            prohibited from doing the same.  This special favored  
            treatment is founded on the false premise that these  
            operations - which are currently conducted in open defiance of  
            the law - bring environmental benefits.  Quite the opposite is  
            true.  A year ago Uber stated that it has some 16,000 vehicles  
            operating in San Francisco alone?According to GPS developer  
            TomTom, in the two years that TNCs have been allowed to  
            operate, San Francisco has become the second most congested  
            city in the U.S. (after Los Angeles)."  



          "AB 1360 would promote an unjustified expansion of TNC services  
            that will draw even more passengers away from public  
            transportation?The same holds true for their effects on the  
            taxi industry and taxi drivers. San Francisco has the greenest  
            taxi fleet in the country.  Nearly all SF cabs must be hybrids  
            or other low-emissions vehicles. In contrast, CPUC rules allow  
            all sorts of vehicles to perform TNC services, including  
            non-hybrid vans, minivans, SUVs and pick up trucks.









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          "[The fare-split provision] is meaningless in light of the  
            practice of 'surge pricing,' where the fare at peak times may  
            be as much as eight times the normal charge. Cities strictly  
            regulate maximum taxi charges to keep them non-discriminatory  
            and affordable, but for TNCs the sky's the limit, with no  
            oversight at all."



           8)Technical amendment  .  Committee staff recommend the following  
            technical amendment to the bill to clean up a drafting error  
            in the bill:



          On Page 3, line 10, after "Section 5434" add:  or the  
          requirements set forth in Section 5435





           9)Related legislation  .  AB 24 (Nazarian) would require drivers  
            hired or initially retained by either a charter-party carrier  
            of passengers or a TNC to be subject to background checks and  
            mandatory drug and alcohol testing prior to employment or  
            retention.  The bill would also require a TNC to register any  
            vehicle used in the transportation of passengers for  
            compensation with the commission and display the identifying  
            decal issued by the commission on the vehicle.  AB 24 is  
            currently pending in the Assembly Appropriations Committee.
            AB 828 (Low) would exempt a motor vehicle operated in  
            connection with a TNC, as defined in Section 5431 of the  
            Public Utilities Code, from the definition "commercial  
            vehicle."  AB 828 is currently pending in on the Assembly  
            Floor.


            AB 886 (Chau) would establish new privacy protections for  








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            passengers of TNCs and taxicabs.  AB 886 failed passage in the  
            Assembly Utilities and Commerce Committee on a 4-6 vote.


            AB 1422 (Cooper) would authorize a TNC to participate in the  
            Department of Motor Vehicles pull-notice system to regularly  
            check the driving records of a participating driver regardless  
            of whether the participating driver is an employee or an  
            independent contractor of the TNC.  AB 1422  is currently  
            pending in the Assembly Appropriations Committee.


           10)Prior legislation. 
             AB 612 (Nazarian) of 2014 would have required charter party  
            carriers to participate in the Department of Motor Vehicles  
            Employer Pull Notice system and to submit all drivers to a  
            Department of Justice criminal background check . AB 612 was  
            held in the Assembly Transportation Committee.


            AB 2293 (Bonilla), Chapter 389, Statutes of 2014, established  
            guidelines for insurance coverage for TNCs to ensure personal  
            and financial safety of consumers.  


           11)Double referral.   This bill was double-referred to the  
            Assembly Utilities and Commerce Committee, where it was heard  
            on April 20, 2015, and passed on a 14-0 vote.
          REGISTERED SUPPORT / OPPOSITION:




          Support


          Internet Association (Co-sponsor)










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          TechNet (Co-sponsor)


          Bay Area Council


          City of Los Angeles


          Clean Coalition


          Coalition for Clean Air


          Environment California


          Environmental Defense Fund


          Los Angeles Area Chamber of Commerce


          Lyft, Inc. 


          Natural Resources Defense Council 


          Orange County Business Council
                                                                

          Planning and Conservation League


          San Francisco African American Chamber of Commerce










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          Sidecar


          SPUR


          TransForm


          Uber Technologies, Inc. 


          Valley Industry & Commerce Association




          Opposition


          San Francisco Taxi Workers Alliance


          Greater Livery Association




          Analysis Prepared by:Jennie Bretschneider / P. & C.P. / (916)  
          319-2200

















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