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Austin, Texas, has spent the last 10 months engaged in a big experiment in urban transportation. Uber Technologies Inc. and Lyft Inc. suddenly stopped operating there last May in protest of a law requiring drivers to be fingerprinted. Since then, a wave of startups emerged to fill the gap left by the U.S. ride-hailing giants. Success would be proof that alternative visions of ride-sharing can flourish in a major American city.
But the model will face its biggest test yet on Friday, when crowds in the several hundreds of thousands will start descending upon Austin for the annual South by Southwest festival, a nine-day event that could be accurately described as a tech conference, a music and film festival, and a huge mess. In tech circles, SXSW is renowned for propelling Twitter Inc. and other apps to prominence, at least temporarily. This year’s speakers include Mark Cuban, Gawker’s Nick Denton and Reddit Inc. co-founder Alexis Ohanian.
There are currently seven ride-hailing apps operating in Austin, all of which were in compliance with fingerprinting rules as of Feb. 15, the city said. None of their names will sound familiar to most SXSW attendees. Two apps are leading the pack: RideAustin and Fasten. Both claim to be the city’s leading ride-hailing provider. Michael Ferguson, a professional realtor and recreational beer consumer, prefers RideAustin to get him home after a night of drinking. “RideAustin is pretty normal, man; the app works pretty good, and they have a lot of drivers,” Ferguson said. “I don’t think that for the customer, getting around this town is an issue anymore.”
The data suggest otherwise. Both Uber and Lyft have said they had about 10,000 drivers in Austin at their peak. According to the city’s transportation department, 7,077 people had completed the required background checks as of Feb. 1. Licensed ride-hailing providers completed about 108,000 trips a week in January, the last month for which city data is available. Many full-time drivers appear to have stuck around because volume is only down about 13 percent since Uber and Lyft left, according to estimates from RideAustin.
But SXSW will put a significant strain on the capacity of these young startups. Fasten sees it as an opportunity to capture the national spotlight and reach venture capitalists. It plunked down cash to be an official SXSW sponsor. The company, which is based in Boston, raised $10 million in funding last year, and Kirill Evdakov, its chief executive officer, said he’s seeking an additional $20 million to expand in more cities. “Not many people know about what we do,” Evdakov said.
RideAustin has slightly less riding on SXSW because it’s a local nonprofit with no plans to expand geographically. Still, it’s been working feverishly to mobilize drivers for the nine-day festival. The organization has placed Craigslist ads in nearby San Antonio and Houston, encouraging Uber drivers to come to town temporarily. Joe Deshotel, director of community engagement at RideAustin, boasted that drivers from those cities periodically travel to Austin for days-long work trips—a national trend that has raised social and economic concerns elsewhere. “They’re not making enough in Houston, so they’re coming here,” Deshotel said. “I talked to some other drivers from San Antonio who stay at friends’ houses, or they just drive back.”
While Uber and Lyft will skip SXSW this year, they’re not giving up on Austin. They continue to fight fingerprint proposals nationwide, saying the programs would keep many people from driving for their platforms. They also argue that prints aren’t an effective way to conduct background checks. The companies are working with Texas state lawmakers on a proposal that would override city ride-hailing regulations. In 2016, Uber had 21 lobbyists registered in the state; Lyft had 13. Lyft is planning a lobbying day at the state capitol on March 16.
There are four different bills now pending, all vying to take effect in September. They have widespread support and, for now anyway, no organized opposition. Having consistent regulations statewide could encourage Uber and Lyft to move into smaller cities, said Chris Paddie, a Texas House Republican who’s the primary sponsor of one of the bills. He represents Marshall, a town of about 25,000 that currently has neither ride-hailing nor taxis. Hearings are expected to begin this month.
Uber and Lyft said they’ll come back to Austin if the city’s rules are defeated. The return of two multi-billion dollar companies from San Francisco would inevitably change the business landscape. Cracks are already starting to form for the new startups. RideAustin is funded through donations from the local business community, and it said the flow of money has slowed substantially as state legislation looms large.
Fasten and RideAustin both put on a brave face. They say they’ve gained enough traction to fend off larger competitors that have poisoned their relationships with Austinites. The newer apps claim they’ve improved life for drivers by letting them keep a larger proportion of the fares; they’re sharing more data with the city; and, of course, they’re giving city voters what they asked for by fingerprinting drivers. In their view, the reduction in transportation activity over the last year was only minor growing pains.
Trevor Theunissen, a local spokesman for Uber, paints a different picture. He pointed to a recent report from a local television station that highlighted a thriving illegal cab industry in downtown Austin, where drivers trawl the bar district offering rides for cash. He also argued that the city’s ride-hailing regulations are toothless because they rely on groups to self-report data with unclear consequences for disobeying the rules. “The city’s not doing much to ensure compliance,” Theunissen said.
Steve Adler, Austin’s mayor, didn’t dispute this. But he said Austin’s homegrown ride-hailing industry has proven successful enough that the state should leave the city to its own devices. To him, the bills are the latest volley in a long-running game in which the state tries to impose its will on its weirdest city. “Austin, the rest of the state says, is weird,” Adler mused. “I hear that, and we’re proud of that.”
©2017 Bloomberg L.P.