They’re baaaaaaaack. As of Monday morning, Uber and Lyft have resumed service in Austin, nearly 18 months after the Austin City Council set in motion one of the most rancorous public debates in the city’s history. I’ve been enmeshed in it all since the ride-hail duo first arrived in town three years ago: I was part of the working group established by Austin’s previous city council to establish a regulatory infrastructure for transportation network companies (TNCs). Since I’ve previously written about all of it at length — how the now-infamous Proposition 1 ballot came to fruition; the deceptive means deployed by Uber and Lyft opponents to defeat the referendum (despite the claims that Uber and Lyft were the primary deceptive parties here); and all the questions the media failed to ask during the course of the referendum campaign — I decided to start a follow-up series about what’s happened over the past year, and where Austin TNCs are likely to go from here.
I’ll start by noting this is a story with no outright winners. Uber and Lyft got their way in the end, but at a huge cost (both metaphorical and literal) — and there’s no guarantee either company will be able to overcome the substantial amount of ill will generated among Austinites by the Prop 1 campaign and its aftermath. (Hiring dozens of lobbyists to argue their case to the state legislature — resulting in its preemption of local laws in Austin as well as the rest of Texas — hasn’t helped matters, either.) Over a dozen startup TNCs jumped into the fray after Uber and Lyft exited the market, but only a handful were still standing a few months later, and the two that ultimately emerged as the market leaders — RideAustin and Fasten — have had a decidedly bumpy run, often at the worst possible times, and now face uncertain futures at best. Last year the city council had David-and-Goliath-style bragging rights that they brought two multibillion-dollar Silicon Valley foes to their knees, but many of their rationales for the driver fingerprinting mandate they initiated were later proven to be misleading or false, and their Prop 1 victory celebration was more than a bit tone-deaf considering they had just put over 10,000 drivers out of work — at a juncture when it was still unclear whether, or when, they would be able to start driving for a new TNC venture. Moreover, the Council’s actions were likely the specific catalyst for the state legislature’s vote to preempt all local TNC regulations throughout Texas — an action that will cost the city (actually, all Texas cities) literal millions of dollars from lost tax revenue, along with all the extraordinarily valuable trove of data Uber and Lyft were required to share with the city under its original 2014 TNC ordinance. (That part’s a bit of a personal sore spot, given that I wrote many of the data-reporting requirements for Austin’s first TNC ordinance — most of which were retained for its revised one a year later.)
I’ve also made a point over the past year of gaining perspectives on the broader topic from a variety of angles, including that of a TNC driver: I ended up driving for Fasten and RideAustin, and also joined the Facebook groups established for them. I already knew Lyft drivers in particular had formed a surprisingly close community — both online and off — and was curious if something similar would develop among drivers for the two startups, many of whom had previously driven for Uber and/or Lyft. I was further interested in observing the effects of what (on paper at least) appeared to be two considerably more equitable means of paying drivers versus the flat percentage-based commissions collected by Uber and Lyft. Their actual earnings often proved to be less than expected, however, particularly given that both apps experienced repeated crashes (on both the driver and passenger ends) during some of the busiest periods of the year — in other words, the times when drivers would have otherwise earned considerably more than usual from Fasten’s and RideAustin’s variations on “surge pricing.” (More on both of these topics to come.)
I expressed my chagrin over a year ago about the unambiguously anti-Uber/Lyft bias on the part of Austin’s media outlets — and note that I generally think “liberal media bias” is as fictitious a concept as “voter fraud” — as well as their failure to cover numerous important aspects of the broader story, as noted above. As such, I think it’s apropos to culminate this new series by noting an element of the twosome’s return to Austin that the media has thus far missed entirely: instead of charging heavily subsidized, artificially inexpensive fares that would’ve likely driven all of Austin’s startup TNCs out of business within a matter of weeks, both companies did the exact opposite and raised their fares. Here’s a comparison of their new fares versus RideAustin’s and Fasten’s:
Uber & Lyft: $1.00/mi & 20 cents/min (w/$4.00 min. & $1.65 service fee)
RideAustin: 99 cents/mi & 25 cents/min (w/$4.oo min. & $3.00 service fee)
Fasten: $1.10/mi & 20 cents/min (w/$6.00 min. & $2.70 service fee)
The price differentials between the foursome are only marginally different— in stark contrast to what many observers predicted, myself included. (As an example, RideAustin sent out an email to its drivers on Monday stating, “We know that there will be aggressive programs by the giants to buy back the market.”) Equally surprising was the sincere-sounding open apology to Austin and its denizens posted on Uber’s blog a few days ago. Humility and fair play against its competitors aren’t exactly typical Uber traits, to put it mildly, but it’s encouraging to see them attempting it. (Even if it’s probably because they’re otherwise in a world of hurt right now.)
All that said, the picture is considerably less rosy and more convoluted as far as Lyft and Uber wooing back their former drivers goes. While Austin’s startup TNCs weren’t much different from Uber and Lyft from a passenger’s perspective — their rates were/are similar, and RideAustin’s app in particular bears a striking similarity to Uber’s — for drivers it was a whole other story. I remain surprised by Uber’s and Lyft’s continual failure to recognize the reality that their treatment of drivers is easily their biggest Achilles heel, and it’s an obvious enough flaw in their business model that Austin’s upstarts immediately pounced on it when they launched. In addition to offering sizable bonuses for bringing in drivers and passengers alike into the fold, all of the newbie TNCs deducted considerably lower commissions from each fare versus Uber and Lyft (both of which take a flat 20% to 30% of each fare, plus a service fee that varies by city). Fasten’s initial lure consisted of drivers paying the company only 99 cents for each fare, regardless of distance.* RideAustin took several months longer than its competitors to fully ramp up, but once it did it dangled a seemingly unbeatable proposition: taking full advantage of its nonprofit status, it offered drivers 100% of each fare.**
If that all sounds a bit too good to be true: well, it is, hence the asterisks:
*Fasten charged drivers two “extras” per trip until recently: a 2.9% credit card processing fee (plus a flat 30-cent charge on top of it) and 50 cents per week for direct deposit of driver earnings. Its bigger problem, however, was its continued refusal (again, until recently) to set a minimum fare. This is problematic in Austin in particular because UT students comprise a substantial portion of the TNC customer base, and unknown thousands of them live either near campus or off of E. Riverside — both of which are a short distance from downtown, where students still go to party nearly every weekend night (though now thankfully making frequent use of ride-hail services for transport to and fro instead of driving themselves). Consequently, Fasten’s drivers got stuck time and time again with total fares in the $4 range, and after deducting Fasten’s 99-cent take and roughly 50 cents for credit card processing, a driver’s net income per ride ended up being cut 40% to approximately $2.50.
**RideAustin only allowed its standard-car drivers — roughly the equivalent of UberX — to keep 100% of the fare. Much like Uber, however, RideAustin has three higher-end service options — SUV, Premium and Luxury — and drivers for all three were charged a 20% commission.
An even bigger problem for TNC drivers, however, was RideAustin’s salvo once it was fully up and running: in September it cut its standard fare from $1.50/mile to 99 cents/mile. From a driver’s perspective, this was problematic in several ways. First, none of RideAustin’s for-profit competitors could afford to charge prices that low, particularly since most of them had a mere fraction of RideAustin’s $7 million in funding. While many of them were already finding it difficult to keep pace with Fasten, which by then had emerged as the market leader, RideAustin’s rate cut was likely the fatal blow for many, if not most, of the fledgling startups. (Even as someone who’s observed the industry fairly closely, I remain unsure what’s happened to ventures like GetMe, InstaRyde, ScoopMe and Tride.)
The irony of RideAustin, a nonprofit, engaging in the same style of predatory pricing methods commonly associated with Uber wasn’t lost on TNC drivers. Quite a few noted that RideAustin had initiated the same “race to the bottom” for which Uber’s received continuous driver criticism: when rates are cut, driver incomes invariably go down, even if the TNCs soften the initial blow with ameliorative techniques like short-term bonuses (and RideAustin’s wholesale elimination of its commission for standard rides). As one driver noted in a December article: “These other TNC apps said they wouldn’t do it the Uber way, and they’re slowly coming around to see how you need to do things the Uber way.” In any event, RideAustin’s gambit was successful, and it quickly joined Fasten as one of the two market leaders. (Not uncoincidentally, Fasten has raised the largest amount of operating capital of any newbie TNC: $15 million total, including a $10 million Series A round in November.) The question of which one is, or at least was, on top of the heap remains a matter of debate: both Fasten’s and RideAustin’s CEOs have claimed the mantle.
In any event, all bets are now off: we may not know for several months how Uber’s and Lyft’s return to Austin will play out. Summer is the city’s slow season — thanks to both its nightmarish temperatures and the absence of much of its sizable college-student population, now home until the fall semester — plus it’s too soon to tell just how badly the billion-dollar duo damaged its reputation among passengers and drivers alike. But again: the past year has not only demonstrated how effectively Austinites can rally the troops in the face of crisis, but also its core entrepreneurial spirit. How many other cities would have produced a dozen TNC upstarts within a space of two months, in similar circumstances?
The Great Austin Ride-Hail Battles of 2015–2017: A New Beginning was originally published in Austin Startups on Medium, where people are continuing the conversation by highlighting and responding to this story.
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