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Inside Austin’s Accidental Rideshare Revolution

Uber and Lyft are back in Austin, but this time, they’re the upstarts

(Ringer illustration)
(Ringer illustration)

Uber cars were originally supposed to be sophisticated — sleek, black, luxurious. But today a vehicle summoned via a smartphone app doesn’t have to be black, or from Uber, or a car at all. When driver Gary Hansen whisks people around Austin, Texas, his riders are sometimes surprised when he arrives in a towering gray F-150. “I’ll pick up a European passenger, and they’re like, ‘Yes, I get to ride in a pickup truck!’” he says. “Just little things like that make the job really awesome.”

Hansen doesn’t drive for Uber or its longtime rival Lyft. When he picked up ridesharing as a second job in August, the two companies had recently abruptly exited the Austin market in protest of a new rule requiring fingerprint background checks on their drivers. With the biggest competitors in the sector leaving town, Austin could have easily slipped back into the Paleolithic age of public transportation, taxis, and even walking a mile or two. Instead a mix of local innovators and nascent outside startups — including RideAustin and Fasten, the two companies Hansen drives for — ended up making Austin one of the more fascinating testing grounds for what ridesharing could look like absent its most powerful players.

“There was more innovation and certainly more competition,” says Kara Kockelman, a professor of transportation engineering at the University of Texas at Austin. “You didn’t have two established leaders soaking up all the trips, so you have more variety.”

But Austin is too large and tech-centric a market to keep companies as power-hungry as Uber and Lyft out for long. This week, following the passage of a state law that supersedes the local rule that angered the ridesharing giants, the two companies are back on Austin’s streets. In an odd reversal of fortunes, RideAustin and Fasten are the incumbents, and Uber and Lyft are the upstarts trying to reclaim market share. What happens next will help define the scope of Uber and Lyft’s current control over the mobility sector, and whether things like supporting local communities and compensating drivers matter when squared against low prices and technologically-powered efficiency. “It’s going to be a challenge,” says RideAustin CEO Andy Tryba. “This is David vs. Goliath, and obviously we don’t have $12 billion to throw at the equation.”

The trouble in Austin began at a city council meeting. In December 2015, the council passed an ordinance that would require ridesharing companies to introduce fingerprinting in the background checks of their drivers. Austin Mayor Steve Adler said the extra check would increase rider safety; Uber and Lyft argued that it was overly burdensome for drivers and less effective than their internal safety measures.

Eventually the city decided to put the issue up to a public vote, and Uber and Lyft poured nearly $9 million into an aggressive campaign to sway citizens their way. The efforts were coordinated through a political action committee called Ridesharing Works for Austin, which inundated local residents with television ads, mailers, phone calls, and robo-texts telling them to vote for Proposition 1, which would have overturned the city council ordinance. The campaign dwarfed all previous records for spending on Austin local elections.

Uber was pulling from a successful playbook rallying its huge user base to its political causes. When New York Mayor Bill de Blasio threatened to limit the number of Uber vehicles in the city in order to reduce traffic, the company introduced a “de Blasio’s Uber” feature in its app that asserted that wait times would balloon to 25 minutes with the new regulations. The mayor ultimately gave up.

But the Austin campaign backfired. Residents grew annoyed with the constant pestering, which extended to Lyft drivers hounding their passengers to sign anti-fingerprinting petitions in the middle of rides. “I would come home from work and find two to four fliers in my mailbox every day … telling me about how you should vote for Prop 1 because fingerprinting is bad,” says Hansen. “They would call my phone, text my phone, harass me like, ‘Hey, do we have your vote?’ And I’m just like, ‘Leave me alone.’ The way me and many other people in Austin saw the whole situation is just like they were trying to bully the city.” (Uber and Lyft did not respond to requests for comment.)

Proposition 1 was rejected by 56 percent of voters on Saturday, May 7, 2016. By the following Monday, Uber and Lyft had decided to leave Austin. The city that hosts one of the world’s biggest technology conferences was suddenly without two of the most important companies in the reshaping of global mobility. This was a disaster for Austin — or so Uber and Lyft hoped. In 2015 the companies left San Antonio when its city council drafted similar regulations requiring fingerprinting of drivers. Six months later, Uber returned to the city after local officials agreed to relax their new rules. Lyft came back, too. They likely expected a similar outcome in Austin. Instead, a raft of local ridesharing alternatives began to crop up almost immediately. There were the tiny Uber competitors like Get Me, which were willing to comply with Austin’s regulations and now found a huge new base of customers and drivers. There were outside opportunists like Fasten, a Boston-based ridesharing company that launched in Austin weeks after Uber and Lyft’s exit. And there were homegrown solutions, like the Facebook group that aimed to connect drivers and riders using the blockchain, the same decentralized transaction technology that powers bitcoin. In all there were at least eight ridesharing companies operating in Austin by the start of 2017.

The most fascinating and seemingly sustainable solution to emerge from the tumult, though, was RideAustin. Launched by Andy Tryba and Joe Liemandt, a pair of local tech entrepreneurs, RideAustin is an explicit attempt to prove that the Uber-Lyft financial model is not the only way to run a ridesharing business. Lyft and Uber’s long-term goal is to make their salaried employees and shareholders fantastically rich; RideAustin is a nonprofit. Lyft and Uber typically take a 25 percent commission on ride fares; RideAustin takes no money on the fares of its standard rides, earning money to maintain its operations from donations, a $2 booking fee, and a $1 processing fee. Uber and Lyft asserted that the fingerprint check would deter new drivers and unravel the ridesharing ecosystem; RideAustin, which requires fingerprint checks, has nearly 5,000 active drivers and has completed 2 million rides since launching. The nonprofit has also raised about $200,000 for local charities by encouraging riders to round up their fares to the nearest dollar for a good cause. And it has plans to experiment with hiring some drivers as company employees, rather than contract workers, to disprove the notion that such a model would make ridesharing untenable. “We’ve always tried to run our rideshare completely different than the Silicon Valley giants,” says Tryba. “We want to use this as a testbed to be able to experiment with different models of mobility services as a whole.” He noted that officials in other cities have contacted RideAustin about how to adopt the nonprofit’s model in their own communities.

Other companies have adopted similar driver-centric models. Fasten takes a flat 99-cent commission on every ride, no matter the distance. CEO Kirill Evdakov says the company has done millions of rides in Austin in the last year and has enrolled around 10,000 drivers in the city.

Uber may have popularized the idea of summoning a car with a smartphone, but the basic underpinning technology is now easily imitable and the idea of hopping in a car with a stranger is thoroughly normalized. Absent a big brand name, Austin has proven that consumers are happy to adopt the next best thing. “The switching is very easy,” says Michael Ramsey, an automotive analyst at Gartner. “If … I go over to Lyft and they have similar wait times and similar prices [to Uber], to me it’s nothing to use Lyft or RideAustin. It doesn’t make a bit of difference.”

But do you stick with “the next best thing” when the original model returns? That’s the question no one in Austin is quite sure how to answer.

Uber doesn’t suffer losses, but rather setbacks; one of the company’s core values is “always be hustlin’.” So after it didn’t get its way in Austin, it set its sights on the statehouse, lobbying lawmakers to pass a statewide ban on fingerprinting in background checks. The company’s goal aligned with those of the Republican legislators, who said that onerous regulations would stifle the growth of ridesharing in the state. In mid-May the Texas Senate passed a bill that gives the state authority to regulate ridesharing companies, precluding any local laws. The state regulations don’t require fingerprinting in background checks. When Gov. Greg Abbott signed the bill into law Monday, he admonished the city of Austin for trying to “[trample] freedom and free enterprise.”

Whether or not they agree with the state’s politics, the Austin incumbents now must compete based on price and service quality with a pair of companies that are collectively worth about $75 billion. Uber has shown a willingness to slash prices in order to gain market share — documents unearthed by BuzzFeed this week detailed how the company lost millions of dollars in San Francisco in order to establish Uber Pool in the city. Lyft, meanwhile, is already offering deals to Austin riders.

Service will also be challenging to match. Wait times are an even bigger consideration than price for many riders, Ramsey says. RideAustin and Fasten both boast that their typical wait times are less than three minutes, but both companies were knocked offline for at least an hour, and up to five, due to staggering demand during South by Southwest in March, bringing national attention to the struggles that can befall ridesharing startups. Uber, by contrast, aggressively recruits world-class engineers and has a corporate culture built around stamping out inefficiencies. It’s hard to believe the company won’t offer a technically superior product.

An even bigger problem will be luring tourists. No one likes downloading new apps, so convincing an Austin visitor to adopt a local ridesharing service for one or two trips is a tough sell. Even in a world where RideAustin and Fasten retain their loyal Austin customers, they’re doomed to lose the business of out-of-towners. “Austin is a visitor’s city. I don’t have illusions that the majority of visitors are going to install an additional app on their phone,” Evdakov admits. They’re going to continue using what they’ve been using at home.”

Still, there are a few reasons to think that some of the established Austin options can compete. Uber may be a damaged brand in Austin, not only because of its heavy-handed electioneering last year but because of the maelstrom of negative news that’s followed it throughout 2017. The ongoing revelations about the company’s toxic corporate culture have already demonstrably benefited Lyft’s market share and could limit Uber’s appeal to socially conscious Austinites.

Drivers will also play a key role in determining which company comes out on top. By offering drivers a greater share of fares, companies like RideAustin and Fasten may be able to retain a strong base of workers amidst greater competition. Maintaining lots of drivers can help keep wait times down, which induces more trips and helps both organizations keep prices low. Hansen, the pickup truck driver, has no current plans to start driving with Uber or Lyft. “Their pay structure sucks,” he says. “For some of us part-timers, it may not be too big of a deal, but there are drivers out there that do this full-time and depend on it for their income. When a quarter of their earnings are being taken away, that can make a pretty big impact.”

Ultimately, though, Austin’s ridesharing startups believe retaining riders will be much more challenging than keeping drivers. As with the election, it will be the locals who determine the fate of these organizations. The out-of-towners will pick Uber or Lyft, and a certain subset of cost-conscious residents likely will as well. The question for the tiny competitors who have taken on huge market share is whether they’ve convinced enough Austin residents that they’re an essential part of the community, and that it’s worth staking out a transportation future that’s not entirely defined by two California companies.

“Uber’s technology will always be better than ours. They will subsidize rides like crazy,” says Tryba. “We want to be able to keep that money local as opposed to going in the pockets of Silicon Valley billionaires.”