Update on TNC Horse-Hiring

Update on last week's post: the California Public Utilities Commission may (or may not) crack down on renting or leasing “ridesharing” vehicles by Uber and other TNCs.

On Thursday, August 13^th, the PUC received a string of complaints from taxi drivers during the public comment portion of its meeting in San Francisco. Concerns about Uber’s Xchange Leasing, and similar horse-hiring programs, were at the forefront of the list. First to speak was taxi driver Kim Waldron, who pointed out:

I would like to remind you that the PUC created the TNC program. It was based on using a family car, not a leased car, by the day, week or any other period, which seems to be the common practice now. They also cannot be loaned or rented to a third party. By not acting on any of these practices, the PUC is breaking its own rules... (PUC video).

Although the Commissioners reportedly responded “with the usual vacant stares,” a PUC spokesperson did tell reporters that the PUC would be investigating the new horse-hiring practices:

"A TNC (Transportation Network Company) permit does not authorize the use of vehicles other than those privately owned by the driver," said commission spokeswoman Constance Gordon, who confirmed that the commission is probing Uber's leasing program, as well as a number of smaller companies that offer rental and leasing options to drivers. (Heather Somerville)

Nevertheless, Gordon implied that the problem may not lie with Uber or the other companies that rent or lease to TNC drivers, but with the regulations which the PUC had adopted in order to create TNCs as a new category distinct from taxicabs. Foremost among these was the “personal vehicles” provision; since taxicabs in California are, by law, regulated at the city rather than the state level, this arbitrary distinction was necessary for the PUC to be able to extend regulatory authority over for-profit “ridesharing.”

Gordon told the LA Times:

"It's a brand-new thing. We said when we first set regulations that we'd probably be changing them," she said. "There are things we didn't think of when we first regulated them, so we're adjusting." (Andrea Chang)

But, as I detailed here last week, renting or leasing to cabdrivers is not at all a new thing, but a very old thing. So old, in fact, that the technical term for it is “horse-hiring.”

The fact of the matter is that, when the PUC created the TNC as a new legal category, it was not so much recognizing a “new” form of car service, as creating a new, state-regulated taxi industry which competes directly with the already existing city-regulated taxi industry. That this state-regulated taxi industry should then fall into the same organizational and economic patterns as the traditional city-regulated cab industry should not really be a surprise.

The Spread of TNC Horse-Hiring

A TNC horse-hiring advertisement. Source: Craigslist.

For legal purposes, “Transportation Network Companies” (or TNCs) such as Uber and Lyft are defined as services that “facilitate rides between passengers and private drivers using their own personal vehicles.” Increasingly, however, drivers for these and similar “ridesharing” platforms will be driving cars that they have leased or rented.

Last week, Uber announced its Xchange Leasing program, which is designed to expand Uber’s driver pool to include those who do not have—or do not want to ply for hire with—their own vehicles. With this leasing program, and a rental program being piloted in select cities, Uber is taking a step into a growing phenomenon in the “ridesharing” industry. Numerous companies, large and small, are renting or leasing cars to drivers to operate on the Lyft or Uber platform.

This is just another example of the ways in which “ridesharing” services are recreating aspects of the taxicab industry. In this case, what is being recreated is a very old practice—to wit, horse-hiring.

Horse-hiring in a London cabyard. From Vance Thompson, "The London Cabby," 1904. Courtesy of Taxi-Library.

“Horse-hiring,” as the name suggests, goes back to the horse-drawn era. A would-be cabdriver, who lacked their own horse and cab, could rent these—by the shift, day, week, or month—from a hack company or from a neighborhood livery stable. The driver would pay the owner a set fee for the vehicle, and keep the rest of however much money they were able to make during the period of the lease. As a Parisian cabdriver explained it in 1903:

The day begins at six o'clock. 'Tis then I get my first horse and pay my day––eighteen francs, at present; sometimes the rate is higher, sometimes lower; if it rains the patron puts up the price; if there is a fête day he puts it up––for the day of the Grand Prix we paid thirty francs this year.... And we do what we can. Here a bourgeois and there a bourgeois and so the day goes. (from Vance Thompson, “The Paris Cabman,” 1903)

Horse-hiring was eclipsed in the Twentieth Century by the spread of the employee-cabdriver model, in which companies tracked cab income using the newfangled taximeter, and split the earnings with drivers (this is one of the reasons why Uber, which takes 20% to 25% of each fare, is currently faced with class action lawsuits for treating its “independent contractor” drivers as employees).

But horse-hiring never completely went away--though it now involved the rental of cars, not of horses. During the Depression it was often the mode of choice for smaller fleets:

Horsing - horse-hiring - A small fleet owner, with 18 or 20 cabs, hires a driver to take car out, buy his own gas and oil, and pay the company $5.00 a day for the cab. What he makes above this is his own. This practice is called “horsing.” (from Marion Charles Hatch, "Stories, Poems, Jargon of Hack Drivers," 1938).

The short-term commitment made possible through horse-hiring created a flexible, intermediate model between the independent driver, who owned and operated a single cab, and the employee driver who worked for the big fleets. With the collapse of the employee-driver model in the 1970s and 1980s, many large fleets turned to horse-hiring; this led to the independent contractor status shared today by cabdrivers and “ridesharing” drivers alike.

It was only a matter of time before horse-hiring emerged in the newest and fastest-growing branch of the cab industry: ”ridesharing.”

TNC horse-hirers come in all sizes, big and small. Last summer, I watched the spread of TNC horse-hiring advertisements in Craigslist’s Jobs-Transport section. First appearing in San Francisco, these spread rapidly to Los Angeles and other large Western cities such as Phoenix and Dallas. A larger horse-hirer with more funding and media coverage is Breeze, which started in San Francisco and has since spread to five other cities; other large players include HyreCar, a horse-hiring marketplace available nation-wide (though spottily), and Flexdrive, a Cox subsidiary which rents cars to Uber drivers in several Southern cities.

And now Uber itself is getting into the game.

For drivers, the attraction of horse-hiring is clear. As many ridesharing drivers have discovered, driving your own car as a taxi adds up to a lot of wear and tear on your personal vehicle. The more miles you drive, the more your car depreciates in value; an accident could result in painful out-of-pocket expenses, and put you out of work until your car gets repaired. Rideshare drivers in many states are still in legal limbo regarding insurance, unsure of what kind to buy, or how, and often avoiding the issue by hiding the fact from their insurers that they drive for hire.

Horse-hiring does away with all of those problems. Many leases cover maintenance, or even include insurance; when a vehicle gets worn down, or is involved in an accident, the lease driver can just switch it for another. Although renting a car involves a higher up-front cost (these are businesses, after all), that is a cost the driver knows ahead of time, unlike the uncertain costs of maintenance, repairs, and insurance claims which fall in the lap of the owner-driver. Fleet owners enjoy economies of scale over individual car owners; if horse-hiring leases reflect these savings, renting could even be cheaper than owning for TNC drivers.  The “ridesharing” movement has shifted many of the risks of taxi operation onto the drivers; horse-hiring is a way for drivers to shrug off some of those risks.

This San Francisco horse-hirer offers drivers a range of leasing options. Source: Craigslist.

Horse-hiring in the TNC world is still young, and different companies are experimenting with different versions (longer or shorter term rentals? insurance included or not? mileage caps or no mileage caps?). However, it can be expected to grow. This should not be surprising; it is just another way that the development of the “ridesharing” industry is recreating economic structures and relationships which have long existed within the cab industry.