New York became the first major American city on Wednesday to halt new vehicle licenses for ride-hail services, dealing a significant setback to Uber in its largest market in the United States.
The legislation passed overwhelmingly by the City Council will cap the number of for-hire vehicles for a year while the city studies the booming industry. The bills also allow New York to set a minimum pay rate for drivers.
Uber has become one of Silicon Valley’s biggest success stories and changed the way people across the globe get around. But it has faced increased scrutiny from government regulators and struggled to overcome its image as a company determined to grow at all costs with little regard for its impact on cities.
New York’s move to restrict the number of ride-hail vehicles and to establish pay rules for drivers — another step no other major city has taken — could provide a model for other governments that want to rein in the industry. New York’s aggressive stance also raises questions over how fast Uber can continue to grow as the company, which has been valued at $62 billion, plans to move toward an initial public offering next year.
The proposal to cap ride-hail companies led to a clash among interest groups with taxi industry officials saying the companies were dooming their business and Uber mounting a major advertising campaign to make the case that yellow cabs have a history of discriminating against people of color.
Mayor Bill de Blasio and Corey Johnson, the City Council speaker, said the bills will curtail the worsening traffic on the streets and improve low driver wages.
“We are pausing the issuance of new licenses in an industry that has been allowed to proliferate without any appropriate check or regulation,” Mr. Johnson said before the vote, adding that the rules would not diminish existing service for New Yorkers who rely on ride-hail apps.
[Read more on Uber and the Ride-Sharing Economy]
Mr. de Blasio praised the bills and said he planned to sign them into law. The cap on new for-hire vehicles would take effect immediately.
“More than 100,000 workers and their families will see an immediate benefit from this legislation,” Mr. de Blasio said, referring to the city’s army of for-hire drivers. “And this action will stop the influx of cars contributing to the congestion grinding our streets to a halt.”
But Uber has warned its riders that the cap could produce higher prices and longer wait times for passengers if the company cannot keep up with the growing demand. Ride-hail apps have become a crucial backup option for New Yorkers swept up in the constant delays on the city’s sputtering subway, as happened on Wednesday when signal problems again snarled train lines across a large swath of the city. Ride-hail services have also grown in neighborhoods outside Manhattan where the subway does not reach.
The battle over Uber’s future in New York has been prompted in part by growing concerns over financial turmoil among drivers — a problem underscored by six driver suicides in recent months. On Wednesday, a large group of drivers rallied outside City Hall before the vote and held signs displaying the names of the drivers who took their lives.
New York is the latest city to grapple with questions over how to regulate the company. In London, Uber’s most lucrative European market, Uber recently regained its taxi license after the company agreed to stricter regulations, including providing the city with the trove of traffic data that the firm collects and has often been reluctant to share. Uber has also faced regulatory battles in American cities, like Austin, Tex., and in countries like Canada, Brazil and Italy.
In Seattle, the City Council approved a bill allowing Uber drivers to form unions, but the measure has faced a legal challenge. Uber left Austin in 2016 after the City Council passed a measure requiring the company to perform fingerprint background checks, though Uber later returned to the city. The mayor of Honolulu recently vetoed a bill to cap price increases by Uber during busy periods.
[Read more about the potential impact of the Uber cap.]
The company’s new chief executive, Dara Khosrowshahi, has embarked on a global charm offensive to repair the company’s image after a series of controversies, including complaints among workers over gender discrimination and harassment.
Uber criticized the Council’s decision to approve the cap, but said the company would work to keep up with the increasing appeal of its service despite the limit on new vehicles.
“The City’s 12-month pause on new vehicle licenses will threaten one of the few reliable transportation options while doing nothing to fix the subways or ease congestion,” Josh Gold, a spokesman for Uber, said in a statement.
Anand Sanwal, chief executive of CB Insights, a software company that examines technology trends, said the cap could impact Uber’s public offering if it reduces revenues and emboldens other cities to take similar action.
“If it changes their growth trajectory, that could have an impact on their valuation and the narrative around the company,” Mr. Sanwal said.
Uber said the company would immediately reach out to tens of thousands of for-hire vehicle owners who are already licensed but work for other local car services and try to recruit them to work for Uber. The company said it would also continue to press for another solution, known as congestion pricing — a proposal to toll drivers entering Manhattan’s busiest neighborhoods and that would require approval from state lawmakers.
Many experts believe congestion pricing is the best way for New York City to fix congestion and secure the funds needed to fix the subway. Mr. Johnson supports the idea, but Mr. de Blasio has opposed it. Gov. Andrew M. Cuomo, who controls the subway, has said he will push for congestion pricing during the next state legislative session to help pay for an ambitious, multibillion dollar overhaul plan for the subway.
The City Council approved the cap in a 39-to-6 vote. Councilman Eric Ulrich, a Republican from Queens, said he opposed the cap, arguing that limiting Uber to help yellow taxis was similar to regulating Netflix, the streaming service, to help Blockbuster, the video rental chain.
The legislation allows for the city’s taxi commission to add more licenses if there is a clear need for more vehicles in some neighborhoods. In New York, many Uber drivers work full time and the city regulates Uber vehicles as part of the for-hire vehicle industry, which is different than other cities.
The City Council also moved recently to regulate Airbnb, another tech company that has upended the hotel industry. Mr. Johnson, a Democrat who became City Council speaker in January, has quickly taken bold steps to make a name for himself on high-profile issues, including convincing the mayor to pay for half-price MetroCards for poor New Yorkers.
Many taxi and Uber drivers say they support the cap proposal. They hope it will halt the flood of new vehicles clogging city streets and allow them to make more trips and improve their earnings. Uber and other ride-hail services could add new vehicles only if they are wheelchair accessible.
Lyft, the second most popular app in New York, also criticized the vote: “These sweeping cuts to transportation will bring New Yorkers back to an era of struggling to get a ride, particularly for communities of color and in the outer boroughs,” Joseph Okpaku, a vice president at Lyft, said in a statement.
The vote was a moment of vindication for Mr. de Blasio, a Democrat, who lost a bruising battle with Uber over a proposal for a cap in 2015. Since then, the number of for-hire vehicles in the city has surged to more than 100,000 vehicles, from about 63,000 in 2015, according to the city.
The taxi industry has also been decimated by Uber’s rise. The price of a taxi medallion, which is required to operate a taxi in New York, has plunged from more than $1 million to less than $200,000.
Elizabeth Cassarino, a yellow taxi driver, said she supports the cap and hopes it will improve business for taxis. As she drove a taxi through the clogged streets of Manhattan on Wednesday, she said her credit cards were maxed out and she had trouble making enough money to pay for food.
“Finally,” she said. “We’re starving to death.”
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