Transportation network company

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A transportation network company (TNC), sometimes known as a mobility service provider (MSP) is a company that matches passengers with vehicles, via websites and mobile apps. TNCs for automobiles are commonly referred to as ride-hailing services, and TNCs exist for aircraft and watercraft as well. TNCs are examples of the sharing economy and shared mobility.

TNCs have been noted for providing service in less populated or poorer areas that are not regularly served by taxicabs, and charging lower rates than taxicabs, since taxicab rates are often set by local jurisdictions.[1]

Studies are inconclusive on whether TNCs reduce drunk driving rates in cities where they operate, with some studies showing that it depends on the city.[2]

TNCs are regulated in most jurisdictions and have been banned in a few jurisdictions. Regulations can include requirements for driver background checks, fares, the number of drivers, licensing, minimum wage, and allowing UberX to operate only yards away. Airport taxi drivers spend more than $3,000 annually on required commercial permits and insurance. For more information, see Legality of TNCs by jurisdiction.

Definition and terminology[edit]

In 2013, the California Public Utilities Commission defined, for regulatory purposes, a transportation network company as a company that uses an online-enabled platform to connect passengers with drivers using their personal, non-commercial vehicles.[3] The Virginia Department of Motor Vehicles defines a TNC as a company that "provides prearranged rides for compensation using a digital platform that connects passengers with drivers using a personal vehicle."[4]

In 2016, Brazilian startup Flapper began matching passengers with seats on private aircraft.[5]

In 2017, Uber opened a mobility service for boats.[6]

Misnomer as "Ridesharing"[edit]

In January 2015, the Associated Press Stylebook, the collective that sets many of the news industry's grammar and word use standards, officially adopted the term "ride-hailing" to describe the services offered by Lyft and Uber, claiming that "ridesharing" doesn't accurately describe the services since not all rides are shared, and "ride-sourcing" only is accurate when drivers provide rides for income. While the Associated Press recommended the use of "ride-hailing" as a term, it noted that, unlike taxis, TNCs cannot pick up street hails.[7][8]


Criticism by the taxi industry[edit]

The taxi industry has claimed that TNCs skirt regulations that apply to passenger transport and TNCs are therefore illegal taxicab operations. This has resulted in additional regulations imposed on TNCs and, in some jurisdictions, certain TNCs are banned from operating.[9]

Effect on values of New York City taxi medallions[edit]

In New York City, use of TNCs has reduced the value of taxi medallions, transferable permits or licenses authorizing the holder to pick up passengers for hire. After soaring in value after the Great Recession due to their perceived safety, New York City taxi medallions were again trading for around $170,000 each in 2018. Annual rental rates were $30,000. A couple of credit unions that lent money secured by medallions suffered from bank failure.[10]

Driver criticism of classification of independent contractors[edit]

Unless otherwise required by law, TNC drivers are independent contractors and not employees. This designation may affect taxation, work hours, and overtime benefits and lawsuits have been filed by drivers alleging that they are entitled to the rights and remedies of being considered "employees" under employment law.[11] In response, TNCs say they provide "flexible and independent jobs" for drivers.[12]

In O'Connor v. Uber Technologies, a lawsuit filed in the United States District Court for the Northern District of California on August 16, 2013, Uber drivers pleaded that according to the California Labor Code they should be classified as employees and receive reimbursement of business expenses such as gas and vehicle maintenance costs. In March 2019, Uber agreed to pay $20 million to settle the case.[13]

On October 28, 2016, in the case of Aslam v Uber BV, the Central London Employment tribunal ruled that Uber drivers are "workers", rather than self-employed individuals, and are entitled to the minimum wage under the National Minimum Wage Act 1998, paid holiday, and other normal worker entitlements.[14] Two Uber drivers had brought the test case to the employment tribunal with the assistance of the GMB Union, on behalf of a group of drivers in London. Uber appealed the decision.[15] In December 2018, Uber lost an appeal of the case at the Court of Appeal, but was granted permission to appeal to the Supreme Court of the United Kingdom.[16]

In March 2018, the Federal Department of Economic Affairs, Education and Research of Switzerland, gave the legal opinion that under the conditions that bind drivers to Uber that they should be classified as employees.[17]

Driver criticism of compensation[edit]

Drivers have complained that in some cases, after expenses, they earn less than minimum wage. As a result, in some jurisdictions, such as New York City, drivers are guaranteed a minimum wage.

Dynamic pricing[edit]

TNCs use dynamic pricing models; prices for the same route vary based on the supply and demand for rides at the time the ride is requested.[18] When rides are in high demand in a certain area and there are not enough drivers in such area, fares increase to get more drivers to that area and to reduce demand for rides in that area.[19] The rate quoted to the rider reflects such dynamic pricing.[20]

TNCs were criticized for extreme surcharges during emergencies such as Hurricane Sandy,[21] the 2014 Sydney hostage crisis,[22] and the June 2017 London Bridge attack,[23] especially when taxis offered to transport riders for free; however, in many cases, the surcharges were refunded by the TNCs and TNCs later agreed to either not charge surcharges, or in some cases, offer free rides, during certain emergencies.

Increased traffic congestion[edit]

TNCs have been criticized for increasing traffic congestion in New York City and San Francisco.[24][25] A report published by Schaller Consulting in July 2018 showed that, as a result of TNCs, traffic congestion increased both cities, which already had comprehensive public transport systems in place.[26][27] A main reason was that a large number of people, who would otherwise have used public transport, shifted to services offered by transportation network companies.

Reduced usage of public transportation[edit]

Studies have shown that TNCs have led to a reduction in use of public transportation.[28]

Lack of wheelchair accessible vans[edit]

In some areas, TNCs are required by law to have a certain amount of wheelchair accessible vans (WAVs) on the road at any given time. This can be a difficult requirement for TNCs to meet because TNCs don't provide vehicles and most drivers do not own a WAV, causing a shortage.[29]

Drivers using their phones while driving[edit]

When a customer makes a pick-up request, a driver is notified via mobile app and is provided the customer's location. The driver has approximately 15 seconds to tap the phone to accept the request. In many jurisdictions, tapping a phone while driving is against the law as it could result in distracted driving.[30]

List of notable companies[edit]


  1. ^ McArdle, Megan (July 20, 2015). "Uber Serves the Poor by Going Where Taxis Don't". Bloomberg News.
  2. ^ Hawkins, Andrew J. (October 4, 2017). "Does Uber lead to less drunk driving? It's complicated". The Verge. Vox Media.
  4. ^ "Virginia DMV: TNC Frequently Asked Questions". Virginia Department of Motor Vehicles.
  5. ^ Kjelgaard, Chris (August 10, 2018). "Flapper Technologies Plans Online Booking Expansion". AINOnline. Retrieved April 20, 2019.
  6. ^ Menza, Kaitlin (June 16, 2017). "Everything You Need to Know About the New UberBOAT Service". Town & Country. Retrieved May 13, 2019.
  7. ^ Warzel, Charlie (January 8, 2015). "Let's All Join The AP Stylebook In Killing The Term 'Ride-Sharing'". BuzzFeed.
  8. ^ FREED, BENJAMIN (June 30, 2015). "Why You Shouldn't Call Uber and Lyft "Ride-Sharing"". Washingtonian.
  9. ^ Dickenson, Greg (June 26, 2018). "How the world is going to war with Uber". The Daily Telegraph.
  10. ^ Berger, Paul; Gottfried, Miriam (January 17, 2018). "Hedge Fund Bets on Beaten-Up New York Taxi Business". The Wall Street Journal.
  11. ^ Tansey, Bernadette (July 17, 2015). "Sharing Economy Companies Sharing the Heat in Contractor Controversy". Xconomy.
  12. ^ "The gig-economy: Uber good or Uber bad?". Canadian Labour Congress. May 12, 2015. Archived from the original on May 18, 2015.
  13. ^ Hawkins, Andrew J. (March 12, 2019). "Uber settles driver classification lawsuit for $20 million". The Verge.
  14. ^ Griswold, Alison (October 28, 2016). "A British court rules Uber drivers have workers' rights in the "employment case of the decade"". Quartz.
  15. ^ Between (1) Mr Y Aslam (2) Mr J Farrar & Others and (1) Uber B.V. (2) Uber London Ltd (3) Uber Britannia Ltd (PDF) (Report). Employment Tribunals. 28 October 2016. Case Nos: 2202550/2015 & Others.
  16. ^ "Uber loses latest legal bid over driver rights". BBC News. 19 December 2018.
  17. ^ "Swiss authorities say Uber drivers should be treated as 'employees'". Swissinfo. March 19, 2018.
  18. ^ Newcomer, Eric (May 15, 2017). "Uber Starts Charging What It Thinks You're Willing to Pay". Bloomberg News.
  19. ^ Kerr, Dara (August 23, 2015). "Detest Uber's surge pricing? Some drivers don't like it either". CNET.
  20. ^ Carson, Biz (June 23, 2016). "Uber will stop showing the surge price that it charges for rides". Business Insider.
  21. ^ Bosker, Bianca (October 31, 2012). "Uber Rethinks New York 'Surge Pricing,' But Doubles Driver Pay". The Huffington Post.
  22. ^ Mazza, Ed (December 15, 2014). "Uber Raises Fares During Sydney Hostage Crisis, Then Offers Free Rides". The Huffington Post.
  23. ^ "Uber has refunded passengers after London Bridge terror attack". BBC News. June 5, 2017.
  24. ^ Fitzgerald Rodriguez, Joe (December 11, 2016). "SF blasts Uber, Lyft for downtown traffic congestion". The San Francisco Examiner.
  25. ^ Fitzsimmons, Emma G.; Hu, Winnie (March 6, 2017). "The Downside of Ride-Hailing: More New York City Gridlock". The New York Times. ISSN 0362-4331.
  26. ^ "The New Automobility: Lyft, Uber and the Future of American Cities" (PDF). Schaller Consulting. July 25, 2018.
  27. ^ Wolfe, Sean (July 27, 2018). "Uber and Lyft are creating more traffic and congestion instead of reducing it, according to a new report". Business Insider.
  28. ^ Badger, Emily (October 16, 2017). "Is Uber Helping or Hurting Mass Transit?". The New York Times.
  29. ^ Said, Carolyn (February 27, 2018). "Uber does not have enough wheelchair-accessible vehicles, new lawsuit says". San Francisco Chronicle.
  30. ^ Jacks, Timna (January 11, 2019). "Uber drivers complain they are forced to break the law to do their job.So that means that the drivers put the passenger in danger to which is against the law". Sydney Morning Herald.