BILL ANALYSIS                                                                                                                                                                                                    

                              Senator Jim Beall, Chair
                                2015 - 2016  Regular 

          Bill No:          AB 828            Hearing Date:    7/7/2015
          |Author:   |Low                                                   |
          |Version:  |4/20/2015                                             |
          |Urgency:  |No                     |Fiscal:      |No              |
          |Consultant|Randy Chinn                                           |
          |:         |                                                      |

          SUBJECT:  Vehicles:  transportation network companies

            DIGEST:  This bill excludes from the definition of "motor  
          vehicles" any motor vehicle operated in connection with a  
          transportation network company (TNC), under specified  

          Existing law defines a "commercial vehicle" as a motor vehicle  
          used for the transportation of persons for hire or the  
          transportation of property.

          This bill excludes motor vehicles operated in connection with a  
          TNC from the definition of commercial vehicle provided that:

          1)The vehicle is operated for passenger service only and is  
            limited to seven passengers excluding the driver; 
          2)The vehicle is operated exclusively by the person to whom the  
            vehicle is registered or insured; 
          3)The vehicle is not a paratransit vehicle; 
          4)The vehicle is not operated for public transit services; and
          5)The vehicle is not operated for school bus services.

          Author's Statement.  According to the author, TNCs are at the  
          cutting edge of transportation innovation.  The convenience of  
          TNCs has led to many more people using them, which cuts down on  


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          traffic and emissions from cars.  Exempting TNC drivers from the  
          commercial vehicle registration process encourages the expansion  
          of TNCs, which reduces vehicle trips, total vehicle miles driven  
          and the carbon emissions that contribute to climate change.

          Purpose.  In January 2015, the Department of Motor Vehicles  
          (DMV) announced that any passenger vehicle used for the  
          transportation of persons for compensation is a commercial  
          vehicle.  A week later, after some concern from TNCs, the DMV  
          retracted that announcement.  This bill updates the definition  
          of a commercial vehicle to clarify that it does not include  
          vehicles used in connection with TNCs.

          The growing TNC industry.  In California, the TNC business is  
          large and growing rapidly.  A January 2015 report from Uber<1>,  
          the largest TNC, reports 20,000 active Uber drivers in Los  
          Angeles, 16,000 in the San Francisco area, and almost 5,000 each  
          in San Diego and Orange County, up from zero in July 2012.  Some  
          estimates put the total number of active TNC drivers in the  
          United States at 150,000.  TNCs are successfully competing with  
          taxi cabs, limousines, and other regulated transit operators.  

          What this bill does.  By exempting vehicles operated in  
          connection with TNCs  - hereafter referred to as TNC vehicles -  
          from the definition of commercial vehicle, this bill simply  
          exempts those vehicles from having to obtain commercial license  
          plates.  A commercial license plate is more costly than a  
          non-commercial plate.  For cars weighing less than 3,000 pounds  
          (e.g., Ford Focus), the additional cost is $8/year; for cars  
          weighing between 3,000 and 4,000 pounds (e.g., Honda Accord),  
          the additional cost is $24/year; and for cars weighing between  
          4,000 and 5,000 pounds (e.g., Volvo XC 90 SUV), the additional  
          cost is $80/year.  The reason for higher licensing costs for  
          commercial vehicles is to compensate for the additional wear on  
          the roads caused by these vehicles, which is why the cost  
          increases as the vehicle weight increases.

          Commercial plates are easily distinguishable by law enforcement  
          from regular license plates.  Knowing that a vehicle is  
          operating commercially can be helpful in the investigation of an  
          accident, as insurance requirements are more substantial for  
          vehicles which are used commercially.  The California Public  

          <1> An Analysis of the Labor Market for Uber's Driver-Partners  
          in the United States, by Jonathan V. Hall and Alan B. Kreuger;  
          January 22, 2015.


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          Utilities Commission (CPUC) requires that TNC vehicles carry  
          additional insurance.  

          What else the bill does, potentially.  According to supporters,  
          classifying a TNC vehicle as a commercial vehicle may create  
          additional problems with financing and insurance.  A vehicle  
          that was originally financed as a personal vehicle may be in  
          technical violation of the financing agreement if that vehicle  
          becomes a commercial vehicle.  The concern with insurance  
          potentially arises because the CPUC's recent decision refers to  
          TNC vehicles as personal vehicles, not commercial vehicles.   
          While these concerns have not yet been raised by the financing  
          and insurance industries, the supporters are concerned that this  
          risk will deter potential new TNC drivers.

          An unlevel playing field.  The different types of transportation  
          companies (e.g., TNCs, limousines, Super Shuttles, taxis) are  
          all regulated differently.  Rates, routes, insurance  
          requirements, vehicle inspections, and driver requirements vary.  
           State law has begun to address the biggest differences between  
          TNCs, but there's little dispute that big differences remain.   
          In an ideal world, companies would compete based on the  
          differences in their business models and competence, not on the  
          differences in how they are regulated.

          Creating a level playing field slowly.  The laws and regulations  
          governing the provision of transportation services are many  
          decades old.  These laws and regulations have evolved slowly, as  
          evidenced by the arcane and complicated carrier classifications.  
           At least over the last several decades, the few new laws have  
          focused on safety issues.  The rapid growth of TNCs has  
          disrupted this relatively quiet corner of our economy, changing  
          the economics of transportation and challenging the economic  
          models of the traditional transportation providers.  This has  
          upended the lives of many people in the transportation industry,  
          while at the same time providing many benefits to transportation  

          Regulators are struggling to keep up with the rapidly evolving  
          transportation industry, a bit hamstrung by laws which never  
          anticipated the different ways that TNCs operate.  In September  
          2013, the CPUC, which has regulatory authority over much, though  
          not all, of the passenger transportation industry, issued its  


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          first set of rules<2> intended to foster the growth of TNCs,  
          without compromising public safety.  These rules started the  
          process of establishing a level playing field so that all  
          transportation companies would have similar regulatory  
          obligations, allowing them to compete based on their business  
          models.  Among the rules were requirements for obtaining an  
          operating permit from the CPUC, requiring criminal background  
          checks for drivers, establishing driver training programs,  
          implementing zero-tolerance policies on drugs and alcohol, and  
          minimum insurance requirements.  

          The CPUC has initiated a second phase of its investigation to  
          look more closely at the regulation of TNCs and the traditional  
          transportation companies, known as charter-party carriers<3>.  A  
          set of issues has been proposed and comments on the scope of  
          those issues have been submitted; a decision on the scope of  
          issues is expected shortly.  As the state's regulatory agency  
          over transportation matters, the CPUC is in the best position to  
          consider whether its current regulations provide for a fair and  
          competitive market.  It can recommend specific changes to law  
          and, in some cases, can implement changes to its own regulations  
          to achieve the goal of a level playing field.  

          If it looks like a duck ?  There is no question that TNC  
          drivers, like drivers of taxis, limos, and shuttles, do it to  
          make money; they are "commercial" by definition.  So it is hard  
          to see how a full-time TNC driver should be treated any  
          differently than a full-time taxi driver or full-time limousine  
          driver; they do the same work and perform the same service. 

          The argument for exempting vehicles used by TNC drivers from the  
          definition of a commercial vehicle is that many of the drivers  
          are part-time, driving their personal cars infrequently just to  
          pick up a few dollars.  The January 2015 Uber report cited above  
          notes that 55% of their drivers drive 15 hours/week or less.   
          Given this, it may be reasonable to limit the exemption from the  
          commercial vehicle definition for part-time drivers, just as it  
          is reasonable not to regulate the lemonade stand on the corner.   
          Some may question whether a part-time exemption can be enforced.  
           But this can be dealt with just like any other commercial  
          vehicle.  If that individual's vehicle happens to be a part of  
          <2> D.13-09-045; issued September 23, 2013.
          <3> Assigned Commissioner and Administrative Law Judge's Ruling  
          Amending the Scoping Memo and Ruling for Phase II of Proceeding;  
          Rulemaking 12-12-011; April 28, 2015.


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          any law enforcement inquiry, say because of an accident or  
          driving infraction, the investigating officer can inquire about  
          the status of the vehicle.  While this may not be perfect, it is  
          at least a concrete step towards establishing a level playing  
          field.  The author and committee may wish to consider exempting  
          TNC drivers whose vehicles are driven 10 hours or less per week  
          in connection with any TNC from the definition of commercial  

          Double referred.  The Rules Committee has requested this bill if  
          it passes out of this committee.

          Related Legislation:
          AB 1360 (Ting) - allows transportation network companies more  
          flexibility in how they charge multiple riders.  This bill is  
          pending in the Senate Energy, Utilities and Communications  

          AB 1422 (Cooper) - requires transportation network companies to  
          participate in the Department of Motor Vehicles program for  
          notifying employers of the driving records of their drivers.   
          This bill is pending in the Senate Transportation and Housing  

          AB 2293 (Bonilla, Chapter 389, Statutes of 2014) - requires  
          specified levels of insurance coverage for TNCs and their  
          Assembly votes:

            Floor:    71-1
            Trans:    14-0
          FISCAL EFFECT:  Appropriation:  No    Fiscal Com.:  No    Local:  

            POSITIONS:  (Communicated to the committee before noon on  
                          July 1, 2015.)
          Bay Area Council
          Brea Chamber of Commerce


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          Clean Coalition
          Internet Association
          Los Angeles Area Chamber of Commerce
          Metropolitan Transportation Commission
          Orange County Business Council
          Orange County Supervisor Michelle Steel
          Planning and Conservation League
          San Francisco Chamber of Commerce
          Westward Liberty


          California Delivery Association
          California Labor Federation
          Greater California Livery Association
          Los Angeles Taxi Workers Alliance
          Sacramento Taxi Cab Union
          San Francisco Taxi Workers Alliance
          San Jose Taxi Drivers Association
          United Taxi Workers of San Diego
          Numerous individuals

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