What happens if Uber comes to Ocean City?

Ocean City officials are already starting to think about what happens if app-based ride sharing companies like Uber and Lyft decide to expand into the resort.

Uber started advertising last month for drivers in the Ocean City area online. Resort officials say Uber is welcome, but at this early stage in the game, the consensus seems to be that Uber drivers are going to have to play by the same rules as taxi drivers.

Uber connects drivers with passengers using a smartphone app. Payment is also coordinated through the app, so no cash changes hands. The app lets prospective passengers see a GPS map of how many drivers are in their immediate vicinity. Drivers and passengers also can rate each other using the phone app. Uber is now operating in dozens of U.S. markets and in 55 countries.

In Ocean City, the taxi community isn't too happy at the prospect that Uber may come here and operate without the same standards and practices as regular cabbies.

"Uber has nothing to offer the Eastern Shore marketplace except unscreened drivers," said Carl Kufchak, who owns Ocean City Taxi, the resort's largest taxi fleet. "If allowed to do business in Ocean City, we will see the likes of the late '90s, when companies were charging whatever they wanted."

A Feb. 21 ad on the jobs website Indeed.com tells people they can "get started now" as an independent contractor for Uber X in the Ocean City area. The ad offers a position with flexible hours and $20 per hour in fares. Requirements for drivers include having a four-door car that's less than 10 years old, as well as a driver's license and insurance. Previous experience as a professional driver is a plus, the ad says.

Representatives from both Uber and competitor Lyft tell The Daily Times that neither has firm plans to launch in the Ocean City market. Uber spokeswoman Kaitlin Durkosh said the company uses advertising as a way to test the viability of a market.

The resort is still going to "prepare for the possibility and the likelihood" that ride-sharing services like Uber or Lyft will make a foothold at the beach, said Ocean City spokeswoman Jessica Waters.

"Hail" rides versus technology

Uber has been operating unregulated in Maryland for two years, and is embroiled in a legal battle with state regulators over whether it should be treated as a taxi company. Uber had argued that it wasn't a transportation company, but was a tech company that happened to offer a driving service. The state disagrees.

Uber on Feb. 26 struck a five-year agreement with the Maryland Public Service Commission. Uber agreed to be regulated as a motor carrier, to use drivers with proper commission permits, and to provide a list of those drivers to the commission. It says Uber may utilize surge pricing — a more costly fare when demand rises — just as long as riders are informed ahead of time.

This Public Service Commission agreement only applies to Uber SUV and Uber Black, a premium limo-style service. The low-end service where people can use their own cars to ferry passengers, called Uber X, isn't included in the agreement, according to the opinion.

Ride-sharing companies have an ally in state Sen. Bill Ferguson, D-46, Baltimore City, who's sponsored a bill in the General Assembly that would outline standard regulations for services like Lyft and Uber.

"It has changed the game in the city," he said. "It has provided consumers with much more options. The obvious demand that has led to the growth of Lyft and Uber in the metropolitan areas is a testament to a market that's not functioning well. If the uncertain transportation market were working effectively, Lyft and Uber would have no reason to enter. Their growth is proof of a lack of effective options."

Ferguson said the existing regulatory model for taxi businesses creates barriers to entry because of high costs, which he argues leads to market inefficiencies that benefit the provider and harm the consumer.

His proposed law offers a framework of rules about background checks, insurance and discrimination, among other issues.

"The goal of this bill is to fight for consumer choice. I think we need to prove in Maryland we are friendly to innovative ideas. When governments are creating barriers to prevent free market competition, consumers lose. At the end of the day, we need to protect consumers but make sure they have options," he said.

Ferguson also noted that companies like Uber and Lyft don't accept "hail" rides, meaning passengers need the app to connect the rider and the driver.

"Ride taxis will always have a spot in this marketplace. The ability to initiate a ride by hail is a different type of service, a different type of model, than a technology-based matching system."

Ferguson's bill is now in the Senate rules committee. He hopes it will move to the Finance Committee and could get a hearing on the Senate floor later this month. There's also companion bill cross-filed in the House.

The medallion: A commodity

Ocean City's current system of taxi regulation dates to 2010, when the Town Council mandated that all taxi drivers had to have a medallion — a small, numbered plate displayed on the dashboard — and be subject to regular vehicle inspections and drug tests.

The law requires all taxis to purchase one of 175 town-issued medallions at $1,500 each. The law also compels drivers to submit to random drug testing and provide the town with proof of insurance.

Five years later, the city doesn't issue medallions anymore. They're instead bought and sold between cabbies, which was always the plan. Because it's a commodity, the buyer and the seller can come to their own agreement on price; the town takes a 25 percent cut of the sale price. Annual holding costs include a $500 renewal fee and a $300 business license fee.

Medallions are separated into two categories: independent and fleet. The law says corporate cab companies get 85 percent of all medallions, with the remainder allotted to independent drivers. No one fleet owner can own more than 35 percent of all medallions. There are 170 active medallions; five are held back by the town.

The last taxi medallion sold March 2 for $4,500, giving Ocean City $1,125 in transfer tax. Another independent medallion sold in January for $7,100, according to the City Clerk's office.

Kufchak, of Ocean City Taxi, believes the current system "will have been a total failure" if Uber is allowed to operate in Ocean City because until now, Uber hasn't been subject to any regulations.

"Uber's claims for faster service are baseless," he said. "Our company, the Shore's largest, has 70 cabs available at all times. Uber can't come close. The app is a great feature, but the application to the real world is not. In the small market we have, and the shortness of (the season), it's not cost-effective."

"A wait-and-see basis"

Lloyd Martin, president of the Ocean City Council, said the town is still waiting on state regulators before taking action. The town's Police Commission, a board with oversight of taxicabs, has been briefed on what Uber is, what they're doing in the state of Maryland, and their ongoing fight with regulators.

"They're considered a taxi. They're picking up and dropping off. (Our attorney) is looking into the legality," said Martin, who also sits on the Police Commission. "Ocean City being only a few months a year, would it even be profitable for them? I think the whole town's on a wait-and-see basis."

Martin said Ocean City's rate structure is stable, while Uber has fluctuating fares based on demand.

"So the consumer doesn't know what they're going to pay from day to day," he said. "If they're coming out of the bar at 2 in the morning, what's going to be the price of Uber? There's so many unanswered questions. We have a regulated industry that seems to be working. People know how much they'll be charged per mile, in every cab, no matter what."

Martin also said Ocean City's regulation of taxis was an attempt to make the business worthwhile for cab owners.

"They have a vested interest now because their business is growing. A guy has something to sell when he's done," in the form of the medallion. "If the government has control of it, and there's free enterprise involved, it's great. If there's too much, it's not.

"To me, I don't think it would work in the town of Ocean City."

Some in the resort would welcome a ride-sharing app in lieu of regular taxi service.

Frankie Knight, 26, of Ocean City said her experience with taxis in Washington and Baltimore left her wary of drivers who weren't always friendly.

"With Uber, it's a company that goes through what seems to be a more stringent hiring process. The drivers were always clean-cut, appropriate and well-spoken.

"I knew with Uber they would give me almost an exact time they would arrive, and I wouldn't have to wait long, either. It seems privately-owned cabs are less reliable and on their own time," she said.

When she uses Uber, she doesn't have to wait in a taxi line or share a cab with a stranger, she said. There's no searching for a taxi phone number because the app is right in the palm of her hand, in her phone.

"I'd take Uber over a cab, and I know a lot of our tourism comes from larger cities like Baltimore and D.C. They'd be familiar with the service and take Uber."

bshane@delmarvanow.com