Drivers of Austin TNC Heyride Investigated by PI in 2012

Report on Austin’s first TNC was submitted by Yellow Cab to city’s taxi regulators

(Note: The main source document in this story is available at the bottom.)

Back in 2012, apps for what is now called ridesharing were not limited to Lyft and SideCar (and the following year, Uber). Smaller companies were experimenting with the concept across the US. For instance, in Boulder, CO, a group of students received a $4,000 entrepreneurship award for a ridesharing service called “Rideorama.” The goal was to find a cheaper way for people to travel to and from the remote Denver International Airport 40 miles away. But they unknowingly made the mistake of posting fliers in the airport, whose officials quickly reported them to the state’s taxi regulators. Rideorama shut down after only two months of service.

Government employees who oversaw for-hire vehicles have often had a close working relationship with their constituent taxi companies. Since taxis have historically been treated as a public utility, the fares and supply of cabs have been tightly regulated. In turn, regulators have defended the companies from unlicensed “bandit” competitors. But over time, the reliability and service quality of cabs deteriorated, and there was no sign it was going to improve any time soon. The tech industry believed ridesharing apps could offer a superior service to inefficient taxis, a thought that was irrelevant to taxi regulators. For them, their first and most important constituent was usually the taxi company, not the convenience of the riding public.

Thus, it was little surprise that after Austin’s first ridesharing app, Heyride, launched on Oct. 26, 2012, the Austin Transportation Department (ATD) sent them a cease-and-desist letter five days later. Heyride was the brainchild of University of Texas alumnus Josh Huck, who during that year’s SXSW festival thought about paying a “normal-looking guy in a Volvo” five dollars to take him to his office. With the help of a few friends, they turned the idea into an app that allowed potential passengers to select a specific driver and offer a price.

Josh Huck (Heyride Facebook)

The ATD didn’t announce the cease-and-desist until the Austin Chronicle released a cover story on Heyride on November 21st, three weeks after the letter was issued. Yet, Huck had noticed that a cab driver tweeted a picture of the letter before the story broke or the ATD’s announcement. The Chronicle suggested that the pressure might have originated from the taxi industry through the ATD.

They couldn’t have known how right they were.

Heyride had stepped into the early stages of several battles between the taxi industry and non-taxi apps, beginning with Uber. At the time, Uber provided rides only via dark, luxury sedans driven by licensed chauffeurs, but it was so efficient that it was infringing on taxi revenues. As the company expanded across the country, taxi regulators began to take notice and grow concerned.

One of the more concerned was Matthew Daus, an attorney, former chair of the New York City Taxi & Limousine Commission, and president of an association of taxi regulators. During the summer of 2012, he drafted a white paper suggesting that Uber’s model was little more than an electronic version of street hailing, a market reserved by law for taxis. In effect, the paper served as a call to action. Several taxi managers across the US circulated the paper to their local regulator, including in Austin. Ed Kargbo, president of Austin’s Yellow Cab company, sent a copy to the City of Austin’s taxi regulator, Carlton Thomas, on July 26, 2012.

“This is the best work to date on rogue apps (as we discussed the other day),” Kargbo wrote to Thomas. “I’ll continue to share information with you as I get any.”

In November, within two weeks after Heyride’s cease-and-desist, Thomas traveled to Washington, DC for an annual conference put on by Daus. Attending with him was Kargbo and two other executives from Texas Taxi, Inc. (the parent company of the Yellow Cab fleets in Austin, Houston, and San Antonio). During the conference, one of the more prominent issues presented was a set of model regulations intended to prohibit Uber’s luxury-sedan business model. While sitting on a panel of regulators, Carlton Thomas said, “We support the model regulations and look forward to moving towards implementation.”

Like Uber, Heyride was just another iteration in the war of app encroachment on the inefficient but legally protected taxis. Kargbo mercilessly kept Thomas updated with any intelligence he came across. He found an industrious Heyride driver promoting himself online, and in an email, he forwarded to Thomas links to the driver’s YouTube, Craigslist, and personal webpage listings. “This is one of their drivers, who is pushing them and himself as an independent heavily online.” In a later email to Thomas, Kargbo listed over a dozen URLs to Heyride articles.

Two days before the DC conference, Kargbo forwarded to Thomas a report from a private investigator (PI) who had taken a handful of Heyride trips. “Please review the attached document and share with [ATD Assistant Director] Gordon Derr and [ATD Director] Rob Spillar,” wrote Kargbo.

The PI apparently reviewed drivers as they shuffled him between bars, cafes, and the headquarters of the Sheriff’s Association of Texas. In his report, the PI provided names, makes and models of cars, license plate numbers, physical descriptions, and any background information he could obtain while chatting with the drivers.

“Laura D. appeared to have facial studs/jewelry. She related that she was a waitress at a restaurant/bar…” “… the operator a [white male] in his late 20’s or early 30’s with close cropped hair, tattoo on right bicep arm …. James E. related he was into photography and other work.”

To determine which mobile operating systems the app utilized, the PI also sent an email to Heyride masquerading as a fan of the app. “Liked website and donations being made to a worthy cause. Rather use your service than cabs,” he wrote (and it appears Huck himself responded).

It’s not clear to what extent the ATD used the PI’s report, but when the Chronicle story broke, they sent the city manager a memo which stated, “A review of City Ordinances shows that this operation very closely resembles that of a taxi franchise…” By January, they began sting operations, which included a fine to one of the drivers mentioned in the PI’s report, along with another to Huck for “no operating authority” for a taxicab franchise. In both citations, Carlton Thomas was listed as a witness.

By February 2013, Heyride was “acquihired” by SideCar, one of the first prominent ridesharing companies, based out of San Francisco. The prior month, a term sheet between Uber and California regulators leaked, and in one of the provisions Uber strongly hinted it would enter the ridesharing space. SideCar owner and CEO Sunil Paul was trying to get a head start by expanding across the US before Uber could gain ground, especially in Austin just before the next SXSW conference in March 2013.

Immediately after SideCar announced they would launch in Austin, the ATD responded by sending a brand-new cease-and-desist letter, and they sought emergency powers from the city council to impound taxi-like vehicles during SXSW.

The ATD’s campaign against ridesharing began anew.