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Will Virginia Embrace the Coming Transportation Revolution or Thwart It?

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Has Virginia has given up any pretext of being a market- or innovation-friendly state? The Department of Motor Vehicles has issued cease-and-desist orders to the Uber and Lyft ride-sharing service and slapped the companies with a total of $35,000 in fines. Their offense? Operating order-a-ride-with-a-smart-phone services and giving traditional taxicab companies a good scare.

According to the Washington Post, DMV claims the two companies are operating in violation of state law (although it’s not clear from the article what provision of the law they are breaking). Here’s what a DMV spokesperson had to say: “Virginia DMV supports innovation. … DMV has been charged by the General Assembly to conduct a study of these transportation network companies. We are confident that the solution to transportation network companies operations will come out of the study and we hope that Uber and Lyft will actively participate in the study and be a part of creating the solution. In the meantime, Virginia DMV must fulfill its obligation to highway safety and enforce the law as it is currently written.”

Uber and Lyft maintain that they are operating legally, and they will not obey the cease-and-desist order.

This dispute is far more important than Virginians realize. It’s way more significant than a dust-up between local taxicab companies and the Silicon Valley up-starts who would compete with them. We are in the early phases of a transportation revolution. Right now, companies like Uber and Lyft are targeting the premium end of the market because that’s where the money is and where they can most rapidly recoup the cost of developing their software apps, administrative systems and algorithms for positioning their vehicles. Once those concepts are refined and proven in the marketplace, we will see them migrate downstream to other market segments. I recently highlighted Bridj, which is providing premium bus service in the Boston area for highly competitive fares as an example of the next wave of innovation.

The logical culmination of this technology revolution will be the emergence of a wide array of transportation services with different mixes of convenience, price and amenities targeted to different population segments. People will enjoy a far broader array of transportation services than they do now, and it is entirely reasonable to expect new enterprises to begin serving low-income populations in neighborhoods that municipal bus lines do not now serve. This change will be driven by the profit motive — by entrepreneurs filling niches in the marketplace that are now ill-served by taxicabs and municipal bus lines — and will not require government subsidies.

While it may be appropriate to maintain basic minimum regulations — companies and drivers need to carry insurance, for instance — all government has to do is step out of the way. While cities from Chicago to Seattle are throwing up barriers to transportation innovation, Virginia should embrace the trend. DMV should back off while the General Assembly studies the issue. And the McAuliffe administration should make it a core plank of Virginia transportation policy to become the most hospitable state in the country for the likes of Uber, Lyft, Bridj and other heralds of the New Transportation.

(This article first ran in Bacon’s Rebellion on June 15, 2014)

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