BLAW 4260 CSU Business Law Uber in Colorado Case Study

For the exclusive use of T. Haidar, 2022.
NA0417
Uber in Colorado—Seeking Regulatory
Certainty
Paul R. Seaborn, University of Denver
Peter Scott, University of Denver
Will Miller, University of Denver
I
t was December 2013, but Will McCollum, general manager for Uber Denver,
was not expecting to have a relaxing holiday season. The Colorado Public Utilities
Commission (PUC) had announced its intentions to review ride-sharing services
offered by Uber and competitor Lyft at the next PUC meeting on December 11th.
The outcome of the meeting, and Uber’s response, would determine whether the PUC
would pursue an investigation of Uber that could lead to new regulations and even put
Uber’s entire Colorado operations at risk. Uber’s arrival in Denver had been a shock
to the highly-regulated and difficult-to-enter taxi industry, and this was not the first
time incumbent taxi companies and the PUC had raised concerns about Uber’s Colorado operations. For most of 2013, the commission had been considering changes to
existing transportation rules that would likely have pushed Uber’s black car service,
“Uber Black,” out of the state. After a strong anti-regulation campaign by Uber and a
number of other key stakeholders, the PUC had withdrawn its proposed changes in
September 2013.1
Now, with the threat of a new wave of regulatory changes targeting the company’s
UberX ride-sharing service arising only three months later, McCollum considered
Uber’s options. Should Uber continue to fight any potential regulations from the
PUC, or instead collaborate with the PUC or elected officials to develop a set of rules
governing ride-sharing? These were not the types of decisions McCollum had expected
to focus on when he joined the technology startup company seventeen months earlier.
UBER
Uber was started as “UberCab” in San Francisco, California in March of 2009, by
Travis Kalanick and Garrett Camp in response to Camp’s experience of being stranded
on the streets of San Francisco, unable to find a taxi.2
Uber’s business model involved a mobile application that could be accessed using
a cell phone or other mobile device to connect drivers to customers in a matter of
minutes. GPS and other mobile technologies were used to optimize the matching
of drivers and riders and to automate the tracking, pricing, payment, and customer
service functions.
Copyright © 2017 by the Case Research Journal and by Paul Seaborn, Peter Scott, and William Miller. This
case study was prepared as a basis for class discussion rather than to illustrate either effective or ineffective handling of the situation. The authors would like to thank Will McCollum and Uber, as well as the
associate editor and reviewers of the Case Research Journal for their guidance on how to improve the case.
Uber in Colorado—Seeking Regulatory Certainty
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As shown in the timeline provided in Exhibit 1, Uber had experienced rapid growth
and was now seen by many customers as an alternative to traditional taxi or limousine
services. In August of 2013, investors valued Uber at $3.4 billion dollars, a dramatic
increase from its $330 million dollar valuation in November of 2011. This valuation
increase stemmed from Uber’s growth rate and the idea that the company was becoming an instant gratification service, not just a car service. Uber had experimented with
flower deliveries on Valentines Day, ice cream trucks in the summer, and other mobile
promotions, which investors believed might be the future of Uber.3
As of December 2013, Uber offered its services in nineteen different countries and
more than thirty-five cities around the world.
Uber offered a number of different versions of its service. The first and most
well-known was the Uber Black car service. Users seeking a premium transportation
experience would request a ride from a nearby driver who was trained and licensed as
a limo driver and driving either a higher class black sedan or SUV. While Uber processed the payment, the third-party limousine company was legally responsible for any
problems in the service.
Later the company had added a second option known as UberX. UberX solicited
private individuals as drivers who used their own vehicles to provide transportation
to Uber customers at a less expensive price. The UberX offering was aimed at a much
broader target market and made driving for Uber a possibility for a much larger pool
of drivers.
Uber viewed its business model as involving a three step circular process, as shown
in Figure 1. Uber saw its primary role as providing a technology link between drivers and riders. However it also recognized the role of government in determining the
regulatory environment in which Uber operated. The goal of Uber’s interactions with
government was to obtain clear and consistent guidance on the “rules of the game,”
giving the company increased regulatory certainty in which to operate.
Figure 1
Regulatory Certainty
(Government)
Protect $
Safety
Regulations
Technology
(Uber)
Drivers
Riders
Source: Provided by Will McCollum, October 20, 2014.
2
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In most major U.S. cities, taxi drivers paid as much as $100 a day to rent their taxis
from one of the local taxi companies and were responsible for other expenses such as
fuel and in some cases credit card processing fees.4 Drivers then kept their fare revenue
but needed to work long hours in order to make a profit.5 Uber believed this to be
an unfair system for drivers and instead offered the opportunity for drivers to use or
obtain their own cars, and then would take a royalty fee of 20 percent per ride.
Uber’s standard pricing involved conditional fares calculated based on per minute
and per mile rates. But Uber had also introduced a unique pricing strategy to the transportation industry which they referred to as surge pricing.6 This pricing approach was
developed to try and balance the supply of drivers and demand of riders by raising the
price of a current ride by a fluctuating multiple depending on the separation between
supply and demand. This pricing strategy had received both praise and criticism. Riders were happy with the fact that UberX at its cheapest price was 30 percent less than
a taxi,7 but criticism came on New Year’s Eve and other times of peak demand when
Uber charged six or more times the base price. Uber understood that some customers
might be intoxicated or distracted when requesting a ride and installed several notifications and a confirmation process in an attempt to make sure the customer would
not be surprised by the price. However, some customers still believed the surge pricing
process was unfair and voiced complaints through traditional and social media, generating negative publicity for Uber.
Despite being a relatively new company, Uber had already made an impact on a
wide variety of other organizations. It had established partnerships with limousine
companies whose drivers provided UberBlack service and with groups concerned about
drunk driving and transportation access in low-income neighborhoods. As corporate
business travelers became a key customer segment, corporations were increasingly
finding Uber charges on their employee expense reports. Insurance companies, vehicle
manufacturers, transit authorities, and airports all had reason to consider the potential
impact of Uber and other ridesharing companies.
IN WHICH INDUSTRY DID UBER COMPETE?
Due to the novel aspects of Uber’s business model there was considerable disagreement over whether the company should be classified as a taxi or limousine company, a
technology and information company, or perhaps a new type of company that did not
fit within any existing industry definition. Determining the industry in which Uber
competed had significant implications for whether it was subject to any existing laws
and regulations and how any new laws and regulations intended for Uber needed be
written.
In most jurisdictions, taxis and limousines had long been regulated at the local
or state level, so Uber potentially faced a wide variety of regulatory environments
rather than a single national regulatory system. Uber’s transportation services had
many similarities to the traditional taxi and limousine businesses, but also a number
of differences. By connecting riders to drivers who were not Uber employees, Uber’s
role was in some ways similar to the role of a telephone company when a customer
called a taxi or limousine company. This made determining whether Uber was subject
to some or all of the same regulations as taxis and limousines a complex undertaking.
In positioning its services relative to existing transportation providers, Uber referred
Uber in Colorado—Seeking Regulatory Certainty
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to its terms of service, to which all users had to agree before signing up as a rider. The
terms stated that,
The Company does not provide transportation services, and the company is not a
transportation carrier. It is up to the third party transportation provider, driver or vehicle operator to offer transportation services which may be scheduled through use of the
application or service. The company offers information and a method to obtain such
third party transportation services, but does not and does not intend to provide transportation services or act in any way as a transportation carrier, and has no responsibility
or liability for any transportation services provided to you by such third parties.8
Despite these claims, taxi companies saw Uber as a direct competitor. “They think
it’s all about technology,” said Robert McBride of Metro Taxi. “But reality is, they’re a
transportation company just like I am. There’s no difference.”9
Uber had also attracted the attention of taxi regulators in most markets it entered,
resulting in cease-and-desist orders, court injunctions, and the impounding of cars.
Washington, DC and New York City attempted to prohibit Uber and other ride-sharing
companies from their jurisdiction, only to reverse the ban later on due to public backlash.10 In December of 2012, New York had approved a one-year trial, allowing Uber
and other competitors to operate in the city.11
Portland, Oregon and Las Vegas were two other cities that had made it difficult
for Uber to enter their markets. In Portland, long-standing legal barriers prevented
the entrance of the start-up transportation company. These laws that were set in
place in part to protect riders from exploitation also protected incumbent companies
from additional competition. One specific law still in place in Portland required a
60-minute advanced reservation for any non-taxi ride, a requirement contrary to the
“just-in-time” nature of Uber’s on-demand service.12
Las Vegas also had strict laws regarding taxi companies, including a rule preventing
any cab from being hailed on the Las Vegas Strip. To obtain a cab, a customer had to
walk to one of the many taxicab stands at each casino on the Strip. Because Las Vegas
was such a popular tourist and convention destination, taxis were often in short supply at peak times. When discussion arose about a potential Uber launch in Las Vegas,
the state’s Department of Business and Industry, which oversaw the Taxicab Authority
and the Nevada Transportation Authority, directed regulators for both agencies to cite
Uber drivers as illegal operators and impound their vehicles if caught.13
Uber CEO Travis Kalanick’s assessment of the challenge facing regulators was that
“They need to decide whether we are Orbitz or American Airlines.”14
WILL MCCOLLUM AND UBER DENVER
Will McCollum was appointed as the Denver City general manager of Uber Technologies in July of 2012, making him the first Uber employee in Denver and one of the
first 100 employees of the entire company. McCollum had graduated from the University of Colorado–Boulder, Leeds School of Business, with a focus in entrepreneurial
finance, venture capital, and private equity law. His previous experiences included IT
solutions consulting for DHL, international sales and marketing with Presto Translations, and an internship as a business analyst for Encana. He had studied abroad in
Switzerland, England, Costa Rica, and China.
Initially McCollum had intended to find a post-MBA job outside the transportation industry but saw a job posting by Uber Technologies where the combination of
4
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his previous experience, MBA studies, and entrepreneurial attitude appeared to be
an ideal fit. McCollum made an aggressive push for the job and was hired to be the
primary spokesman and decision maker for Uber during its entrance into the city of
Denver.15
Uber effectively operated each new market as its own startup company. General
managers were given a revenue target and told to do whatever they saw fit to attract
both riders and drivers. Local staff members were given access to almost all the company’s data, which allowed McCollum to learn from the experiences of Uber in other
markets.16 As a company, Uber’s goal was to grow rapidly in all of its markets and
employees were judged on their vision, “quality obsession,” “fierceness,” and “super
pumpedness.”17
Despite starting with a team of just three employees, McCollum moved quickly to
establish Uber’s Denver, Colorado operations. Local tech entrepreneur David Cohen
was dubbed “Rider Zero” when he took the first trial Uber ride in Denver on August
9, 2012, just a month after McCollum’s hiring. Uber held its official Denver launch
party on September 5, 2012, making Denver Uber’s fifteenth city. The company partnered with a number of Denver limousine companies and individual drivers who were
already licensed by the PUC but were interested in obtaining additional paid customers through the Uber application. By November, an Uber SUV option was added,
guaranteeing Denver riders a larger vehicle that could seat up to six people. Exhibit 2
describes Uber’s pricing for both services in the Denver market.
Uber experienced rapid growth in the Denver market despite starting with just three
local employees and doing little traditional advertising. Instead the company focused
on developing a very visible social media presence and launching a variety of creative
marketing and promotional activities intended to increase brand awareness and public
support for the company and convince riders to try Uber for the first time. Inspired
by a successful Uber promotion in Washington, DC, Uber organized an “UBERcade”
on October 3, 2012, the day of a presidential candidate debate in Denver between
Barack Obama and Mitt Romney. Random Uber riders were driven to their destination in a presidential-style, multi-vehicle motorcade, generating both publicity and
some confusion among Denver residents.18 At Christmas, Uber held an “UberSleigh”
campaign that offered customers a discount if they donated a toy to a local toy drive,19
and on Valentine’s Day customers could use the Uber app to request that red roses be
delivered to their significant other. Nationally, Uber frequently offered $20 credits to
new members and partnered with high-profile organizations and events. During the
2013 NFL season, for example, Uber drew national media attention for partnering
with the NFL Players Association to offer NFL players a personalized keychain card
that contained a $200 Uber credit.20
McCollum and Uber held off on launching the UberX service in Denver until
after the PUC’s September 2013 decision not to regulate UberBlack. UberX offered a
minimum fare of $6.00 as compared to $15.00 for UberBlack and $25 for UberSUV.21
Becoming an UberX driver required applying on Uber’s website, uploading proof of
their driver’s license, car insurance, and registration, and photos of their vehicle which
needed to be four-door, 2005 or newer and, if possible, fuel-efficient. After passing the
background checks and completing an online training course, drivers were invited to
Uber’s Denver office, where, for a $100 deposit, they were given a data-only iPhone
that served as their connection to the Uber dispatch system.22
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As Uber’s Colorado operations grew, McCollum’s role also expanded to involve
working closely with the other Uber Denver employees as well as Uber corporate
staff in San Francisco and general managers of other cities. “It’s not just me,” said
McCollum, “there’s an amazing team of super-smart, motivated people behind the
operation.”23
COMPETING BUSINESSES IN COLORADO
Ride sharing businesses had grown in popularity across the United States and this was
true in Denver as well. Two other ride sharing companies, Rideorama and Lyft, had set
up shop in the Denver metropolitan area since Uber’s launch in 2012.
Rideorama began operations in 2012. Based out of Boulder, Colorado, Rideorama
was the creation of a group of University of Colorado–Boulder MBA students who
had originally developed a website to arrange rides going to the Denver International
Airport. After an official complaint was filed with the Colorado PUC, Rideorama was
ultimately shut down in 2012 because registered driver’s insurance and safety documentation was not verified by the business.
In contrast to Rideorama, Lyft was a national company, like Uber, that had started
in San Francisco and expanded to other cities while attracting significant private
investment. It was founded in May 2012 by two twenty-eight-year old entrepreneurs,
John Zimmer and Logan Green, who had previously founded a long-distance ridesharing company known as Zimride.24 The company made Denver its thirteenth market
when it launched its operations in September 2013, just forty-eight hours after the
PUC withdrew its proposal to regulate Uber Black25 and only a few days before Uber
introduced their UberX service to Denver.
Lyft’s operations differed from Uber in a number of ways. First, all Lyft drivers
were private individuals who had passed through a screening process and gave rides
in their own cars. Because no Lyft drivers were professionals this made Lyft a direct
competitor of the UberX service but not the original Uber Black service. Second, Lyft
managed local market queries and concerns through its San Francisco headquarters
and relied on top-rated local drivers to onboard new drivers rather than hiring staff
in each market.26 Third, initially Lyft charged no mandatory fee for its service. After
arriving at their destination, riders were prompted to make a donation to the driver,
of which Lyft took a small percentage. Late in 2013, Lyft started a transition away
from this donation-based model to a mandatory fee.27 Fourth, even after adopting a
mandatory fee structure Lyft did not employ surge-pricing in the same way as Uber.
Rather than allow fares to fluctuate freely in response to the supply and demand of
drivers and riders Lyft introduced a “Prime Time Tips” multiplier during busy periods
that was capped at a maximum of 200 percent (3X). Finally, Lyft sought to differentiate itself as a more informal ridesharing experience. Passengers were encouraged to sit
in the front passenger seat and initially Lyft vehicles were identified by a large pink
moustache attached to the front of the vehicle. “The experience is more like getting a
ride with a friend or an equal,” said Lyft spokeswoman Erin Simpson. “There is that
social component and community component that really sets the Lyft experience apart
from something like a taxi or black car where you would just get in the back and tell
the person where you want to go.”28
Car sharing was also a growing trend in the greater Denver area, welcoming businesses like Zipcar, Occasional Car, and Car2Go. These companies provided a pool of
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cars parked throughout the city to be rented and driven by their customers. Denver
Public Works had agreed to provide dedicated parking spaces to these vehicles, which
had increased the legitimacy and competitiveness of car sharing programs in Denver.29
Car sharing pricing structures were primarily based on time, either per minute or per
hour. Together, all of these new transportation businesses offered the possibility of
reducing car ownership and changing travel and traffic patterns in the cities where
they operated.
TAXI COMPANIES, REGULATION, AND HISTORY
In Colorado and in many other markets, taxis and limousines were treated as two
separate transportation products with differing operating regulations. In Colorado,
both the number of taxi companies and taxicabs was strictly regulated under rules
that had been in place since 1947. Taxis were required to charge primarily by distance
according to regulated rates, to operate vehicles meeting certain physical characteristics
and could pick up passengers at any time without prebooking. In contrast to taxis,
limousines were required to charge by time and to carry only prebooked passengers,
but the number of limousines and limousine companies was not regulated. Both taxi
and limousine vehicles were required to undergo a safety inspection and drivers were
subject to a medical exam.
The relationship between taxi companies and taxi drivers was not always a harmonious one. Taxi drivers typically did not own their own vehicles but instead paid
a weekly rental fee to taxi companies. Unlike passenger fares, these rental fees were
not regulated, due to 1991 legislation that prohibited the PUC from regulating taxi
companies’ lease rates at all.30 In 2013, the annual mean wage for taxi drivers and
chauffeurs in was $26,260, according to the U.S. Bureau of Labor Statistics.31
“The current state is the worst of both worlds for the public, which is being
charged a monopoly price, and the drivers, who are being exploited with a monopoly
lease rate,” said former PUC chairman Ray Gifford, a critic of the current system.
According to one PUC study, Denver taxi lease rates increased by an average of 5.4
percent annually between 2002 and 2008, while the market itself, based on total taxi
trips, increased only 2.7 percent.32 Many Denver taxi drivers were immigrants from
Somalia, Ethiopia, Eritrea, and Sudan. In the summer of 2010, twenty-one current
and former Yellow Cab drivers, all African immigrants, filed a federal lawsuit claiming
years of discrimination and abuse.33 In February 2012, the arbitrator assigned to the
case awarded the drivers $202,100 and their lawyers $1.1 million to cover legal fees.34
There were four licensed taxi companies in Colorado—Yellow Cab, Metro Taxi,
Freedom Cab, and Union Taxi. As of February 2013, these four companies had PUC
permission to operate a combined 1,262 cabs and shared more than $70 million in
annual taxi fares.35 Two of these companies, Yellow Cab and Metro Taxi, handled 80
percent of the trips in the metro Denver market (Exhibit 3).
Yellow Cab, which began operation in Denver in 1924, had PUC approval to operate 300 cabs and charged most drivers around $460 per week. In 2004 Yellow Cab had
been acquired by one of the world’s largest transportation companies, Connex, a subsidiary of French conglomerate Veolia.36 Metro Taxi was Denver’s largest taxi company
with 492 cabs and charged most drivers $540 per week. Metro had been serving the
Denver area since 1985, when its owners purchased Ritz Cab, which had operated in
Denver since 1932.37 Freedom Cab was founded in 1995 with the first new taxi license
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granted in forty-eight years, after a two-year legal battle supported by the Washington,
DC based Institute of Justice.38 It had 250 cabs and charged its drivers $300 per week.
Union Taxi Cooperative, a driver-owned operation founded in 2008, had 220 orange
cabs on the road. Safety audits in 2010 and 2011 had found that over a thirty-day
period, Metro drivers had 175 violations for exceeding maximum driving hours, Yellow drivers had sixty-two such violations, and Freedom Cabs’ drivers had just one.39
Due in part to regulation, new entrants were generally not welcome in the Colorado taxi market. Until 2008, prospective taxi companies had to prove to the PUC that
there was sufficient demand for new service, and only Freedom Cab had successfully
overcome this barrier. A bipartisan bill passed in the state legislature shifted the burden
of proof to existing cab companies to show conclusively that the market couldn’t bear
new companies in order to block entrants. Union Taxi was the first, and only, successful applicant under the new rules before they were changed again in 2009 to make
entry more difficult. Union Taxi submitted their application in June 2008 and were
initially denied by the PUC, but after months of legal negotiations and eleven days of
PUC hearings had cabs on the road in May 2009. Mile High Cabs applied to enter the
market in September 2008 but was denied approval by the PUC in 2010 for the reason
that there were already too many cabs on metro Denver streets.40 The drivers took their
case all the way to Colorado Supreme Court where they won their appeal in 2013, but
at the end of the year were still waiting for PUC approval to enter the market.41
For McCollum and Uber, the current state of the Denver taxi market meant potential opportunity. “This market has been so underserved by artificial supply constraints
courtesy of the PUC and the taxi industry,” said McCollum. “Take Mile High Cab:
The taxi companies’ approach has been to bleed them dry, and the PUC has been
complicit in allowing that to happen.”42
Even before Uber entered Colorado in 2012, the PUC began to receive complaints
and concerns from incumbent transportation companies. Four days after the first news
article appeared touting Uber’s plans to enter the Denver market, a representative of
Yellow Taxi e-mailed PUC officials saying “I believe we have a real issue coming to
us in the Colorado market that may need some rule changes or legislative changes to
clarify how phone apps can and should work with transportation.”43 Uber claimed this
to be an effort to slow its growth within Denver.44
GOVERNMENT IN COLORADO
The Colorado state government structure was similar to that of the United States federal government and other states with three primary branches. The legislative branch
consisted of the Senate and the House of Representatives. Following the 2012 election,
the Colorado Senate consisted of thirty-one Democrats and twenty-six Republicans.
The House had eighty-seven Democrats and ninety Republicans.45 The executive
branch was led by the governor of Colorado, John Hickenlooper, a Democrat. Hickenlooper was the former mayor of Denver and had an entrepreneurial background in
the beer industry. Hickenlooper planned to seek reelection in November 2014 and
faced a decision about whether to support the new ride-sharing startup companies in
Colorado and risk upsetting the politically influential taxi industry. The third branch
of government was the state judicial system.
The Colorado Public Utilities Commission (PUC) was an independent, quasiexecutive agency of the Colorado state government and a subdivision of the state’s
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Department of Regulatory Agencies (DORA). DORA’s mission was to protect
consumers by preserving the integrity of the marketplace and promoting a fair and
competitive business environment in Colorado. Agencies within DORA included:
banking, civil rights, public utilities commission, real estate, and securities. DORA’s
divisions included over forty boards, commissions, and advisory committees. The
Division of Registrations alone regulated over forty-seven professions, occupations,
and businesses in the state totaling over 345,000 people. The PUC had full or partial
regulatory authority over the following industries: electricity, gas pipelines, natural gas,
rail, steam, telecommunications, transportation, and water. The PUC’s authority of
the taxi and limousine transportation industry was of primary importance to Uber.46
The PUC had the responsibility of protecting both the taxi companies and the
people using them. Riders were able to file complaints with the PUC, which could
result in civil penalties against the taxi company or driver. The PUC also established
the standard prices for taxis, generally based on time with the exception of flat rates
from certain areas to the Denver International Airport. For consumers, regulated rates
reduced the likelihood of being overcharged by taxi drivers but also eliminated price
competition between taxi companies.
The PUC, like most government departments, was divided into different divisions.
The PUC of Colorado executive office had three commissioners with one, Joshua
Epel, serving as a chairman. Commissioners were appointed to four year terms and
could not all be from the same political party, as established by statute.47 The executive office also had a director, two executive assistants, and two commission counsel.
Below the executive office the PUC had divisions for each major regulatory area, with
the Transportation division employing fifteen individuals responsible for rate-setting,
administration, investigations, and compliance.48
The scope of the PUC’s responsibilities included not only developing and enforcing regulations but also adjudicating any disputes regarding the same regulations.
Companies that had an issue with the PUC’s actions had to first raise the issue with
another PUC division, Administrative Hearings, rather than going directly to the judicial system. Administrative Hearings employed four administrative law judges who
adjudicated disputes that arose in any of the other divisions.
THE PUC’S FIRST PROPOSAL
The new regulations proposed by Administrative Law Judge Harris Adams of the PUC
in January 2013 did not make any specific reference to Uber or other new transportation companies in the Denver market. However, the specific details had a number of
direct impacts on Uber’s business model.49 First, the regulations proposed to prohibit
sedan companies from charging based on distance traveled, which was Uber’s current pricing structure. Second, the regulations would have changed the definition of
“motor carrier” to include companies that “provide transportation,” which would have
no longer categorized Uber as a technology company, requiring them to apply for a
PUC permit and insure all vehicles themselves. Third, the proposed regulations would
also have disallowed limousines from parking within 200 feet of a bar, restaurant,
hotel, or taxi stand, making Uber trips less convenient to many potential customers.
The previous rule had been within 100 feet and covered only hotels and taxi stands.
Lastly, the PUC’s proposed regulation would have prohibited limousines from parking
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at the pickup location more than thirty minutes before the scheduled pickup time and
would have required companies to set a fixed price before picking up a rider.50
Public Utilities Commission spokesperson Terry Bote stated that the rules had
been drafted in response to taxi companies’ complaints that limousine providers were
providing taxi-like services, which were not allowed under the current rules. Uber
disagreed publicly with the PUC’s approach. McCollum stated that the judge’s recommendation “doesn’t help the public, it doesn’t help competition, it doesn’t help the
marketplace and it sure doesn’t help Colorado’s reputation as a pro-business, businessfriendly state.”51
RESPONSES TO THE PUC PROPOSAL
The January 2013 regulatory proposal generated more attention for the PUC than any
proposal in recent memory, with frequent coverage in the local media. Fortunately for
Uber, customers, other technology companies, and eventually the governor, came out
in support of Uber’s ongoing operations in Colorado.
Within six months of launching in Denver, Uber had signed up tens of thousands
of registered users, in part due to promotions such as offering the first ride free. When
the PUC announced the potential amendments to the rules of transportation that
would make it illegal for Uber to operate, a petition was started on change.org, as
shown in Exhibit 4. This petition was directed towards the PUC and Governor Hickenlooper, stating the people’s support for Uber. The petition focused around the issues
of the new amendments and their potential restrictions to a “free market,” and marked
the first time that the Colorado PUC had been the subject of an online petition. The
petition received 2,500 signatures in support of Uber.52
Uber also invited customers to a “Save UberDenver” rally featuring CEO Travis
Kalanick, following a PUC public hearing in March 2013. In the invitation, McCollum told invitees that, “These proposed regulations are designed to protect a Taxi
industry that hasn’t been responsive to your needs, and to prevent reliable, efficient
and high quality transportation—in other words, their aim is to shut down Uber.”53
Also in March, the Federal Trade Commission (FTC) took the unusual step of
writing to the Colorado PUC, urging it not to adopt the proposed new rules that
would require a “specific fixed price” and to avoid “unnecessarily restricting the ways
that consumers can be picked up by vehicle transportation services.”54 Leaders of other
Colorado technology companies also took a stand against the PUC’s regulatory proposal. Erik Mitisek, CEO of the Colorado Technology Association, a trade group with
600 member companies, told the Denver Post, “It’s a troubling decision and bad signal
to send to our entrepreneurs and innovators who really hope they can build and grow
large, scalable businesses in the state.”55
In August of 2013, with the proposed January rules still pending, Judge Adams
proposed additional rule changes—including prohibiting luxury limousines from
containing “a taxicab meter or other device for calculating any component of rates
charged based upon time and mileage, other than a clock.” McCollum immediately
used the Uber website to alert customers to the proposal stating, “As a state, we’re at a
crossroads—do we want to be a place that welcomes innovation, entrepreneurship, job
creation and technology? Or do we want to be a place where the most sophisticated
way we can measure commerce is simply a clock?”56
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For the exclusive use of T. Haidar, 2022.
Colorado Governor John Hickenlooper had stayed out of the debate between taxi
companies and Uber, causing speculation that he sided with the taxi companies and
the PUC. But soon after the new proposal, Hickenlooper spoke out publicly against
some of the proposed regulations, saying, “attempts to micro-manage limousine services constitute an overreach, are unnecessarily complicated and are not in the public
interest.”57
The PUC proposal was withdrawn only a few weeks after Hickenlooper’s reversal.
“Luxury limousines are, by definition, more expensive than taxis,” PUC chairman
Joshua Epel said at the time of the withdrawal. Epel added, “I think existing enforcement mechanisms are adequate.”58
Even though the withdrawal of the proposed changes had the effect of deeming
Uber Black to be legal, Uber had since launched ride-sharing service UberX in October 201359 to compete against companies such as Lyft, and the status of this type of
public transportation in Colorado was not clear. In fact, many of the arguments that
Uber had made for why its Uber Black limo-requesting service should be allowed to
continue to operate, such as the fact that all Uber Black drivers were already licensed
by the PUC and drove licensed vehicles, did not apply to the UberX or Lyft services. As
a result, incumbent taxi companies had continued to raise concerns about driver qualifications and screening, vehicle safety, liability and insurance, and rideshare pricing.
“The transportation industry is at risk right now,” said Kyle Brown, general manager
at Metro Taxi. “The safety standards that taxis have traditionally been held to, there
is an attempt by these new companies to lower that standard in order to compete.”60
McCollum preferred to highlight the potential synergies between Uber and taxi
companies. “I would challenge the entire premise that we compete with taxis . . . What
we find is that the taxi industry, they’re breaking records year over year, every single
market that we come to, because we increase the number of transportation options.
From my perspective, it’s not taxis we’re competing with, they’re just a part of the
transportation landscape. It’s car ownership. It’s driving your own car, that’s what we’re
competing with. We want rides to be so affordable, so ubiquitous, and so safe, that you
don’t even think twice about it. Literally, transportation as reliable as running water.”61
UBER’S NEXT MOVE
It was only a few days until the next PUC hearing, when the future of both UberX
and Lyft would be discussed by the PUC commissioners. After the meeting, the PUC
would send Uber a letter outlining staff concerns and the company would have thirty
days to respond, after which the commission would decide whether to pursue an investigation. While it was possible that the PUC would determine on their own that no
regulatory action was needed, it was also possible that the PUC might reach a decision that would significantly disrupt or shut down some or all of Uber’s Colorado
operations.
McCollum and Uber were well aware of the various regulatory outcomes, both
positive and negative, that Uber had experienced in other locations, and knew that
they had a number of choices for how to proceed. First, Uber could launch another
public campaign against the PUC, opposing any regulation of the UberX service. This
approach had worked previously in Colorado when UberBlack was under review and
in some other markets, but was no guarantee that the PUC would back down again.
Second, Uber could instead cooperate with the PUC process in the hope that the
Uber in Colorado—Seeking Regulatory Certainty
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For the exclusive use of T. Haidar, 2022.
commissioners would interpret or modify existing regulations in a manner that was
satisfactory to Uber. While California’s PUC had recently announced regulations that
made the state the first to regulate ridesharing companies, there was no guarantee
Colorado’s appointed PUC commissioners would take a similar approach. The PUC’s
treatment of now-defunct Rideorama was a cautionary example of the risks of this
approach. Third, Uber could lobby the elected officials in the Colorado House and
Senate, seeking their support either in influencing the PUC’s process or in passing new
legislation that would establish the legality of ride-sharing companies and formally
recognize them as distinct from taxi and limousine companies. Despite operating in
so many cities and countries, no Uber location had yet chosen to seek or support new
government legislation. Earning the support of elected officials in a state such as Colorado where neither political party was dominant would require making a compelling
case that appealed to each side. Although the execution and enforcement of any new
legislation would still be the responsibility of the PUC and subject to legal challenge, it
would provide the PUC with clearer direction on its mandate to regulate ride-sharing
and could reduce the uncertainty that seemed to have prompted the current PUC
review of UberX and Lyft.
McCollum had no prior political experience or training and had never intended
to become involved in government lobbying or rulemaking. But as the point person
for Uber’s operations in the Colorado market, his days were increasingly focused on
regulatory issues rather than technology, human resources, or financial matters. There
was a limit to how much assistance Uber’s corporate staff could provide to local markets given Uber’s rapid growth and the differences in transportation regulations and
political environments between Uber markets. As a result, McCollum had already had
many dealings with the PUC, state politicians, and the taxi companies, and had also
established relationships with local lawyers and lobbyists who were well-connected in
Colorado’s political circles.
As McCollum looked out his office window at the snowy December weather, he
wondered how he should proceed. What specific rules, if any, should Uber support for
governing ride-sharing in Colorado, and how could Uber obtain the support of other
key stakeholders in order to reach its desired outcome? If Colorado politicians could
agree on rules that met the needs of the UberX service but also addressed the concerns of other transportation companies and the public, perhaps they could overcome
opposition from the taxi industry and provide Uber with greater regulatory certainty
in the Colorado market. However, there was also a chance that the interests of other
stakeholders would take priority and the end result would be unfavorable to Uber and
other ride-sharing companies.
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For the exclusive use of T. Haidar, 2022.
Exhibit 1: Uber Timeline
Date
Event
March 2009
UberCab founded by Travis Kalanick and Garrett Camp.
May 31, 2010
Uber officially launches in San Francisco.
October 2010
Uber receives a cease and desist notice from the Public Utilities
Commission of California, changes its name to Uber.62
February 14, 2011
Uber announces first major round of funding.
May 2011
Uber officially launches in New York City.
December 7, 2011
Uber officially launches in Paris, France and announces $32M
in new funding.63
December 15, 2011
Uber officially launches in Washington, DC.64
July 2012
Will McCollum is hired as Uber Denver’s first employee and city
general manager.
July 2012
Uber announces UberX service.
August 9, 2012
Uber begins pilot testing in Denver and Boulder areas with its
first rider.65
September 15, 2012
Uber officially launches in Denver.
October 2012
California PUC issues cease and desist letters to Uber, Lyft, and
other ridesharing companies.66
November 14, 2012
UberSUV option launches in Denver.
January 2013
Rule change proposal by PUC with potential to disrupt Uber
Black operating model.
January 29, 2013
Change.org petition begins seeking public support for Uber in
Colorado.
January 31, 2013
Uber strikes a deal with the California PUC avoiding $20k in
fines.67
August 9, 2013
Governor Hickenlooper speaks out on behalf of Uber in attempt
to protect the technology industry in Denver.
September 4, 2013
Uber Black cars are cleared to continue to operate in Colorado.
September 18, 2013
Lyft Denver market launch party.
September 19, 2013
California becomes the first state to regulate ride-sharing
services.68
October 4 , 2013
UberX is officially launched in the Denver market.
December 10, 2013
PUC publicly acknowledges that it is considering investigating
unregulated ride-sharing services offered by UberX and Lyft.
Uber in Colorado—Seeking Regulatory Certainty
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Exhibit 2: Uber Pricing
Source: Uber Denver website, November 14, 2012. Retrieved from
https://newsroom.uber.com/us-colorado/give-thanks-for-suvchoice-denver/.
Exhibit 3: Taxi trips in 2011 in the Denver Metro Area
Taxi Company
Yellow Cab
Freedom Cabs
Taxi Trips
1,368,418
192,475
Metro Taxi
1,560,713
Union Taxi
512,799
Total
3,634,405
Source: December 2012 report by the Colorado Public Utilities Commission.69
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For the exclusive use of T. Haidar, 2022.
Exhibit 4: Change.org Petition
Source: https://www.change.org/p/colorado-puc-don-t-shut-downuber-withdraw-proposed-rules-changes.
NOTE
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clear in Colorado.” The Denver Post. Retrieved from http://www.denverpost.
com/editorials/ci_24134834/finally-uber-clear-colorado.
2. Kalanick, T. (2010, December 22). “Uber’s Founding.” Uber. Retrieved from
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3. Shontell, A. (2013, August 23). “The Vision for $3.4 Billion Uber Is
Much More than Just a Car Service, and It Could Vastly Improve Our
Lives.” Business Insider. Retrieved from http://www.businessinsider.com/
why-uber-is-worth-34-billion-2013-8.
4. Tobias, M. W. (2011, November 18). “How Taxi Companies Rip Off Their
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5. Avery, G. (2013, March 8). “Feds ride to Uber’s defense.” Retrieved from http://
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7. Vuong, A. (2013, December 11). “PUC to investigate low-cost ride-sharing
services Lyft and UberX.” The Denver Post. Retrieved from http://www.
denverpost.com/business/ci_24698031/puc-investigate-low-cost-ride-sharingservices-lyft.
Uber in Colorado—Seeking Regulatory Certainty
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For the exclusive use of T. Haidar, 2022.
8. UBER. (2015). “Terms and Conditions.” Retrieved from www.uber.com/legal/
usa/terms.
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org/news/story/uber-lyft-could-soon-face-tighter-restrictions-colorado.
10. Staley, R. S. (2009, October 11). “In D.C. Taxi Bribe Case, a Taste of Regulation’s Perils.” The Washington Post. Retrieved from http://www.washingtonpost.
com/wp-dyn/content/article/2009/10/09/AR2009100902990.html.
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NFL players.” The Denver Post. Retrieved from http://www.denverpost.com/
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23. McCollum, W. (2015, October). Presentation.
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http://vator.tv/news/2016-05-03-when-lyft-was-young-the-early-years-of-lyft.
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Case Research Journal • Volume 36 • Issue 3 • Summer 2016
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For the exclusive use of T. Haidar, 2022.
25. Voung, A. (2013, September 18). “Details on Lyft’s ridesharing service
launching in Denver on Thursday at Basecamp.” Retrieved from http://blogs.
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Markets.” Retrieved from https://www.buzzfeed.com/johanabhuiyan/lyft-putsits-money-and-man-power-where-its-pink-mustache-is.
27. Hoge, P. (2013, November 18). “Lyft and Sidecar replace voluntary donations
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blog/2013/11/lyft-sidecar-uber-ride-sharing.html?page=all.
28. Vuong, A. (2013, September 18). “Lyft’s ride-sharing service to hit Denver this week.” Retrieved from: http://www.denverpost.com/2013/09/18/
lyfts-ride-sharing-service-to-hit-denver-this-week/.
29. Pankratz, H. (2013, August 01). “Zipcar launches car-sharing service in Denver.”
The Denver Post. Retrieved from http://www.denverpost.com/ci_23775273/
zipcar-launches-denver.
30. Institute for Justice. (2015). “Challenging Denver’s Taxicab Monopoly.”
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31. Dano, M. (2014, June 1). “App-based upstarts fight for slice of Denver’s taxi
market.” coloradoBiz Magazine. Retrieved from http://www.cobizmag.com/
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32. Warner, J. (2014, March 20). “Street Fight.” Westword Magazine. Retrieved
from http://digitalissue.denverwestword.com/article/Street_Fight/1663313/
201938/article.html.
33. Warner, J. (2010, November 30). “Mean Streets.” Westword Magazine. Retrieved
from http://www.westword.com/news/mean-streets-5110813.
34. Warner, J. (2014, March 20). “Are Denver cab companies ready for an Uberbumpy ride?” Westword Magazine. Retrieved from http://www.westword.com/
news/are-denver-cab-companies-ready-for-an-uber-bumpy-ride-5123724.
35. Vuong, A. (2013, February 19). “Uber regulatory circus drives into Denver.”
The Denver Post: Business. Retrieved from http://www.denverpost.com/
business/ci_22617550/uber-regulatory-circus-drives-into-denver.
36. Moore, P. (2005, October 9). “Taxi, shuttle rides pricier because of high gas
costs.” Denver Business Journal. Retrieved from http://www.bizjournals.com/
denver/stories/2005/10/10/story1.html.
37. Metro Taxi. “About Us.” Retrieved from http://www.metrotaxidenver.com/
about_us/.
38. Institute for Justice. “Challenging Denver’s Taxicab Monopoly.” Retrieved from
http://ij.org/case/jones-v-temmer/.
39. Warner, J. (2014, March 20). “Street Fight.” Westword Magazine. Retrieved
from http://digitalissue.denverwestword.com/article/Street_Fight/1663313/
201938/article.html.
40. Warner, J. (2010, November 30). “Mean Streets.” Westword Magazine. Retrieved
from http://www.westword.com/news/mean-streets-5110813.
Uber in Colorado—Seeking Regulatory Certainty
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For the exclusive use of T. Haidar, 2022.
41. Colorado Supreme Court. (2013, April 22). Supreme Court Case No. 11SA312.
Retrieved from http://www.taxi-library.org/colorado-supreme-court-on-milehigh-cab.pdf.
42. Warner, J. (2014, March 20). “Are Denver cab companies ready for an Uberbumpy ride?” Westword Magazine. Retrieved from http://www.westword.com/
news/are-denver-cab-companies-ready-for-an-uber-bumpy-ride-512372.
43. Avery, G. (2013, March 8). “Feds ride to Uber’s defense.” Retrieved from
http://www.bizjournals.com/denver/blog/boosters_bits/2013/03/feds-ride-toubers-defense.html.
44. Vuong, A. (2012, September 03). “Tech startup Uber irks taxicabs and garners
regulatory scrutiny.” The Denver Post. Retrieved from http://www.denverpost.
com/ci_21457606/tech-startup-uber-irks-taxicabs-and-garners-regulatory.
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with Proposed Rule Changes.” Slideshare. Retrieved from http://www.scribd.
com/doc/122690162/Colorado-PUC-Docket-No-13R-0009TR-withProposed-Rule-Changes.
47. Bartels, L. (2013, December 10). “Gov. Hickenlooper appoints former Rep.
Glenn Vaad to the Public Utilities Commission.” The Denver Post: The Spot
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html?page=all.
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bits/2013/03/feds-ride-to-ubers-defense.html?page=all.
51. Vuong, A. (2013, August 11). “Uber taxi battle threatens to hurt Colorado’s tech
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com/business/ci_23833414/uber-taxi-battle-threatens-hurt-colorados-techand-business-image/.
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For the exclusive use of T. Haidar, 2022.
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BLAW 4260
Uber in Colorado
1. In which industry do you think Uber competes? Why?
2. Who are the major stakeholders in the case? What political influence and
power does each stakeholder group have in the PUC’s decision making?
3. Were the original PUC proposed regulations withdrawn in September 2013
overly restrictive, or were they appropriate given the PUC’s mandate?
4. Now that you have assessed Uber’s situation and the various needs and
expectations of its stakeholders, what is your recommendation to Will
McCullum and why?