A transportation network company (TNC), sometimes known as a mobility service provider (MSP) or ride-hailing service, is an organization that pairs passengers via websites and mobile apps with drivers who provide such services. Transportation network companies are examples of the sharing economy and shared mobility.
Transportation network companies have been noted for providing service in less populated or poorer areas that are not regularly served by taxicabs, and charging lower rates than taxicabs, since taxicab rates are often set by local jurisdictions. Some reports say TNCs reduce traffic congestion: since their cars "can't accept street hails, they do much less unnecessary driving-around than either government-licensed/regulated taxi cabs (who are cruising for hails) or individuals (who are looking for a parking spot)." TNCs say they provide "flexible and independent jobs" for drivers.
Studies are inconclusive on whether TNCs reduce drunk driving rates in cities where they operate. A March 2016 study by Judd Cramer and Alan B. Krueger of the National Bureau of Economic Research showed that a ride via a TNC uses capacity more efficiently than traditional taxicabs as TNC drivers are more likely to have a passenger than a taxicab.
However, some have criticized TNCs as avoiding government regulation.
In 2013, the California Public Utilities Commission defined, for regulatory purposes, a transportation network company as a company that uses an online-enabled platform to connect passengers with drivers using their personal, non-commercial vehicles.
Virginia defines a TNC as a company that "provides prearranged rides for compensation using a digital platform that connects passengers with drivers using a personal vehicle." Other states have also regulated TNCs, including Massachusetts.
TNC platforms have sometimes been called "ridesharing", but the terms "ridesourcing" and "ride hailing" have been developed to describe the transportation services associated with TNCs. Some early reports used the term "ridesourcing" to clarify that drivers do not share a destination with their passengers and that the driver's primary motivation was income. The term "ridesourcing" refers to the outsourcing of rides. In early 2015, the Associated Press Stylebook officially adopted the term "ride-hailing" to describe the services offered by Lyft and Uber to reflect the availability of private vehicles and taxis services on the platforms. "Ride-hailing" makes no reference to the driver's motivation or to the trip characteristics; some rides may not necessarily be motivated by income. Uber allows drivers to match destinations with riders in limited cases. However, using "ride-hailing" interchangeably with "ridesharing" can be misleading. Companies like Uber and Lyft prohibit drivers from picking up 'hailers' as all of their riders need to be logged through their website or mobile app software to adhere to their terms and conditions and local laws. Otherwise these companies would be categorized as a 'taxi service.'
Drivesharing is an arrangement where several drivers share a vehicle to transport rideshare passengers for a fee. Vehicles used in drivesharing are not owned by any of the drivers, but instead rented from a drivesharing (third-party) company that services or is in partnership with a TNC like Uber and Lyft. Drivesharing responds to the high demand of qualified drivers who are interested in working for TNC platforms but do not want to acquire or use their own vehicle to do so. Drivesharing companies aim to help the ridesharing industry by increasing ridesharing accessibility, getting more paid drivers on the road and reducing individual vehicle ownership for drivers and riders alike.
For example, TNCs are required by law to have a certain amount of wheelchair accessible vehicles (WAVs) on the road at any given time. This can be a difficult requirement for TNCs to meet because TNCs don't provide vehicles and most drivers do not own a WAV, causing a shortage. Third-party drivesharing companies are stepping in to help fill that gap by providing TNC approved WAV vehicles that drivers are incentivized through TNCs to use, therefore helping TNCs meet the WAV requirements.
Taxi industry groups, labor unions, and some courts say that TNCs are illegal taxicab operations. Several communities, governments, and organizations have established rules and regulations that specifically govern TNCs and, in some jurisdictions, TNCs are completely illegal to operate.
TNCs increase traffic congestion in some cities, due to the large number of TNC vehicles constantly cruising waiting for customers. Reports based on New York City data suggest that TNCs are unsustainable. The TNC model allows avoiding the costs of insurance, sales tax, mechanical vehicle inspections, and providing a universally-accessible service. Some critics believes that TNCs' success comes from being parasitic on the cities in which it operates. New regulations are proposed to compensate some of these disadvantages.
Services like Uber and Lyft, even taking into account trips (as with UberPOOL and Lyft Line) where multiple passengers share the same vehicle, are also worsening traffic congestion. This is because they are attracting to customers who would otherwise have taken transit, walked, biked or avoided the trip, according to a study published in 2018.
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