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Aug 16, 2019

Why B.C.'s wait for ride-hailing services may stretch even longer

Uber and Lyft can't keep hemorrhaging money through R&D: Tech expert

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It’s not the pressure of closing a sale or getting investor funding that’s keeping Vancouver tech entrepreneur Hossein Maleki up at night. Instead, he’s scrambling to make arrangements to meet a big client coming in from New York the next morning.

“I have to get a Car2go, pick him up and then make sure he gets a cab back to the airport,” Maleki said in a phone interview. “It’s embarrassing!”

The lack of ride-hailing services like Uber Technologies Inc. (UBER.N) or Lyft Inc. (LYFT.O) in Canada’s third largest city of Vancouver is hurting some business owners like Maleki, who runs e-commerce agency Satel Creative. Managing a team of 25 young workers, he says he can’t stay competitive without ride-hailing services for his employees and clients.

“You’ve got to remember that with small tech companies, it’s all about the perks like snacks at the office or whatever,” he said. “Team outings are the biggest hassle, a big expense.”

Fed up, Maleki started Stranded B.C. last year, a volunteer group petitioning to bring ride-sharing services to the province. Members range from restaurant owners, to the elderly and disabled.  

While Lyft recently announced its intent to operate in B.C. as early as this fall, the province’s ride-sharing rules remain unclear. Following years of debate and delays, B.C. will begin accepting applications for wannabe ride-share operators in the province on Sept. 3. But the province’s Passenger Transportation Board (PTB) is still working out final details regarding fares, boundaries and the number of vehicles.

“We’re waiting to see how the last mile of regulations look, then [we’ll be] onboarding drivers so we can effectively launch the service,” Lyft B.C.'s General Manager Peter Lukomskyj said in a phone interview. 

Meanwhile, the company’s main competitor Uber said it’s still assessing if the province will enable “true ride-sharing” before applying, according to a statement by Michael van Hemme, Uber’s head of Western Canada. 

Despite Lyft’s optimism on B.C.’s ride-hailing market, a number of major roadblocks still stand in the way. Here’s a look at some of them:

 

1. Driver supply hindered by commercial licensing requirement

All ride-hailing drivers applying to operate this fall must have a Class 4 commercial licence, a requirement that calls for additional testing and a doctor’s exam. So far, only B.C. and Alberta have this regulation, and critics say this rule makes it difficult for ride-hailing companies to operate given the limited pool of qualified drivers.

“It’s quite absurd,” said Lukomskyj, who took a Class 4 test, which comes with a manual that teaches drivers things like the turning radius of a semi-trailer truck and how many standing passengers are allowed on a bus.

“It’s not something that makes ride-sharing any better,” Lukomskyj added, pointing out how many party-goers on Vancouver’s Granville Street are left stranded on Friday and Saturday nights. “We don’t have that surge level of [driver] supply.

“And what about the safety of those patrons?”

 

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2. The strong voice of B.C. taxi groups 

Taxi groups pose another hurdle for ride-hailing services in the province.

“The taxi association has been extraordinarily successful in getting the government to put a cartel or monopoly on this,” said David Gillen, director of the Centre for Transportation Studies at UBC’s Sauder School of Business. “Significant political donations are provided by these taxi companies.”

Among those that will apply to operate this fall is Kater, a local tech company that launched an app and partnered with the Vancouver Taxi Association for use of some of their existing licences.

Critics suggest Kater was given an unfair political advantage to operate before the ride-hailing legislation was enacted because of the involvement of a former NDP party member in the company, as reported by the Vancouver Sun.

“It’s just not a level playing field,” said Mohan Kang, president of the B.C. Taxi Association, whose members are not affiliated with Kater. He also points out that while ride-hailing drivers can work anywhere in Metro Vancouver, his 17 members in the area are constrained by municipal boundaries that often lead to lost revenues on empty trips going to or from their home base.  

 

3. B.C. could continue to take its time

Vancouver has a “unique opportunity” to launch ride-hailing services right, according to Kater CEO Scott Larson.

“Other jurisdictions are re-examining how they’re allowing ride-hailing,” he said, pointing out how countries like France, Germany, Portugal, and Denmark implemented rules that ultimately caused ride-hailing companies to leave those markets, either in part or whole.

“San Francisco is examining additional taxes and fees for ride-hailing companies in order to offset congestion and infrastructure usage,” Larson added.

Garland Chow, emeritus associate professor of operations and logistics with UBC’s Sauder School of Business, says thinking through the various insurance scenarios around ride-hailing is also causing major delays. “The government has taken a measured approach with a sharp focus on the public’s overall safety,” he said.

ICBC, a provincial crown corporation and the country’s only for-profit public auto insurance provider, stands to lose or earn a lot of money, according to Chow. 

“If drivers can’t read a handbook or take an extra course, I’m glad we require a Class 4 licence,” Chow said.