As Uber fights to maintain its technology company classification in India, the rest of the world watches

By Michael Carney , written on February 20, 2015

From The News Desk

Uber cars may be whisking passengers across major cities in India once again, after an alleged December rape by one of the company’s New Delhi drivers led to a temporary ban -- but the company still lacks the regulatory approval to do so. India's Minister for Road Transport and Highways, Nitin Gadkari, gave Uber and its local competitors until February 25 to rectify this situation before facing further sanctions.

At issue is whether Uber will be classified as a technology company or a transportation company under a pending Radio Taxi, or taxi aggregator’s license. As has been the case in the United States, Uber is seeking the designation of a technology intermediary, or platform. The company argues that because it does not own any vehicles or employ any drivers, but rather simply connects independent contractor drivers with consumer demand, it should not be regulated by existing transportation company laws. Indian authorities are having none of that.

"Though transport is a concurrent subject, I believe they are in the transportation business and should be governed by the existing laws under Motor Vehicles Act," Gadkari tells the Economic Times. "If print media from tomorrow only starts publishing news on the Internet, does that mean you should not be regulated in future? Same way such (online taxi aggregators) should come under the Motor Vehicles Act."

An unnamed Delhi transportation official echoed this point, telling the Times, "When a crime happens in a cab it's not a cyber crime, it's a physical crime. Such companies can't go scot free citing themselves just as technology companies.”

Uber resumed operations in early January, less than a month after the rape accusations, submitting a Radio Taxi application after making several enhancements to its security procedures, while promising still others. The company has created a special taskforce in India to focus on improving its driver verification and rider safety standards in the country. As part of this enhancement, the company has promised to work more closely with local police to re-evaluate existing drivers and to more-effectively suss out fraudulent identification documents and background information. The company also added an in-app ShareMyETA feature that allows a rider’s loved ones to track their real-time GPS location while in an Uber vehicle.

One area where Uber has been less compliant is with regard to the transportation administration’s insistence that it install a physical panic button in every vehicle on its network. Uber has argued against the practicality of such a solution, pointing out that many of its drivers work for competing radio taxi services and would thus need multiple distinct buttons in-car for each service. The company has suggested instead that it add a virtual panic button in-app or that the industry work with law enforcement to adopt a single universal panic button that alerts local police, rather than an individual transportation company, to an unfolding emergency.

But individual safety features aside, the larger battle being fought in India, as well as other global markets, is whether Uber-like transportation network companies can and should be regulated by existing taxi and transportation laws. Ask the companies and they’ll tell you that existing laws are a poor fit for their business. The problem, in many markets, is that these services have charged in and begun operating despite this lack of regulatory clarity. But when passenger rapes and assaults become a frequent occurrence, this regulatory ambiguity becomes more than a friendly misunderstanding.

Uber’s largest competitor in India, SoftBank-backed Olacabs, is facing the same application amendment deadline, but has already submitted additional details requested by the transportation department. A third competitor, NTL Taxi, has accepted the reclassification to a transportation company and is now licensed to operate within the country.

In a letter to Uber on Wednesday, seen by Reuters, Delhi regulators are describing next week’s deadline as a “final opportunity” for the company to submit its application and any supporting details like proof of a local office and customer support call center in the city. Authorities have promised to discard the company’s application if it does not comply with the requested changes within the deadline set forth.

An Uber spokesperson tells Reuters, "[we are] evaluating the deficiencies in its application in the time period provided by the government."

The clock is ticking on Uber's ability to operate in India, with the company risking losing access to its second largest global market, beyond the US. Meanwhile the criminal case against the accused driver is winding down and the company is facing a lawsuit in California brought by the victim of this alleged crime.

It’s rare that global regulators would look to India to set legal precedent for later use in other markets. But in this instance, if Uber and Olacabs are forced to capitulate to transportation company classification in Delhi, it could send ripples throughout the global on-demand transportation market.