The inside story of how the Uber-Portland negotiations broke down

Update 12/18: The Wall Street Journal is reporting that Uber has agreed to “suspend operations in Portland for three months while the city works to update cab regulations.” This is the story of how the two sides came to an impasse.

Portland and Uber seem like an ideal match of city and startup service. Like many West Coast cities, Portland isn’t dense enough to support blanket taxi coverage, but does have a density of tech-savvy residents who are not afraid to use their smartphones and credit cards. Portland passed landmark legislation legitimizing Airbnb hosts, and the city’s mayor, Charlie Hales, recently wrote an op-ed in which he said “companies in the sharing economy that care about Portland, and that want to operate here, should be welcomed.”

It is perhaps surprising, then, that Uber launched in Portland on December 6 without the city’s approval—and according to a source in City Hall, without even reaching out to city officials to tell them they were doing so. The city, in turn, hit the company with a lawsuit. Uber continues to operate without the city’s consent.

So, what happened? Uber has been scrapping with cities through every step of its expansion. Uber has run the same playbook over and over: Launch without permission and get customers. Then, deploy those customers to lobby the city on their behalf, while they unleash professional lobbyists as the other half of their political pincer maneuver. Dozens of local governments have ceded to these actions and Uber now operates all over the country.

The story that Uber likes to tell is that cities like Portland are “taking a stance against innovation and protecting the status quo.” They like to paint cities as protectors of the entrenched interests of corrupt cab companies. Meanwhile, cities portray Uber as a rogue outfit that refuses to comply with simple directives or respect the basic laws of their cities.

But the reality of the fight between Uber and Portland is messier than that. For one, the city’s dealings with Airbnb cut against the idea of a luddite city afraid of the sharing economy. Second, while Uber and the city might have first started talking in the summer of 2013, their actual contacts have been limited. It wasn’t that negotiations broke down, but that they barely got started, according to the timeline of events I’ve put together through interviews with a city official and the Uber general manager for the West Coast, Brooke Steger.

The other key consideration is that Portland officials know that their cab system isn’t healthy. Unlike the similarly sized Washington, DC (population: 646,000), where there are 7,000 cabs, Portland (population: 609,000) has a mere 460 cab permits. And the current Portland taxi system already isn’t working well for cab drivers, either. A 2012 labor market report found that they had an average net hourly income of $6.22 and typically worked longer than 12-hour days.

“We look at our taxi cab system and it’s not working very well,” a City Hall staffer told me. “The drives are treated poorly and there aren’t many cabs around. It’s not a good system. They keep saying we’re trying to protect this antiquated system, and nothing could be further from the truth.”

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Uber arrived in Portland on July 19, 2013, bearing gifts. They organized on-demand ice cream delivery throughout the city, as a kind of friendly shot across Portland’s bow. Over the next couple months, Uber’s head of corporate communications, Andrew Noyes, made contact with city officials, exploring the possibility that Uber could launch its black car service in Portland, as was typical for the company back then.

In September 2013, Uber’s head of global public policy, Corey Owens, presented to the Private-for-Hire Transportation Board, arguing that Uber Black would make sense for the city. Specifically, Owens asked Portland to change three regulations, so that the company could launch its black-car service. Portland requires that an hour pass between booking a black car and its arrival, which is roughly the opposite of how Uber’s black car service works. So they wanted that regulation changed. Uber also requested that Portland change its pricing scheme, which required that black cars be 35 percent more expensive than cabs. And finally, they wanted the ability to deploy black cars that were not “large, expensive vehicles,” as required by the code.

In a long meeting, the board members and local cab drivers and affiliates peppered Owens with questions and challenges. The board discussed a motion to vote the company’s requests up or down, but it ultimately did not come up for a vote and no decision was made on the regulatory changes. Board member Kathleen Butler told Owens, “It is very unusual that we get a request for a code change and it’s brought before the board in such a short period of time,” she said. “Code changes are usually a much more lengthy process with numerous public hearings. There is a very strong concern that we have adequate time to get more information.”

Conversations between Uber and the city stalled in December 2013, and Uber’s Pacific Northwest crew, based in Seattle, decided to focus on markets—mostly in Washington State— where they had an easier path to launch, like Spokane. In July 2014, Uber launched in Vancouver, Washington, which is just across the Columbia River from Portland, and more of a suburb than a fully independent city (I grew up a few towns north of Vancouver in the exurbs). As ridership built in “the Couv,” Vancouver’s local half-ironic nickname, Uber began to consider making a move into Portland. They trotted out the ice cream delivery stunt again, and hired some new lobbyists to set up meetings with city officials.

This time around, though, they didn’t just want to launch Uber Black—which competes with towncar services—but UberX, which allows anyone approved by Uber to give rides.

Through August and September, Uber didn’t meet with city officials, but was, in Steger’s words, “actively engaging them.” But a city government—especially Portland’s, where individual city commissioners run local bureaus—is a many-headed beast. There are a lot of people to talk to. So, at a meeting on October 1, 2014, Frank Dufay, speaking for the Private-for-Hire Transportation Board, said that Uber had not made contact with the board since the September 2013 meeting.

Uber did have meetings with some city officials on October 6 and October 16. “The ask was pretty clear. We also pitched a pilot program. In many cities, there’ll be a temporary operating agreement. We also sent that to them,” Steger told me. “So not only did we supply them with model—or examples of—regulations that have worked in other jurisdictions, we also pitched a temporary agreement like we had in Spokane.”

Steger said that city officials told them they would take up the issue in early November. The city does not appear to have done so, at least publicly.

Meanwhile, Uber was moving ahead. Steger’s team, at the invitation of local mayors, launched in four suburban towns around Portland—Beaverton, Tigard, Gresham, Hillsboro. Of course, the most popular destination for riders in those towns was Portland, meaning Uber users could get into the city but not back out. Steger admitted that they knew this strategy would increase the number of Uber users who were dissatisfied in Portland—which would, in turn, ratchet up the pressure on the Portland city government. The city proper would be surrounded.

On December 1, Steger said she sent Transportation Commissioner Steve Novick an email asking for an update and showing them some of the data they’d compiled from the edge cities. The next day, she sent the same email to the mayor.

Later that week, Uber reached out to Mayor Charlie Hales through Obama campaign manager turned Uber lobbyist David Plouffe. The company wanted to in Steger’s words, “let him know what was going to happen—or what we were planning—to get his take on it and get his next steps and really be a partner.” But Hales was in an all-day land-use-planning meeting. And by the time Hales got back to Plouffe, a reporter had gotten wind that Uber was launching, and had called the city to ask what they thought of the plan. “We found out through press reports,” the city staffer lamented. “We got a call from somebody at the Oregonian.”

City officials were not happy, and they saw it as the latest sign of poor communication out of the Uber team.

“It’s not that we’ve sat down in rooms and worked through the issues,” the City Hall staffer told me. “They have not been that interested in trying to engage in our process. But I hope they will, if they think we’re serious.” The staffer said that Uber only had three or four contacts with the Transportation Commission over the last six months, which squares with Steger’s account of events. From first contact in July 2013 to December 2014 Uber launch, it appears company and city officials met officially, at best, a handful of times.

The whole negotiation was complicated by the fact that, although Uber first made contact with the city 18 months ago, the teams on both sides of the deal have changed. Andrew Noyes, the former communications staffer who began the Portland campaign, has left the company, and Corey Owens is no longer on the Portland frontlines. Pacific Northwest regional manager Brooke Steger and a different set of lobbyists are now dealing with the city. Meanwhile, on the Portland side, the Private-for-Hire Transportation Board of Review got moved from the city’s Revenue Bureau to the Transportation Bureau. That meant Uber had a new city commissioner (Novick) and a new set of staffers to contend with.

Of course, from Uber’s perspective, things look different. They’ve been waiting to enter the Portland market for 18 months. It’s not their fault that the local government reshuffled the taxi board—a board that is stacked with cab companies and drivers, by the way—into a different department. And since even Portland officials will admit that the city’s taxi system is broken, shouldn’t they be welcoming Uber with open arms?

The PR deck is stacked in Uber’s favor. They’ve got decades of anti-regulation and anti-government rhetoric to activate among editorialists, professional and amateur. And many people do legitimately love their service, even though they sometimes hate themselves for loving it. For some drivers, too, it provides work flexibility and extra money at a time when full-time employment can be hard to come by.

Let’s say, for sheer argument’s sake, that Portland officials really like Uber. Let’s say they even would like to have Uber in their town. Still, they need Uber to play by the rules, or else they’ve set a miserable precedent for the next Silicon Valley-backed corporation to run roughshod over their regulations. To Portland’s elected representatives, the way Uber has smashed its way into markets raises real questions about the nature of representative democracy.

“What Uber is doing is an insult to every law-abiding citizen,” Commissioner Steve Novick, who oversees the Portland Bureau of Transportation, told the Oregonian. “Everybody who applies for building permits, stops at stop signs, and obeys speed limits. Every restaurant that obeys health standards. If we let Uber get away with breaking the law, what would we say to ordinary citizens who could legitimately ask, ‘Which laws am I now free to ignore?'”

Portland city officials see for-hire cars as part of the city’s overall transportation system. As such, cabs and black cars agree to provide public, non-profit-maximizing service. They maintain wheelchair-accessible cabs in their fleets, offer 24-hour service, and submit to car inspections, background checks, and more.

“We’re really open to having different conversations about different ways to get around. Mass transit, bike share, and all these other things. We need to do it comprehensively and do it in a way that makes sense and not be forced into it,” the City hall staffer said. “Uber’s corporate culture is so campaign, win-at-all costs, as opposed to sitting down and working with us on how to make it work. It’s disappointing and ultimately it’s going to make for a messier outcome.”

The city of Portland worked out a new set of rules for black cars in 2009 through the Private-for-Hire Transportation Board. That board, as Owens noted in a 2013 blog post after his appearance, is composed not just of city officials, but people from the cab and black-car companies themselves, too. From Uber’s point of view, this feels unfair. But that is the nature of many such boards, which have historically—and to the distress of some progressives—produced business-friendly outcomes by working with, rather than against, regulated industries. (One of Uber’s strengths is adopting the pose of the underdog in every local fight, even though it is a $40 billion global corporation.)

The disruption that Uber brings to for-hire car markets doesn’t only affect the cab companies. From the city staffer’s perspective, Uber is threatening the livelihood of cab drivers who are working 12 hours a day and making $6.22 an hour.”We have to find something, but I’m not sure just unleashing Uber is going to make things better for the workers,” the Portland staffer told me. In San Francisco, the number of trips per cab dropped 65 percent between March 2012—when services like Uber and Lyft started to ramp up cab service—and July of 2014.

But from Uber’s perspective, the Private-for-Hire Transportation Board is carrying water for the larger cab companies, who have the resources and sway with city officials. As Uber’s Owens put it in a blog post after his appearance in Portland, “This is regulation by the taxi industry for the taxi industry,” he said. “Consumers’ interests are getting bulldozed by lobbyists, campaign contributions, and cronyism run amok.”

For one side, then, it’s about democracy and protecting vulnerable members of society. For the other side, it’s about letting consumers pick the way they want to travel and trusting the market. But what if the people really do want both Uber and the city to protect their fellow citizens and maintain democratic order? It’s a sadly precise incarnation of Robert Reich’s theory of Supercapitalism in which he argues that our consumer and citizen selves are increasingly at odds with one another.

And yet, although it may be an ideological collision of epic proportions, the Uber/Portland battle has been built on a basic foundation of lack of communication and simmering distrust. So, can the rift be patched up? Can corporate and consumer desire be squeezed into the Portland civic enterprise?

Uber’s Steger seemed conciliatory. “I think there are always multiple pathways to a solution,” she said. “In an ideal world, they would sign a temporary operating agreement with us and then create a set of regulations that are focused on consumer and public safety.” She welcomed the city to audit their background check, vehicle inspection, and insurance processes. As far as specific concessions Uber might be willing to make, Steger pointed to accessibility. “In some cities, we have an accessibility product on the app,” she said. “And in some cities, we pay a fee into an accessibility fund.”

But Uber is not willing to compromise on the core offering—a smartphone app that connects you with an independent contractor vetted only by Uber, who then drives you from point A to point B. And the city government may very well dig in its heels on the basic proposition of Uber and try to force the company to go through its rigorous regulatory process.

“We don’t have to sacrifice the basic concept of the rule of law in order to keep pace with innovation or to take advantage of the new business models that come with Internet access and smart phones,” Mayor Hales wrote in an Oregonian op-ed in the wake of the Uber launch. “We’ve proven that by figuring out how to legally accommodate Airbnb and other short-term rental services. We will do the same with the private for-hire transportation services as well.”

The odds of a city government victory might not be good. Uber has won in nearly every other American city it has tried to enter. Then again, Portland has always been weird.