Riding by the rules: the astonishing growth of ridesharing networks has policymakers asking how to ensure the road ahead is not only safe, but fair.

• Author: Shinkle, Doug
• Position: TRANSPORTATION

With the advent of Uber and Lyft, hailing a ride has never been easier. The popularity of these relatively new "transportation network companies" (TNCs) is disrupting the transportation status quo in the United States and around the world

Critics claim ridesharing services have an unfair advantage over taxis by not having to play by the same set of rules, regulations and licensing requirements.

The debate is capturing the attention of lawmakers as well. "Ridesharing companies are meeting a need," says Illinois Senator Antonio Munoz (D). "I am in strong support of the entrepreneurial spirit and innovative ways of creating jobs--as long as the service being provided is beneficial and safe for all parties involved."

Americans' use of these ridesharing networks has skyrocketed. Lyft and Uber, the two San Francisco-based giants in the transportation network world, along with others such as SideCar, Get Taxi, Hailo, leCab and Taxi Mobility, offer a convenient, low-cost way to get around. Appealing to users is their simplicity. The networks consist of a smartphone app and willing drivers.

From a passenger perspective, catching a ride with one of these services is the peak of convenience. After downloading the free app onto a smartphone and entering your credit card information, all you do to summon a ride is enter your location. Voila! A driver using his or her own car heads your way, monitored in real-time on your phone. When the driver arrives, you climb in, state your destination, sit back and relax. No need to count your cash or worry about tipping--your credit card will be billed at a preset level. You'll even get the receipt on your phone, via text message.

Drivers for Lyft decorate their vehicles' front grills with a pink moustache. The business began in 2007 and now operates in more than 68 U.S. cities. Uber followed two years later and has proved to be a fierce competitor with an eye overseas. UberX (its low-cost option) now operates in 45 countries and 117 U.S. markets.

As these ridesharing networks grow, state lawmakers are faced with a billion-dollar question: How do we ensure the safety of passengers and the fairness of regulations without stemming the remarkable growth and convenience of these alternative transportation companies?

Uber, Lyft and others have given millions of rides in the past year, creating a strong, committed customer base that has served them well wherever and whenever a regulatory debate is brewing. Many political and business leaders are eager to embrace them as well, recognizing their benefits and appeal, especially with young professionals and millennials who prefer to have several transportation options. Uber has particularly rallied its customers to action, using positive public opinion to blunt any regulation the network believed could harm its operations.

California Assemblywoman Susan Bonilla (D) notes, however, that "encouraging innovative business models and achieving adequate consumer protection are not mutually exclusive goals."

The First Test Run

In early June, after some heated debate, Colorado became the first state to pass legislation that legalizes the operation of transportation network companies and creates a regulatory structure for the growing industry. Debate centered on a number of issues, including whether to require background checks of drivers for traffic violations and criminal behavior.

But the main point of contention was deciding what the proper insurance requirements should be for these new transportation networks. Insurance companies argued that the personal insurance drivers carry is not appropriate to cover commercial driving, which includes the "in-between" time when drivers are logged into their...