The Indian government this week called for all unregistered taxi services to halt operations. The order came after the reported rape of a woman by a driver for the company Uber in the capital New Delhi. Uber uses a mobile app to link drivers and people seeking a ride.
The federal government in New Delhi ordered a halt to all taxis using ride-sharing apps because they do not meet local requirements. The government also has sent a notice to all states asking them to halt unregistered taxi services.
A statement from Uber said the company will "work with the government [of India] to establish clear background checks currently absent in their commercial transportation licensing programs."
Transport Minister Ntiin Gadkari said the ban was not the answer saying the rules needed to be improved.
The incident and resulting government action has brought attention to the issue of rules for mobile service businesses. The issue has grown more important with the expansion of what is called the "sharing economy." The question is, "How should new companies entering an established market be regulated?"
Uber has been expanding quickly. The company says it operates in over 200 cities and over 50 countries around the world. Its fast growth has led financial experts to value the company in the billions of dollars. However, Uber's expansion has placed it in competition with existing taxi services and caused some cities and countries to ban the ride-sharing service.
Uber has faced or is facing bans in Germany, Spain, India, and Thailand. In the United States, opposition to the ride-sharing service is widespread but uneven.
In Pennsylvania, for example, UberX, a low-cost ride-sharing service from Uber can operate anywhere except the state's largest city of Philadelphia. In Philadelphia, Uber Black, a more expensive limousine service from Uber, and other taxi services can legally operate with licenses from the Philadelphia Parking Authority.
In November, Philadelphia tried to sell medallions, which are licenses to operate a taxi in the city. News reports suggested many medallions were not sold because of Uber and similar competitors.
Vince Fenerty is the director of the Philadelphia Parking Authority which regulates taxis in the city. He says UberX is unfairly, and illegally, entering the taxi service market in Philadelphia without following the same rules as companies that hold a medallion.
"We have a medallion cab system. No place else in Pennsylvania has a medallion cab system. So they're not competing with someone who by statute had to buy a medallion to operate their business."
Mobile applications let businesses sell directly to their customers. The so-called sharing economy takes this a step further. Individuals can rent things they own such as a car or an extra room to people anywhere using mobile apps. Even payment is taken care of through an app.
The issue is that these transactions are not regulated the way taxi services or hotels are. Critics say they can be unsafe. Vince Fenerty calls the unregulated taxi services "hacks."
"They are basically running what's called a hack taxicab service. A totally unregulated service which brings into question the safety of the passenger, the credentials of the driver and the mechanical workings of the vehicle. They submit to nothing."
Uber says on its website that every ridesharing driver is investigated using a criminal background check. The company says it reviews each driver's motor vehicle record. But in the reported case in India, the company is accused of not performing a check of the driver's criminal record.
Uber started in 2009 in San Francisco, California. Its competitor Lyft also started in that city. But as ride-sharing businesses like UberX enter new markets, they increasingly face local public safety laws overseeing their service.
This past week, the city of Chicago approved new rules to create a mobile app to assist taxi services licensed by the city. And New York is considering a similar measure as the answer to the new sharing economy.
I'm Mario Ritter.