RESEARCHED BY: MAGANDIA, ABDUL JOMAR P.

Uber/Grab:

Transport Network Company or TNC is defined as an organization whether a corporation, partnership, or

sole proprietorship, that provides pre-arranged transportation services for compensation using an
internet-based technology application or a digital platform technology to connect passengers with
drivers using their personal vehicles

[DOTC D.O. No. 2015-011]. e.g. Uber and Grab.

The TNC may or may not have been granted a Certificate of Public Convenience (CPC). If it is a holder of
a valid and current CPC, it is known as a common carrier. Otherwise, it is classified as a land
transportation service contractor.

The Partners (owners of the vehicles used in transporting passengers) forming part of the network of a
TNC, may or may not be a common carrier, depending on whether the Partner(s) itself/themselves are
holders of a CPC. A mere Accreditation given by LTFRB is not an equivalent to a CPC and will not make
said holder a common carrier. If the Partner is a holder of a CPC, said Partner is a common carrier.
However, if the Partner is not a holder of a CPC, said Partner is merely a land transportation service
contractor [BIR RMC 70-2015].

The term “utility” in the label for Uber and related services is not an accident. The best way to find
regulatory models for this emerging class of powerful platforms is to look to the way public utilities are
treated. What actually makes something a “utility”? There is great confusion about the term. The most
familiar examples of utilities are public and partially-public services such as electricity and water.

In general terms, utilities share several characteristics:

 Societally significant markets

 “Connection” infrastructure
 Tendency toward monopolies
 Personal information via data exhaust

Under these criteria, Internet-enabled network services bear many of the indicia of utilities. Uber, for
example, provides transportation functionality that could be, for many, essential to daily life (especially
where it reaches a scale that displaces competing forms of transportation in local areas). It stitches
together a virtual network of riders, drivers, mapping, payments, and other functions into an integrated
platform. Though the market is still developing, Uber has a dominant share in most cities where it
operates, with both traditional taxi operators and smaller rivals such as Lyft struggling to maintain
footholds. It also collects extensive information about riders’ locations and activities as an outgrowth of
its business. These factors alone do not mean that Uber is harming the public interest or even that it has
reached a sufficient scale to justify regulatory scrutiny. They simply imply that Uber can be accurately
classed as a utility, which is the starting point, rather than the endpoint, for regulatory analysis. Other
Internet-enabled networked services have similar attributes.

One of the signal attributes of utilities is their regulatory status. As previously noted, utilities are firms
that are, in the language of nineteenth and early twentieth century jurisprudence, “affected with a
public interest.” In some cases, utilities are operated by governments or other public authorities, but
they can also be organized as private, for-profit firms. In those latter cases, the public significance of the
utilities is addressed through special regulatory benefits and obligations. These can take many different
forms based on the market sector and structure.

The past several decades have witnessed a dramatic shift from topdown regulation of economic activity
toward approaches focused on competition and market forces. As a result, utility regulation faded to the
margins of public policy conversations. It became associated with a particular heavy-handed, monopoly-
friendly, bureaucratic approach, which was viewed with increasing skepticism. However, the concept of
utility regulation can be distinguished from its historical implementations. The rationale for distinctive
treatment of utilities remains operative

Common carriage is a legal construct that recognizes the need to treat utilities differently. The category
is not limited to monopoly telephone networks or even to communications providers. It has been
applied to stage coaches, taxis, trucking, gas pipelines, and even roller coasters, cruise ships, and
elevator operators. Even within federal communications law, common carriers are defined elliptically,
leaving the boundaries of the category disputable. A “telecommunications carrier” is a common carrier
if, and only if, it is providing “telecommunications services,” which means offering telecommunications
to the public for a fee. This circular definition incorporates an important concept: a common carrier
must hold itself out as such. Private services are private, but if a company chooses to provide fee-based
offerings to the public at large, it may take on corresponding obligations.

In 2014, the Maryland Public Service Commission, parsing the definition in its state statute, concluded
that Uber was, in fact, a common carrier under Maryland law. The key requirement was that it “engaged
in the public transportation of persons for hire.” Though Uber styles itself as a software platform used
by independent drivers to deliver private services, its entire value proposition derives from operations
as an Internet-enabled, coherent virtual platform. Whether or not the Maryland decision is upheld, it
raises important questions. Public platforms that provide a significant share of important public services
necessarily raise questions of public policy. The domain of common carriage is where such questions
have long been debated
THE Land Transportation Franchising and Regulatory Boards (LTFRB) recent
encounters with ride-sharing applications, Uber and Grab, generally drew flak
from the public. While a compromise was eventually reached, questions on LTFRBs
power to regulate this new industry and on the governments ability to keep up
with technological change have surfaced once again.

Must the likes of Uber and Grab conform to the existing law or must the law adjust to technological
innovation? This question reminds me of Judge Frank Easterbrooks famed law of the horse. He
cautioned lawyers from unduly carving out a new field of law just because of the perceived gray areas
brought about by advances in technology. He said that the best way to learn the law applicable to
specialized endeavors is to study general rules.

THE GENERAL RULES

The authority to regulate the operation of public land transportation vehicles and grant franchises or
certificates of public convenience (CPC) belongs to the LTFRB. A CPC is a government authorization to
operate a public utility or a public service. The Supreme Court defines a public utility as a business or
service engaged in regularly supplying the public with some commodity or service of public
consequence. Its principal determinative characteristic is that of service to, or readiness to serve, an
indefinite public or portion of the public which has a legal right to demand and receive its services or
commodities. However, the act of offering services or goods that promote public good and serve public
interest does not automatically make the business a public utility.

On the other hand, public service is defined as including every person who owns, operates, manages
or controls, for hire or compensation, and done for general business purposes, any common carrier
Common carriers are those engaged in the business of carrying or transporting passengers or goods
or both for compensation, offering their services to the public.

THE ACCREDITATION OF UBER/GRAB

In response to the clamor of the taxicab operators for the regulation of Uber and Grab, the DoTr made
a new classification of public transport service known as Transport Network Vehicle Service (TNVS).
These refer to the Uber/Grab partners/drivers/vehicle. A Transport Network Company (TNC) is the
entity that provides pre-arranged transportation services for compensation using Internet-based
technology application or digital platform technology to connect passengers with drivers using their
personal vehicles. Uber and Grab are the TNCs. The TNCs business model, which capitalizes on
disruptive technology, allows it to create this dichotomy in the transportation service.

TNCs are considered as Online-Enabled Transportation Service, relying on internet connection, mobile
application, and geo-location technology. This means that their passengers are limited to those who
use the application and have a registered account with the TNC. When a passenger requests a driver,
the application pairs the passenger with an available and willing driver. The price in turn is determined
by the TNCs own computation and made known to the potential passenger.

If the TNCs merely pre-arrange the transportation service (so that passengers in need of a ride and
drivers who are willing to render service can meet at a price set by the TNC itself), then arguably, the
TNC is not operating a public transportation service. Hence, it is not a public utility. But, TNCs are
required to accredit with the LTFRB so that the state can properly exercise its regulatory powers to
promote public safety. This was also the view of the California Public Utilities Commission.

How about the TNVS?

In US v. Kutz (1916), the US Supreme Court refused to consider that part of a taxicabs business
which consists in furnishing automobiles from its central garage on individual orders generally by
telephone, as a public utility. The TNVS may argue that they are similarly situated because their
contract of carriage appears to be undertaken by special agreement and therefore the public has no
legal right to demand its services.
However, the LTFRB does not see it this way.

While it described the TNCs business as [p]roviding pre-arranged transportation services -- and not
merely providing the platform to pre-arrange the service -- only the TNVS is treated as public utility.
Yet, it required the TNVS to accredit with an accredited TNC and to maintain such accreditation in
good standing in order to continue operating legally. In other words, the LTFRB considered the
dichotomy in determining the extent of its authority even if, by its own definition, the TNCs
technology-enabled role in the process is indispensable in delivering the service.

The potential of new technologies to change the way we deal with our everyday affairs and its impact
on existing legal understanding makes law and technology a very interesting topic. While the
existence of technology law as a distinct legal field is debatable, developments in this area cannot be
simply ignored as it continues to challenge our traditional legal understanding and the existing legal
framework.

While state regulation of technology-driven businesses and activities at the administrative level is
always viewed reluctantly, regulators (and even policy makers) can consider this as opportunity to
innovate to deliver better public services within the confines of their mandate but at the same time
carefully ensuring that fundamental rights are respected. Inasmuch as the law should not stifle
innovation, the innovation if possible should also be able to mold itself under existing law.