Waymo wants to offer robotaxis in California. But the state insists they be free

Nov. 1, 2019 6 AM PT

Waymo wants to deploy a robotaxi service for the general public in parts of California as soon as possible. But that’s unlikely, the company says, because California says it has to offer the service for free.

Last year, the California Public Utilities Commission allowed driverless “robotaxi” pilot programs in the state but banned permit-holders from charging fares. The ban is considered temporary but has no timeline. Some industry analysts say the uncertainty could put California’s reputation as the world leader in driverless technology at risk.

For the record:

10:46 p.m. Nov. 1, 2019A previous version of this post referred to the San Francisco Municipal Transportation Agency as the San Francisco Metropolitan Transit Authority.

The free-or-nothing mandate makes no sense to Waymo, the driverless vehicle arm of Google’s Alphabet, or to other driverless vehicle start-ups hoping to establish themselves in a new industry that could produce the biggest change in ground transportation since the invention of the automobile.

Waymo requires a “commercial path forward” before it can offer Californians the kind of driverless taxi service it’s already running across 100 square miles in Phoenix, according to George Ivanov, Waymo’s head of policy development and regulatory initiatives.

Without the ability to charge fees, Ivanov told the commission at an Oct. 22 hearing in San Francisco, “any expansion would be difficult” in the company’s home state.

In July, Waymo began a commission-approved pilot program to ferry Waymo and Google employees and guests through parts of Silicon Valley in driverless cars for free.

Waymo doesn’t need fare money to fund operations — Alphabet is an enormous profit machine, and holds more than $100 billion in cash. But Ivanov explained that experimenting with customer response to different fare structures is essential to building out the robotaxi business, which would be like Uber or Lyft but without a human driver.

Smaller companies hoping to grab a piece of what could grow into an industry worth hundreds of billions of dollars want to be able to charge fares too. “There are commercial goals we are working toward,” Bert Kaufman, head of regulatory affairs for Zoox, told the commission.

Based in San Francisco, Zoox is developing a driverless vehicle with plans to deploy initially in Las Vegas. Kaufman said it wants to offer the service in California but it can’t plan for deployment if it doesn’t know when it might be able to charge fares.

Experimenting with fare structures at different times of day and in different locations would help a company know where and when to begin offering a full-fledged commercial service, Kaufman said at the Oct. 22 hearing. “Regulatory certainty” is one reason the company might start out in Nevada, he said. It would help, he told the commission, “knowing that California is actually open for business.”

In California, the state Department of Motor Vehicles regulates vehicle safety and issues permits for driverless vehicle testing and deployment. The CPUC, whose main task is regulating utilities such as Pacific Gas & Electric, also oversees commercial transport services, including bus companies, limousine services, Uber and Lyft. It’s up to the CPUC to decide whether companies can charge fares.

The commission declined to make commissioners or staff members available for an interview. A commission spokeswoman pointed to a document issued in June 2018 that set rules for driverless vehicle pilot programs in California.

“The free rides will identify the pilot program as different from ordinary transportation,” the document reads, “and, therefore, will encourage the public to be more mindful of their experience and provide critical feedback to the commission and the permit-holders.”

Other driverless companies at the hearing — which included Cruise, Aurora, Pony.ai and AutoX — seemed baffled by the reasons given for banning paid driverless pilot programs.

“It’s very important we’re able to charge for our service not just for us but for the entire industry in California,” said Jewel Z. Li of AutoX, which is developing autonomous technology and robotaxi logistics systems in the U.S. and in China. It’s important, she said, to test “real-life sustainable business models.”

If companies eschew California for more welcoming states, the economic effect is likely to be small. In any case, it’s not the CPUC’s responsibility to consider economic growth in the state. In the past, some experts have lauded California’s cautious approach to driverless regulation. But “California runs a risk of losing some of its mantle of being the center of driverless vehicle innovation,” said Mike Ramsey, an automotive technology analyst at Gartner.

Ramsey also is interested in hearing more detail about the commission’s objection to fare charging. “This is not a safety issue,” he said. “This is about the capability of a company to recover some of the costs, if not to profit” from technology development.

Grayson Brulte, head of driverless vehicle consultants Brulte & Company, earlier this year moved his headquarters to the Miami area from Beverly Hills, because, he said, California’s bureaucracy is dragging its feet.

“The future was being deployed in Florida, so we relocated our company to Florida to be part of the future,” he said. Florida’s driverless regulations are either more lax or more forward thinking than California’s, depending on whom you ask.

Advocates for blind people and for small-business owners asked the commission at the recent hearing to allow fare charging. Only one person supported the idea of banning fares in pilot programs — a representative of the San Francisco Municipal Transportation Agency, who said the commission should first ensure the public interest is being served.

After the hearing, one company representative said the commission is taking too much time making decisions. The person asked not to be identified for fear of antagonizing commission members.

The CPUC issued its permit rules in June 2018. The October hearing, called a “workshop,” was the first public discussion held since then.

The Times asked the commission spokeswoman if there is a timeline for addressing the industry’s fare-ban complaints.

“As for next steps,” she wrote in an email, “we have committed to soliciting written comments.”