The Bike-Share Company Trying to Bypass Cities

Most dockless bike-share companies want to work closely with cities. In Florida, Ofo has bigger plans that involve the state.
by | February 14, 2018
Ofo, the world's largest dockless bike-share company, is pushing for state regulations in Florida that would preempt local rules. (Shutterstock)

The world’s largest dockless bike-share company has repeatedly clashed with U.S. cities as it tries to get a foothold in the American market. But in Florida, it’s taking those disputes to the next level.

The company is pushing bills in Tallahassee that would require the state to regulate dockless bike-share companies and cut cities out of the process.

“The policy we’re trying to change is that we’ve run into about a dozen exclusive contracts with docking providers, Deco Bike in Miami Beach. They’re locked in [with those vendors] for a long time, which prevents other companies from coming in and providing services,” says David London, Ofo’s head of government relations in North America.

The move by Ofo, the Beijing-based company that has attracted $1.3 billion in venture capital, puts it squarely at odds with most of its major competitors, including LimeBike and Spin, which have been trying to curry favor with local officials rather than bypass them. The move also angers local officials across Florida who say that they are in a better position than state lawmakers to regulate their streets and sidewalks.

City leaders are worried that Ofo will flood cities with thousands of bicycles -- as they have in China -- and offer cheap rides in an effort to build market share and put their lesser-funded rivals out of business. State regulations would give cities little say in the type of bike share they want.

In South Florida, as in many places in the U.S., a handful of cities have entered into exclusive deals with dockless bike-share operators that bar competitors from operating there. They say those arrangements better serve their residents than wide-open competition.

But Ofo isn’t buying it.

“You’ve heard the same arguments [against] Uber in the last couple of years. This is no different,” said Ofo Florida lobbyist Brad Burleson at a legislative hearing last month. (Burleson also lobbies on behalf of Uber.) “This is docked companies that have exclusive agreements with certain cities that are trying to keep competition out, nothing more. ... Let Florida be open for business.”

But it’s not just docked companies -- that is, bike-share operators that require users to return their bikes to fixed stations -- that oppose the bill. So do other dockless bike-share companies. In fact, the national industry group representing the entire bike-share industry, including Ofo, is adamantly opposed to the legislation.

“I don’t know of any other bike-share company in favor of it,” says Samantha Herr, the executive director of the North American Bike Share Association (NABSA). “Some of their main [dockless] competitors like LimeBike, Spin and Zagster have been incredibly vocal against it. We’re not even split. There’s just one company that wants this, and everyone else is against it.”

But Ofo claims their legislation would benefit the whole industry.

“Every company has to do what it needs to do to benefit its investors,” London says. “We come from a different point of view. But if [other dockless providers] take a close look in the mirror, they’d end up in the same place as we are.”

“Like a lot of dockless providers, we are members of NASBA, but at the end of the day, the organization represents docking companies and an industry [that] is not well-positioned for the future,” he adds.

NABSA says their opposition is not about stopping new business models.

“This is not an issue about fighting disruption. NABSA is enthusiastic and encourages industry innovation. This is about providing safe, quality bikeshare that meets the needs of communities and upholds our standards for bikeshare,” Herr says.

“It's extremely important that the ability of local jurisdictions to uphold local, state and federal regulations regarding the public right-of-way are not compromised, especially when to do so will mean incurring additional costs. While NABSA fully embraces technological innovation in the bikeshare industry, we must include the voices of those who will be impacted the most -- the communities in which bike sharing happens,” she adds.

The dockless debate turns some traditional arguments on their head.

Most industries (with the notable exception of the insurance industry) don't actually prefer to be regulated in a piecemeal fashion. And, indeed, the bill’s House sponsor, Rep. Jackie Toledo, argued at the hearing that imposing different rules for different cities could stymie the spread of the new bike services and frustrate customers. Riders who begin their journey in one city and end in another may not be able to park their bikes legally under the current city-by-city regulations, she said.

Bike-share operators, though, say they prefer working with cities.

Local officials, Herr says, know best about the needs of their residents and the peculiarities of their cities. Cities also bear the cost of oversight and enforcement of bike-share programs, so they should have a say in determining what those costs are going to be. And local governments are responsible for managing the rights of way, particularly when it comes to ensuring that people with disabilities can use sidewalks and have space to load onto wheelchair-accessible vans, she says.

“When it comes to planning, implementing and executing a bike-share system, local decisionmakers need to have authority over how that happens in their jurisdiction,” Herr says.

That’s not to say the industry group doesn’t want any type of state regulation. In fact, it supports efforts by the cycling advocacy group People for Bikes to change state laws so that electronically powered bicycles (often called e-bikes) are regulated more like bicycles than motorcycles. But it objects to the broad preemption in Ofo’s Florida legislation.

“This is not about being anti-state regulation at all,” Herr says. “It’s just a bad bill.”

The Florida League of Cities is also fighting the proposals.

“This bill is not needed. There is not a problem now,” says Jeff Branch, a lobbyist for the group. “This is one vendor who wants to come in and turn the market over.”

The details of the legislation have changed as companion bills have made their way through House and Senate committees. But many of the provisions Ofo has been pushing would make statewide standards that are less stringent than local regulations that are now in place, Branch says.

For example, Ofo called for requiring the bike-share companies to have $500,000 of liability coverage, but the lowest amount that a Florida city now requires is $1 million, he says. And then there are the fines cities can charge companies for not picking up damaged bikes or moving bikes that obstruct rights of way. Miami currently charges companies fines of $1,000 a day per bike that’s not taken care of; Ofo’s legislation would set a statewide fine of $10 a day per bike.

London, Ofo's top lobbyist, stressed that cities could still regulate dockless bike-share companies under the legislation. They could, for example, specify where bikes could or could not be parked. But cities would have to regulate dockless bikes the same way as all other bikes. Ofo would still work with city officials to help decide where to move bikes to and from to meet demands, and the company would share some of its information with cities to help make transportation decisions.

But city regulations like caps on the number of dockless bicycles allowed can punish high-performing companies for the shortcomings of its competitor, London says. Ofo and a few of its competitors can actively rebalance bikes, repair them and move them out of prohibited areas. Smaller competitors can't handle those responsibilities, he says. But he expects the industry will “weed itself out” in the next year or two.

“The real issue is quality over quantity,” London says. And what should cities do about the problems caused by unresponsive bike-share operators? “It’s how the free market works.”

Ofo’s top concern is fighting the exclusivity arrangements that only allow one bike-share company to operate in a city. The Florida legislation would instantly invalidate any of those existing arrangements in the state.

The company complained when San Francisco signed an exclusive partnership with JUMP, an Ofo competitor. Ofo wrote to express its “great surprise and concern,” along with its “strong disappointment” of the “opaque permit granting process.”

Ofo is also one of several dockless bike-share companies that have begun serving Dallas, Texas, which has not imposed regulations on the new services. That’s led to an influx of bikes -- and plenty of complaints about bikes that are damaged, abandoned or just left in the way.

“If Dallas does decide to impose regulations,” Ofo wrote city officials recently, “we ask you to engage the dockless operators and cycling public an a transparent and inclusive decision making process.”

“Our greatest concern,” added Everett Weiler, Ofo’s general manager in Dallas, “is that regulation will impair the ability of responsible operators to provide a much-needed service to residents and visitors but fail to prevent damage caused by the less conscientious among us.”

But Ofo's London says the Florida situation stands out.

“In Florida there have been unique circumstances with current agreements that have taken place,” he says. “As it stands today, we have no plans to run bills in other states.”

Ofo’s pugilistic approach stands out among its competitors, but it wasn’t too long ago that other major players were trying to avoid city regulations as well.

New York City sent Spin a cease-and-desist letter when the California-based company tried to launch there last summer. At nearly the same time, Spin published a blog post complaining about “rogue (often, foreign) companies attempt covert deployments in Miami and San Diego, and engaging in behavior that is disruptive to local communities,” referring specifically to LimeBike and Ofo.

The bike-share industry, though, developed a code of conduct last year that calls for operators to value “community first.”

“Bikeshare systems must reflect the needs and requirements of each community in which they operate,” the NABSA code states. “This means that in addition to being safe, reliable and user friendly, they must also comply with all applicable local, state and federal laws and regulations. All operators and prospective operators should be respectful of existing local efforts, agreements and processes.”

NABSA members that do not comply with the code of conduct can be suspended or expelled from the group.

This story has been updated to include comments from Ofo's David London and a response from NABSA.