November-December 2015 | Featured Article

Barwood vs. Uber

Barwood owner Lee Barnes is in the battle of his professional life with Uber.

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Taxis often sit idle at Barwood’s White Flint Industrial Park headquarters. Photos by Lisa Helfert.

Lee Barnes wasn’t happy at all. The president and owner of the county’s largest taxicab company had lobbied councilmembers individually, and had sat patiently in the meeting room, letting others do the talking, as the Montgomery County Council slogged through a public hearing last December and six work sessions this year. Now, he’d had it.

It was July 21. The council had just passed a bill it promised would “level the playing field” between the county’s established cab companies—such as Barnes’ Barwood—and Uber, the new unruly kid on the block that claims it’s not really a cab company, just a technology vendor, and therefore cannot be regulated. So, after huddling with his advisers in the council cafeteria, the 62-year-old Barnes spoke his mind.  

“I think the taxi industry—fleets, individual owners and drivers—is worse off,” he said. “The council hasn’t done anything to make the industry more competitive. Uber is more successful not just because it has the app, but because it has [billions] to take on anybody. It’s a corporate bully.”

Barnes, determined to continue the company his father founded more than 50 years ago, has had a tough few years. In addition to fighting Uber and other transportation network companies (TNCs) such as Lyft, he’s been warring with his own drivers over such issues as the lease terms he requires on cars he owns, including daily rental rates of $100 or more, and credit card charges that the drivers argue are excessive. The conflict has led some drivers to switch to Uber and others to form a union affiliated with the AFL-CIO: MontCo Union Taxi, which is creating a co-op to compete against both Uber and Barwood.

Second-generation Barwood owner Lee Barnes.

The new legislation may indeed level the playing field for taxi drivers, but it probably doesn’t for companies like Barwood. According to the new law, the county will now decide how much taxicab companies can charge drivers to rent their cabs. The bill also adds 100 new passenger vehicle licenses (commonly called PVLs; the equivalent of New York City’s medallions) to the 770 the county had allowed.

Half of the new PVLs are reserved for the co-op; 25 are to be split up among the three smallest cab companies operating in the county; and 25 for other, unaffiliated drivers—a new category, since all drivers before now needed to be affiliated with a fleet. The bill also allows cabs to be any color and to carry less conspicuous dome lights—in other words, to look less like cabs and more like, well, Uber.

Despite the changes in the law, it’s a tough landscape for nearly everyone in the industry, except perhaps for Uber, which says it has some 12,000 drivers roaming the Washington, D.C., metro area just waiting for the next online request for service.  

All of this matters to the riding public. Not only to those who profess to love Uber, including legions of millennials, but also to the segments of society to which Uber does not cater, including the wheelchair-bound; up-county residents; and people without cellphones and credit cards, such as the low-income elderly.

“It is a new world,” declared Councilmember Roger Berliner, transportation committee chair, after the July meeting. “A lot is changing. We’re trying to strike the right balance. Nobody is going to be happy.”         

The taxi business used to be pretty simple. You needed a ride, you called or hailed a cab. For drivers, it embodied the American dream, the notion that anyone who worked hard could do well. At least that was the philosophy of Harrison Eugene Barnes, a World War II Army veteran from Taylorsville, North Carolina.

After the war, like a lot of GIs from rural America, he came to Washington, where he and his brother, Harold, owned country music bars and restaurants, and drove cabs.

Depending on the hour and the day, anywhere from four to 20 dispatchers are on duty at Barwood headquarters.

By the mid-50s, the District was regulating its growing number of taxis, and the Barnes brothers looked for less-plowed pastures. They found them in wide-open, unregulated Montgomery County. “Everyone heard Montgomery was better,” says Lee Barnes, Harrison’s son.

So, in 1958, the brothers started Montgomery Cab next to the Tastee Diner on Woodmont Avenue in Bethesda. In 1960, Harold left to sell used cars. Henry Woodfield, a Ford dealer in Damascus, took his place and threw in some 60 vehicles. In 1964, Barnes and Woodfield became Barwood.

Harrison Barnes owned a light-blue 1964 Thunderbird. At the time, most Montgomery County cabs were black, so the senior Barnes chose light blue to distinguish his. Would Barwood ever change its color? “No way,” his son says.

Barnes says that some nights, business is off 50 percent compared to what it was before Uber.

Lee Barnes grew up in the Wyngate neighborhood of Bethesda off Old Georgetown Road, not far from where he lives now, and graduated in 1971 from Walter Johnson High School. As a kid, he rode often with his father, who, in addition to owning the company, drove cabs. He remembers his dad giving him a dime each time he opened the door for the “little old ladies” to whom he gave rides.

During the summers, Lee Barnes worked in the cab company’s dispatch room and garage, in an old house at 8215 Wisconsin Avenue that had rental rooms for drivers. As a teenager, he cleaned cabs and answered phones, experiences that taught him the importance of customer service. “You have to learn how to read your customers, their wants and expectations,” he says.

Barnes was studying accounting at the University of Maryland and driving a cab to make money when his father suffered a heart attack in October 1974. Barnes dropped out of school the next day to help run the business, and the two worked together until Harrison Barnes died in 1983 at the age of 63.

“Washington is a town of movers and shakers, and I’ve had my share as a driver,” Barnes says. “When I drove, [presidential adviser] Clark Clifford was one of our regulars, and he always asked for me. He was a really good tipper. I drove [television news commentator] Eric Sevareid, [AFL-CIO President] George Meany, [columnist] George Will. I drove [former Vice President] Hubert Humphrey.”

Barnes is proud that his father hired the first female and African-American drivers in the 1950s, and that he refused to cater to the Southern sensibilities of some of his white customers. “In 1965, 1966, you’d get [white women] who’d ask not to have an African-American driver. My dad would say, ‘Be polite, say no, we can’t do that.’ ”

In 1970, Barwood moved its headquarters to Metropolitan Avenue in Kensington, near the train tracks. Twelve years later it moved to 4925 Nicholson Court in Kensington and then in 1995, moved again, this time next door, where it’s been ever since. The 3-acre site, on a cul-de-sac in White Flint Industrial Park, encompasses a sea of light-blue Barwood cabs, a repair shop and a two-story brick office building.

Office walls and hallways are adorned with family and Barwood photos. Upstairs, a former locker room is now a prayer room to accommodate the company’s large contingent of Muslim drivers. The call center on the ground floor is a warren of 16 cubicles. Four to 20 dispatchers are on duty at any time, depending on the hour and day.

Over the years, the driver demographic has changed from all white to a rainbow of colors and ethnicities. Barnes says the company often sees an influx of drivers from countries that are experiencing upheavals. In the late 1960s, Iranians began driving; in the 1970s,
Nigerians; in the 1980s, Afghans; and in the 1990s, Ethiopians. Today, most are African immigrants, many of them
well-educated and happy to be in America.

Barwood got to be the leading company by buying up others, but the road hasn’t always been smooth. A 2006 traffic accident involving a Barwood cab resulted in a $3 million judgment—and bankruptcy in 2007. To repay its debt, Barwood persuaded the county to allow it to sell up to 250 of its PVLs to its drivers at an average price of $62,000, according to Barnes. To buy the PVLs, many of the drivers took out loans from Barwood that they’re still repaying.

Barwood retains 300 PVLs, plus 159 affiliated drivers with their own PVLs. Regency Cab is next with 113 PVLs and 22 affiliates, followed by Action Taxi with 62 and 17, Sun Cab with 60 and 11, and Orange Taxi with 14 and 12. Currently, there are no independent cab drivers in the county, but that’s scheduled to change by Jan. 1, 2016, under the new law.

No sooner had Barwood begun to emerge from bankruptcy than a new threat appeared: Uber. The company promised drivers they could earn more by using its Web technology to lure customers—without having to meet stringent state standards applied to traditional taxis and drivers.

Many Barwood drivers who did not own PVLs are now driving for Uber. This move to Uber has left anywhere from 50 to 200 Barwood cars idle, depending on the time of day and who’s counting. Since Barwood still owns the PVLs on these vehicles, no one unaffiliated with the fleet can use them. Uber drivers, of course, don’t need them.

“Some nights our taxi business is off 50 percent,” compared to what it was before Uber, Barnes says. “We’ve probably lost 75 or 100 drivers. They go [to Uber] because there are none of the regulations. Nobody’s ticketing them [$200] for not filling out a paper manifest.”

Launched in 2010 in San Francisco, Uber quickly spread to cities around the country—and beyond. Its expansion sparked controversies, from riots in Paris and Mexico City to outright bans in South Korea, the Netherlands, Romania, Berlin and Geneva.

Uber’s unregulated entrance into regulated markets also led to an ill-fated effort by New York City Mayor Bill de Blasio to limit its number in Manhattan. It has even become an issue in the 2016 presidential campaign, with Hillary Clinton denouncing, without naming Uber, the “gig economy” that she says denies rightful benefits to workers. Others, primarily Republicans, have praised the company’s entrepreneurial free-market spirit.

Uber driver Richard Sassoon says he doesn’t drive for money; he does it to meet interesting people and socialize.

Meanwhile, lawsuits have been filed against Uber from coast to coast. In California in June, the state labor commissioner ruled that a former Uber driver was an employee entitled to reimbursement for past expenses, and not an independent contractor merely using its digital platform, as Uber maintains. Uber is appealing the ruling. In August, a separate California agency ruled that another former Uber driver was an employee, eligible to receive unemployment benefits.

Cashless payments from riders go to Uber, which returns 80 percent to the drivers. Uber also sets the rates through a “dynamic pricing” strategy that includes “surge prices” pegged to supply and demand. Riders rate drivers on a scale of 1 to 5, and Uber can essentially fire those who are low-rated. Drivers also rate riders, and can steer away from low scorers.

Ride requests are made through Uber’s app.

Despite mounting challenges, Uber so far seems to have a winning strategy. The company was recently valued at $51 billion. It operates in 329 cities in 59 countries on six continents. It claims more than 3,500 employees worldwide (a figure that excludes drivers but covers marketing, communications and operations personnel), hundreds of thousands of “driver partners,” and “millions” of riders.

Uber is less forthcoming about its local operation, other than to say it has more than 12,000 drivers in the Washington, D.C., area who are able to move freely back and forth across jurisdictions—a perk not available to local cab companies, which are only allowed to pick up passengers in Montgomery County. “Specific numbers of drivers and riders in the area is proprietary,” says Uber spokesman Taylor Bennett. The Uber office in downtown Washington is off-limits to reporters

Uber calls its service “ridesharing,” a term suggesting that it is not a business transaction. Uber insists it merely makes its app “platform” available to drivers it calls “providers” and to riders who use it to facilitate a no-cash transaction. Users must have a cellphone and credit card, requirements that Uber critics contend exclude many low-income riders.

“Borders didn’t go out of business because people wanted to stop reading books,” says John Marshall, an attorney for the Coalition for a Competitive Taxicab Industry (CCTI), the local taxi trade association. “A percentage was hollowed out by Amazon. In the transportation industry, where it’s really troubling is if cab companies go under, what happens to those passengers who don’t use a cellphone, what happens to the elderly? Uber has no interest in transporting those people. The disruption is to people who really can least afford to be disrupted.”

Uber’s unregulated arrival here in 2011 drew the ire and opposition of established cab companies and their drivers. But, responding to aggressive Uber-driven social media campaigns, first the District in October 2014, then Virginia last February, enacted laws providing a framework in which Uber and other so-called “ridesharing” services could operate legally. In both cases, the rules that applied to Uber and other similar services were far less restrictive than those that already applied to traditional taxis.

“Uber bullied the [D.C.] council with social media, tweets, to make it look like the government was evil,” Barnes says. “They don’t want a level playing field.”  

In 2013, Maryland’s Public Service Commission (PSC) sought documents and information from Uber regarding its operations to learn whether it should be subject to the same rules as traditional taxis. That December, the PSC staff issued a brief that was sharply critical of Uber. “Through its vehicle requirements, screening processes, billing system and rating system, it is apparent that Uber is managing a high-end brand of for-hire transportation,” it asserted. Uber hired H. Russell Frisby Jr., former chairman of the PSC, to represent the company.

In Maryland, several cab companies, including Barwood, filed suit in Baltimore federal court in July 2014 to stop Uber. “If left unchecked,” the suit warned, “Uber will upend the vehicle transportation industry in Maryland, creating a two-tiered market of ‘haves’ and ‘have nots.’ ” The suit was later withdrawn on technical grounds.

On the local level, Montgomery County, which had last overhauled its taxi regulations in 2004, was eager to update its laws. Bills were drafted that, among other things, were designed to address TNCs like Uber. But even as the council was holding a public hearing and work sessions on its proposals earlier this year, a bill moved through Annapolis that superseded its efforts.

In its state lobbying, Uber sought a framework similar to the District’s and Virginia’s that would place it under the PSC—with fewer rules than applied to taxicabs. On April 13, at the last meeting of the 2015 Maryland General Assembly, the legislature passed the Uber bill. It allows companies like Uber and Lyft to conduct their own safety inspections and driver criminal background checks, which do not have to include the fingerprinting required of traditional taxicab drivers. Under the new law, the commission is not allowed to require more stringent background checks until April 1, 2016, at which time the TNCs can ask that such requirements be waived.

One concession: The TNCs must contribute 25 cents per ride to a fund, overseen by the Maryland comptroller, for taxi drivers to make their cabs wheelchair-accessible. The TNCs are honor-bound to report all rides, but the information they provide is deemed confidential.

“You took to Twitter and Facebook, and sent countless emails and phone calls to stand up for ridesharing in Maryland,” Uber blogged to supporters on April 14. “Thanks to your support, [Uber] now has a permanent home in Maryland.”

Richard Sassoon is not the first UberX driver to respond to my ride request one recent morning. First, there is Mushkbar (4.8 stars) who, Uber texts, will arrive in six minutes. Moments later: “Unfortunately, your driver had to cancel the trip. Please request a new ride and we’ll get you moving shortly.”

Then: “All nearby UberX drivers are busy but one should free up soon. Check back in a minute or choose another Uber option.” Uber’s least expensive option, UberX connects riders with the driver of an everyday car such as a Toyota Prius or Honda Accord. More expensive services include UberSUV or UberBLACK, which hooks riders up with a recent-model black sedan with a black leather interior.

Before I have to splurge on one of these higher-cost options, I receive a message saying: “Your Uber is on the way. Richard (4.9 stars) will arrive in 8 minutes.” As a shiny black 2011 Honda CR-V pulls up, a text alert says, “Your Uber is arriving now.”

The 10-minute, 2.38-mile ride from my home to the Silver Spring Metro station costs $7.43, according to the emailed receipt. That’s about what Barwood would charge, I learn from an estimate I glean from its iPhone app.

My driver, Sassoon, 60 and now retired, was chief of capital operations and programs for the Department of Veteran Affairs. He holds a master’s degree in public administration from the University of Maryland and lives in a house in downtown Silver Spring.

In January, Uber released a study that analyzed the demographics of its drivers. Except for his age, Sassoon reflects those findings: Uber drivers are more white, more educated and younger than traditional cabbies. About 37 percent have college degrees, and nearly 11 percent have graduate degrees.

Sassoon and his wife, Jane, are empty nesters. After 37 years with the government, he has a healthy six-figure pension, and Jane works as an accountant. “Being a retiree is an isolating experience,” says Sassoon, who drives for Uber about twice a week. “I enjoy meeting people.” He says he’s driven people from Saudi Arabia and Slovakia. He took three young ladies to a Taylor Swift concert, and drove a journalist from Mother Jones. 

So, how much does he make? For one two-day period, during which he drove for about 20 hours, he says he grossed $385. From that, Uber withheld its fee of 20 percent, lowering his payout to $308—a little more than $150 per day, minus his expenses for gas, maintenance and insurance.  

“It’s really a social experience for me,” he says. “I don’t want it to turn into a grind, don’t need it. I don’t need money per se. It’s a quasi hobby, I suppose. A pastime.”

Driving a cab is not a pastime for Nelson Biama. In order to further his education, Biama, 49, emigrated 23 years ago from Cameroon, where he’d studied accounting. “But when I got here, one of my sponsors passed away and I had no support to pay for school,” he says. He worked in construction, then as a delivery driver, but the economy tanked, he spent his savings, and he lost his job and his house in Prince George’s County. In 2009, he started driving for Barwood.

He now lives in a $1,900-a-month, three-bedroom apartment in Rockville with his wife and children. He says he drives 14 hours a day, seven days a week to support his family. His wife is a home health aide. They have two daughters, a 21-year-old who attends Montgomery College and a 16-year-old high school student, as well as a 17-year-old son who goes to Wesley College in Dover, Delaware, on a scholarship.

“On good days,” he says, “I can go home with about $100 or $110 after paying my [$110 daily rental] expenses with Barwood,” which holds the PVL on the car he drives.

Why didn’t he defect to Uber? “To tell you the truth, I put in my application with Uber. They offered me to go, but I didn’t. Everybody was praising Uber. I was taking a wait and see attitude to see what it would entail. For me, the jury is still out.”

What he did do was get involved with the union in a leadership role. He says he doesn’t want to go to Uber before seeing what he and his colleagues can achieve through the co-op. “We have to change the system from within,” he says. “At the end of the day, our customers need us.”

One recent morning, seven or eight cabs were lined up at a taxi stand near the Silver Spring Metro station, some light-blue (Barwood), others green (Sun Cab), red (Action) and white (Regency). One former Barwood driver said he was now driving for Sun because it charged him less to lease his cab. A Barwood driver in a Prius who owned both his car and a PVL said he is hard-pressed to support his wife and four children on what he earns.

Barwood driver Naftali Ayele, who owns his own PVL, says it is difficult to support his wife and four children on what he earns as a cab driver.

“I’m not happy now,” said the driver, Naftali Ayele, a 43-year-old Ethiopian immigrant who said he paid $78,000 to buy his PVL from Barwood, borrowing the money from friends, Barwood and the Ethiopian Community Development Council.

He said if he weren’t locked into a five-year contract with Barwood, he might switch to Uber.

Neither Uber nor Lyft attended the July 21 county council meeting. But cabbies were there in force—and were divided. Those allied with the union and seeking more PVLs to establish a co-op were on one side. They wore yellow T-shirts that said “MontCo Union Taxi.”

Those who owned PVLs sat on the other side. Worried that the issuance of more PVLs would devalue theirs, they carried signs that said, “No Free PVLs” and “Our Families Are Our Business.” Barnes and other company officials sat somewhere in the middle, uncomfortably, by themselves.

As the council voted to have the county issue 100 more PVLs, there were loud cheers from the union drivers—and boos from the rest.

“This is a mess we helped create and perpetuate,” Councilmember Marc Elrich said, “and now we’re trying to clean it up.”

After the meeting, a convoy of light-blue taxicabs exited the adjoining garage—toward a daunting and unsettled future.  

“It’s an uncertain time,” Barnes said a few weeks later at Barwood headquarters. Outside his office, as many as 100 cabs sat idle for lack of drivers.

But Barnes is not giving up without a fight. He was recently in talks with Verifone, a Silicon Valley-based firm whose technology allows passengers to directly charge their rides without giving a credit card to the driver. The company is also developing an app, similar to Uber’s, that will show riders where cabs are and how long they should expect to wait. As with Uber, the app will allow riders to rate drivers. 

“This is very similar to the TNCs of the world,” Barnes said, being careful not to mention Uber specifically. “I use their name as little as possible. I don’t like to use four-letter words.” 

Eugene L. Meyer is a contributing editor for Bethesda Magazine. To comment on this story, e-mail comments@bethesda