A new car service business called Uber is aiming to compete with SF cab companies by providing a fashionable way to get around the city, but questions about its legality have a powerful state agency investigating the glossy startup.

Uber -- which means "about" or "above" in German – is a technology startup that connects customers to professional town car and limo drivers via a smartphone app, SMS text messages and the internet.         

Eric Flynn is a San Francisco native who works as an advertising copywriter. He is just the kind of person the upstart company Uber aims its marketing towards.

"I was exposed to it through an industry party, an advertising party, said Flynn. Uber was one of the sponsors."

Uber claims on its website that it wants to make on-demand car service accessible to anyone at a lower than usual cost and advertises itself as "your on-demand private driver."

"They put their best foot forward, said Flynn Every car was a Benz. All the drivers were in tuxedos. And they gave us a $20 ride for free, which got us 10 blocks."

San Francisco Cab Drivers Association President Barry Korengold has a one word description of Uber: "Bandits."

While even SF taxi companies agree there aren't enough cabs in the city, they still argue Uber is cheating.

"There're not paying permit fees like cab drivers do. They have no set fees like taxis do," explained Korengold.

Critics also charge Uber with not having meters in their town cars as cabs do.

"Town cars and Uber cab charge what they want to charge, said Korengold. They're twice as much as cabs, but they can sometimes add more. On their website, it says 'Surcharges can be applied.'"

Additional issues raised by critics are that vehicles contacted through Uber’s service don’t have to get the police permits needed by taxi drivers or prove they have a minimum of $1 million insurance per car required by taxi cabs.

KTVU repeatedly attempted to get Uber founder and CEO Travis Kalanick to provide his perspective on his company. He refused to talk.

KTVU was able to learn that after dropping out of college, Kalanick started at least two other software companies before Uber.

One was sold for almost $20 million and promptly ceased operating. The second company led to a multi-billion dollar lawsuit.

In a video clip of Kalanick promoting Uber on a publicity website, the CEO promises: "We are going to dominate every city we are going to go into."

The San Francisco-based company is going into New York, Chicago, Boston, Seattle as well as a number of European cities next.

Problems are starting to arise in many of these places the same kind of problems first seen here in San Francisco.

Paul Rose is a spokesman for the city's municipal transportation agency. He also acknowledges there are an insufficient number of taxi permits in the city, prompting companies such as Uber to come to San Francisco.

"They initially called themselves Uber Cab and we ordered a cease and desist order," said Rose.

He told KTVU that San Francisco officials are trying to remedy the shortage of taxi permits.

"It's something we're working to reform, said Rose. "We're working to increase the number and work out a plan we could sustain throughout the years."

For potential customers like Eric Flynn, the bloom may already be off Uber's rose.

"If you're not covering it yourself and it's a business expense, you can write it off. [If] your company is paying for it and you want to impress clients or you're on a date and you want to impress your date, it's totally a great service, said Flynn. "It is a luxury. For day-to-day getting around the city for the average San Franciscan, which most of us are, we can't afford that."

As KTVU investigated Uber, it surfaced that the California Public Utilities Commission has launched its own investigation into Uber. However, because it's an official probe, regulators declined to comment on what could happen to the company or Travis Kalanick.