Regulatory reform of the taxi industry is long overdue
If the events of the last several months are any indication, Uber’s future is not as certain as public sentiment might have suggested a year ago. But even though the company has taken hits on a number of fronts, Uber and other transportation network companies (TNCs) will continue to have the upper hand in the ride-for-hire market unless a number of restrictions on taxis are eliminated.
2017 has been a year of endless public relations nightmares for Uber. Beyond scandals and hits to the firm’s image, trouble has also been brewing on the financial front. The ride-hailing company has been hemorrhaging money in its battle with competitors to be consumers’ top TNC option. In 2016 the transportation giant incurred annual losses totaling $3.8 billion. Last year, the company burned between $1-$2 billion dollars just on subsidies for promotions to lure more customers and recruit more drivers.
While Uber is only one player in the TNC market, prominent competitors like Lyft are likewise spending a fortune just to keep up. Business analysts and customers alike speculate about whether these firms’ wells might dry before they can achieve profitability.
A precarious business outlook and uneasy investors would seem par for the course for any company that has battled countless municipal and state governments nationwide. But most of the time, TNCs have emerged victorious from the melees with city councils and state legislatures. So while the industry faces a number of perils, the fight with regulators has in many instances been resolved.
The success of ride-hailing companies has been a thorn in the side of taxi drivers, for whom Uber’s recent stumbles must seem a vindication of sorts (as some accounts suggest). Cabbies and business owners were especially vocal during the public conversation about regulations in Massachusetts—one of the first states to produce definitive legislation for TNCs. The introduction of a unique two-tiered background check and authorization for access to Logan Airport and the Boston Convention & Exhibition Center (BCEC) were among the hallmarks of the new law, which largely let Uber, Lyft and their peers continue operating without hindrance.
A 20-cent per-ride assessment on TNCs for redistribution to taxis and other public purposes, however, signaled that some of MA policymakers’ vision for transportation services might be misguided. A more effective way to help cabbies, as Pioneer explored last July, would be to address the broken municipality-based regulatory structure that governs taxi services.
There remain a number of restrictions on cabbies in Greater Boston that prevent them from being competitive with TNCs. Pick-up restrictions by licensing municipality and the inability to employ dynamic or “surge” pricing top the list. These will fortunately be among 16 items that will be reviewed by the Ride-for-Hire Task Force, a committee set up to examine current laws and regulations for private transportation service providers and make recommendations for reforming them. In weighing options for changes to existing regulations, the task force would be prudent to look at examples of what other cities and states are doing on this front.
Some of the most notable steps towards taxi industry deregulation have taken place in California. In an effort to boost cab drivers’ earnings, San Diego’s City Council voted to lift the city’s longtime cap of 993 taxi permits in 2014. After a year, 47 newly permitted drivers were operating their individually owned taxis. The policy goal behind the legislation was to break the monopoly power that permit-holding companies wielded and facilitate small business growth through independent taxi operators. But the jury is still out on the impact of this initiative. The number of taxis has only increased by 5 percent in the first year after introduction of the law and critics argue that flooding the market with new taxis will not address the lack of demand for cabbies relative to more popular consumer options like Uber and Lyft.
San Francisco took a different route to deregulation by removing over 40 pages from their Transportation Code regarding taxi industry regulations in January 2017. The San Francisco Municipal Transportation Agency eliminated a number of onerous provisions, including the stipulation that taxi driver shift changes must occur on the company’s property, the requirement that taxi companies have a business address in San Francisco, and some restrictions on spare vehicle usage. Although the deregulation is slight and some say it may be too little too late, the city hopes these reforms, when combined with improving taxi meters to allow technological innovation, will help level the playing field between traditional taxis and TNCs.
A push for commonsense reform is also underway in Los Angeles. Legislation proposed by City Assemblyman Evan Low, AB 1069, would make taxi regulation a regional issue instead of one to be addressed by individual cities, allowing cabs to pick up passengers in Los Angeles, drop them off in Santa Monica and vice versa without needing multiple permits. Under this legislation, which overwhelmingly passed the Assembly last month, taxis also could raise or cut their prices in response to demand, with a maximum price set by each region, similar to the surge pricing system used by TNCs. The legislation’s regional orientation is especially instructive for the Boston metro area, where current regulations restrict Boston cabbies from making street hail pick-ups in Cambridge, Somerville and other surrounding communities, and similarly restrict cabbies licensed in towns and cities outside Boston.
California isn’t the only place where promising reforms are taking hold. At one time, Fort Worth, Texas had a highly regulated taxi industry; now it is one of the least regulated cities in the country. Fort Worth no longer conducts background checks on taxicab and limo drivers or inspects vehicles. It has instead transitioned to a system whereby companies manage that responsibility. This makes it easier for them to compete with ride-hailing companies, which, other than a $500 licensing fee due every two years and requirements to insure drivers and their vehicles, face very little regulation.
In Washington, D.C., reform has been a mixed bag. While there is no medallion system in D.C. and taxi insurance is much more affordable than in other major cities, recent attempts to “modernize” from the Department of For-Hire Vehicles, including overhauling the meter system, cruising lights, and a uniform vehicle color scheme, threaten to set back D.C. cab companies. While not a perfect system, D.C. taxis can use a smartphone app to set prices based on supply and demand at a given time.
With Greater Boston’s taxi system facing similar issues, these reforms should resonate with MA policymakers and city officials who wish to roll back some of the red tape that binds taxi drivers and businesses to archaic practices. While the future of TNCs is not certain, they remain a popular choice for consumers—and the current state of ride-for-hire regulations only exacerbates the resulting imbalance between traditional cabbies and these new firms. If the Ride-for Hire Task Force and lawmakers want to be realistic about leveling the playing field, they should start by loosening rigid guidelines on meter rate-setting, pick-up restrictions and other regulations that make advancing in the 21st century impossible for taxi companies and other legacy operators of the for-hire transportation industry.
