Deregulating Taxi: A History of Failure

Rule breaking is an attractive proposition, and in some markets, has provided the disruption needed to drive innovation. But in the taxi game, regulation has always been the backbone to providing a healthier business environment and a safe, accessible and equitable public service.

With employment instability at a high during the Great Depression, the opportunity to drive unlicensed cabs became a favorable way to earn a steady income. What proved favorable for drivers was not for cities, however, as an increase in accident rates, poor insurance coverage, and a painful level of road congestion descended. Consequently, cities rushed to pass laws addressing liability, driver rights and most importantly safety. After 40 years of prosperity, local governments in over 20 US cities decided to remove regulations again, unsurprisingly yielding the same results experienced four decades prior. Cities quickly re-regulated.

Having built, innovated and rebuilt itself after tackling deregulation during the 1930’s, 1970’s and 1980’s the introduction of transportation network companies (TNC’s) brought with it new fears of poor quality service, unpredictable fares, struggling drivers and increased traffic. Three years on and those fears have become a reality.

Unsustainable

The more TNC’s joining the rideshare market, the quicker the race to the price floor has become. The issue is that TNCs all offer the same service, so they must compete on price, which means squeezing their margins and creating a race to the bottom. Couple that with the large amount of outside investment and we have a situation where their economics are not really related to the cost of providing service. While this is great for consumers today, lowering rates while spending large amounts of marketing dollars to remain competitive hardly spells longevity.

The predictability of taxis, and the constant supply in major cities remains attractive, and that despite competition, taxi ride numbers in many markets are increasing. The regulatory environment ensures that anybody and everybody has instant access to taxis offering a fixed meter rate, wheelchair accessible vehicles and multiple payment methods catering to all.

Unethical

Regulations are particularly necessary when competition within an industry has the potential to damage the entire ecosystem. They exist also because taxis are considered public transportation, which should have a level playing field. TNC’s have already been discovered and penalized for manipulating passengers, showing the shortest route to drivers and the longest route to riders when they book a trip. They have also been liable of miss-paying drivers, while the list of civil, sexual harassment and safety lawsuits have steadily increased.

On top of that is the continuous incentivizes for drivers to work longer and harder while siphoning large portions of their earnings and offering little to no support for hefty operating costs. Surge pricing encourages drivers to work during peak demand times for extended hours. Drivers have become savvy, and are often accused of facilitating surging at peak times, creating constant price fluctuations in large US cities. They are even found to be cancelling rides when surging begins, forcing customers to re-book under higher rates.

Unsafe

The scariest of all the factors affected by deregulation is the lax approach to customer and driver safety. Even though TNC’s are required to carry out background checks, there are flexible stipulations on how rigorous those checks should be. Many are facilitated by less costly and less efficient third party companies, allowing people who shouldn’t be driving to slip through the cracks with dangerous consequences. Add to this the use of unprofessional and untrained drivers and the safeguarding of passengers cannot be guaranteed.

Regulation demands drivers to endure federal background checks, intensive training courses and regular monitoring of fleet data to constantly improve and retrain drivers. Reducing accidents for a safer rider/driver environment, and less costly operations for fleets.

Irresponsible

While ‘pooling’ is claimed to make taxi’s more environmentally friendly, many believe (us included) that operating without regulation is detrimental to the environment. With no limit on the number of TNC’s allowed on roads we have seen the number of cars, traffic and subsequently air pollution increase. While the exact numbers cannot be found due to the reluctance of TNC’s to share their trip data, it’s thought that rideshare vehicles in New York City have grown to outnumber taxis by 4:1 in the last three years.

“The thought that people are being given incentive by Uber as individual contractors to be on the street non-stop, clogging our traffic and polluting our air is to me corporate irresponsibility” — Santa Monica Mayor Kevin McKeown

So, What next? Reinvention Under Regulation

Having fought for and maintained its status in the for-hire transportation market over the last 3 years, the taxicab will reinvent itself. TNC’s have highlighted where the taxi industry needs to improve, and taxi fleets have remained relevant to allow themselves that opportunity. The future lies a in technological advancements under regulation, centered around the reliability and accuracy of a traditional meter solution with the flexibility and openness of a soft meter. Couple that with the cost saving back office, data collection and reporting efficiencies, and fleet owners and drivers will be empowered with the tools to compete with rideshare companies.

What do you think the next step is? Join the taxi conversation, start a discussion with other enthusiasts in our forum at www.kaptyn.co/driverforum

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