The falling cost of a taxi license in the United States

Enrique Dans
May 20, 2015 · 3 min read

The price of a taxi license, which in cities like New York could once have cost up to a million dollars, has plunged throughout the United States, due mainly to the growth of companies like Uber or Lyft, and hitting large numbers of drivers in the traditional taxi sector hard.

Do these new services put passengers at risk or offer a worse service than taxis? No, they don’t, and they may even be better. After spending a couple of days moving around Miami, I am impressed by the availability of transport in the Uber era.

Drivers rarely take more than a couple of minutes to arrive once you have requested a car through the app. If there is any kind of problem, it is possible to sort it out in seconds by talking to the driver. So far I have been offered a bottle of water, donuts, chewing gum and sweets (one driver apologized, saying his vehicle seemed like a mobile candy store :-) Sometimes, I have to say, I found the attention lavished on me a little too much, but overall, the service works well. The service level clearly improves when drivers are subject to evaluation.

A poor evaluation means a call from the company: any driver whose service falls below four stars is out of the game, which leads to good service.

Services such as Uber or Lyft have become part of everyday life in Miami. Everybody, from your friends to the hotel concierge sees them as the first choice. It should be pointed out that the starting point of this market is different to others: the majority of the taxi drivers were contracted by companies that held licenses and rented them out, rather than being self-employed drivers who had paid out large sums of money for a license and were trying to recoup their investment.

And the cost of a ride? On one occasion, when I had paid around 12 dollars for the outward bound trip, and saw that there was an Uber price surge as rush hour approached, I decided to take a conventional yellow taxi that was passing, only to pay 28 dollars for my return journey. I don’t know if Uber or Lyft are always the cheapest option, but price isn’t the only thing I’m looking for: factors such as the ease with which you can request a car, being able to locate its progress on a map, and pay with a credit card have won me over. If it weren’t for the hotel tips, I could spend a week in Miami without having to carry cash: a smartphone and a few credit cards is enough.

Not that Uber or Lyft are perfect: one clueless driver took ten minutes to find me, despite having given very detailed and specific instructions. On another occasion, the driver suspiciously cancelled the pick up three minutes before a surge pricing warning. On another, the rear seats had the telltale signs of being habitually used by small children. But in general, the net result is a city that is easier to move around. Moving from a highly regulated system based on licenses to one in which drivers decide themselves when they want to work, using their own vehicles, seems to have improved the user experience, as well as creating a more flexible market that allows a greater number of people to make some money.

The current transition is unavoidable. It can be delayed, but it’s going to happen. Travis Kalanick’s supposed vision that snowy winter’s night in 2008 when he couldn’t get a taxi in Paris has been realized: moving around the French capital now is much easier and more pleasant than it ever was. But let’s not forget, that vision goes way beyond just improving taxi services…


(En español, aquí)

Enrique Dans

On the effects of technology innovation on people, companies and society (writing in Spanish at enriquedans.com since 2003)

Enrique Dans

Written by

Professor of Innovation at IE Business School and blogger at enriquedans.com

Enrique Dans

On the effects of technology innovation on people, companies and society (writing in Spanish at enriquedans.com since 2003)

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