“Uber effect?”By Don McCurdy
An interesting article from New York attempted to explain the “Uber effect” on the taxicab industry. There are numerous noteworthy quotes in the article, but the one that piqued my interest the most was a comment by former TLC commissioner Matthew Daus that the taxicab industry has only lost 13% of its revenue. Does the 13% reflect the almost 50% loss of corporate medallion value? I think not.
In reading the various news blubs regarding Uber and the ground transportation industry, I have to believe that the 13% that is lost is the 13% that the owners of the taxicabs and medallions used to be wearing. While the number of drivers can ebb and flow with the economic tide, the payments on the medallions, vehicles, and facilities pretty much remain the same.
The idea that hey, it’s only 13%, it’s not a big deal, belies the fact that the banks are gauging how many medallion defaults they can expect, yellow cabs are parked all over Brooklyn and Queens and the “taxi king” is running for his financial life.
If you pay a million dollars to open a store and suddenly your revenue is 13% less, would that be a problem? Only if that 13% is the owner’s share of the proceeds. While some costs are scalable others are not. You may save on vehicle maintenance if it just sits there and isn’t leased but sooner or later something is coming off line.
The problem with the taxicab industry is that they cannot compete with a less regulated, medallion (or albatross if you will) free competitor that isn’t relegated to only street hails. Matt may be right, it may ONLY be 13%, but it’s not his 13%. I’m sure the former owner of that 13% doesn’t think the word only is a good adverb to go with the lost.
Another “Uber effect” is manifesting itself in Michigan. The state is taking over regulation of ground transportation. If you can’t get the cities in a state to play along with the “correct” version of regulations then you go to the state level and promote good government getting involved in the proper regulation of ground transportation.
While the New York City taxicab industry is only losing 13%, the Boston taxicab industry is described as “imploding” in a recent article discussing the future of the industry in Boston. The city understands the situation to be such that a recent report, discussing the ground transportation future of Boston, lumped taxicabs in with motorcycles as the “other” means of transportation.
But city officials are reported to say that comprehensive reform is unlikely because the industry can’t agree on possible solutions. Ever notice how, when a heavily regulated industry is in trouble, it’s never the politicians regulating the industry that are in any part the cause? They also said the state would have to sign off on any changes to the medallion system.
Well, let’s cut to the chase boys. You sold these medallions to the unsuspecting rubes in a Ponzi scheme that the state wasn’t willing to support by keeping the ride share companies out. Now, you’re staring at a big payout to at least the most recent medallion purchasers and you’re unwilling to do the right thing, probably because you have no idea what that might be. Looks like it’s time to hire a consultant or form a study group.
Reports are that the US Chamber of Commerce is refiling its lawsuit against the city of Seattle over the city’s ordinance that allows unionizing of taxicab, Uber and Lyft drivers. It is the Chamber’s contention that drivers are independent contractors and the city doesn’t have the authority to override federal law.
The mayor of the city declined to sign the ordinance because he foresaw the lawsuits that would most certainly follow, which they did. The suit was filed in federal court previously but was thrown out by the judge because the law hadn’t taken effect.
Despite the law not having taken effect, the Teamsters Union is reported to have gotten permission to start organizing the drivers. So, if the law hasn’t taken effect yet how did that happen?
The case could have serious ramifications for the Seattle ground transportation industry and further if a federal ruling supports the city’s position. It may well be the salvation of the taxicab industry if drivers for every company, taxi, Uber or Lyft were declared employees, because it is possible for the taxicab business model to support that. It wouldn’t be without much wailing and gnashing of teeth to be sure.
A recent article out of New York City lamented the impending death of the taxicab industry with nostalgic references to times gone by when most of the drivers were Jewish immigrants and taxicabs seemed to be everywhere. So, what happened to the taxicab of yesteryear that we all so loved?
There was a day in New York City when you could call a taxicab and one would show up at your door. No, they all weren’t yellow and they had radios, the leading edge technology of the day. But sometimes taxicab drivers would pass customers claiming they had radio calls. Solution? Ban radios from cabs.
Introduction and political support for radio dispatched Limousines and Black Cars in the NYC car service industry signaled the end to the radio dispatched taxi.
Over the years, more and more regulations. Can the industry recover from the Uber invasion? No. The taxicab industry has a gorilla on its back that Uber has managed to avoid. Under the crushing weight of costly regulations and million dollar medallions the taxicab simply cannot offer effective competition to the lightly regulated shared ride companies.
The regulators, in the name of public safety, have driven the golden chariot into the ditch. Countless bureaucrats enacting countless regulations in countless cities to solve problems mostly of their own creation have stifled competition and innovation to the point that the industry needs to go the way of the ice delivery man.
So, as we all lament the death of the taxicab industry let’s remember, it didn’t die of natural causes, it was murdered. Death by a thousand cuts, er, regulations.
I recently traveled to Baltimore and availed myself of the Uber experience. I took several trips, including a trip from Houston’s Bush International Airport. Each of the drivers presented by the app had good ratings, 4.65 and up but the experience was anything but uniform quality.
The first driver failed to find me at all and never availed himself of the ability to call. The second driver was able to find me after calling on the phone and me telling him where I was in relation to the car. Number two barely spoke English and had a difficult time understanding simple instructions. Eventually he got us to our destination after running over a curb and turning left from the center lane.
Number three was spot on, arrived extraordinarily fast, spotless vehicle, congenial and very informative. He seemed a bit reluctant to accept a tip, but after the first two if felt good to get someone who talked and behaved in a professional manner.
My next ride was early morning and was a suitable ride although the driver did not seem to know the area at all. I rented a car for the rest of my stay, but I did Uber home after the trip.
The first driver called on the phone and when she found out how short my trip was she said I was going in the wrong direction. Hmm, sounds like a real cab driver there. The next driver was excellent, jumped out, opened the door, loaded the luggage and didn’t whine about the length of the ride.
The most interesting part of the story, for me anyway, was that four Uber vehicles loaded right across the island from the taxicab loading area and not a single taxicab loaded during that period. If I was a taxicab driver in Houston I believe that I would purchase a new enough vehicle to drive for Uber. If I were advising Uber I would tell them to be actively recruiting professional taxicab drivers and discovering creative ways to get them into Uber cars.
Perhaps, my interactions with the Uber experience aren’t indicative of their genuine quality of service, but a 50% success rate shows there is plenty of room for improvement.
If you have any comments regarding this or any of my articles please feel free to contact me at: don@mcacres.com. - dmc
