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INDUSTRY IN REVIEWBy Don McCurdyWhat falling prices? Medallions, those pesky little licenses necessary to operate a taxicab in some jurisdictions, are dropping in value pretty much everywhere. In New York City, claims are that the city is simply not reporting sales or transfers that are less than $10,000 less than previous sales. This pretty much sums up my feelings on how government statistics are reported in general. Other jurisdictions, besides the medallion mecca, are reporting pressure on prices wherever Uber is doing business. Even Boston, who has resisted the force so far, is reporting medallion prices dropping. Some reports out of NYC are that medallion prices dropped 25% which will give the NYPD’s favorite mayor a little less wealth to redistribute. As predicted in this column months ago, the popular trend to figure out how to allow Uber to operate is costing the medallion markets. Why does this seem so hard for regulators to understand? NYC is claiming that UBER’s selling program was simply too aggressive and that may be part of it, but allowing vehicles to provide ground transportation on demand (e-hail app) without any kind of medallion is most certainly the beginning of the end of the medallion. Why would I want to be subject to all of the rules and regulations associated with the operation of a taxicab in New York City if I didn’t have to? Either New York City figures out how to protect the value of their medallions or they figure out how to replace the money they will lose trying to sell worthless tin. The unfortunate part of the story is the drivers who have invested their life and life’s savings into buying one of these plunging value assets will have little or nothing when they attempt to sell it at retirement.
Story from the land of recent medallions, San Francisco, is that the city is “relaxing” some of the taxicab regulations to allow them to better compete against unregulated Uber. While some industry observers bill it as too little too late, the city is busy trying to figure out how to unload their near worthless medallions on unsuspecting buyers. The entire situation is another clear example of government inconsistently regulating business. Uber wants to pretend it’s not an on demand ground transportation provider which some would otherwise choose to call taxicabs. However, the practical fact of the matter is that if you order a vehicle and it shows up, but because it’s ordered with a smartphone app, it’s not a taxicab. If it’s not a taxicab then it’s a what? Survey said? It’s a taxicab. No, it doesn’t have a meter, it has a mileage app to determine the fare. So, if you have a smart meter would that count as it being an app? The raw fact of the matter is that the very same people crushing the taxicab industry with regulation after regulation have figured out a way to allow Uber to operate with little or no regulation which is nothing short of amazing. The simple solution would be to demand that every vehicle used to transport passengers be licensed and inspected by the regulators. How can you claim to be serving the public safety otherwise?
The regulators in Los Angeles, DC, New York City, and Chicago are trying to figure out a way for taxicabs to compete with Uber. Dispatched trips are reported to be down 21% for taxicabs in LA. While the article did not mention the potential lost revenue for the taxicab end of the business I would speculate that grandma coming from the grocery store still uses a taxicab along with the poorer neighborhoods. It would seem to me that the easiest way to level the playing field is to either deregulate the taxicab industry or to require “ride sharing” companies to only utilize vehicles and drivers licensed and inspected by the cities. Well, neither of those is going to happen. At the same time, the cities are going to have cabs dispatched by a smartphone app. Several jurisdictions are considering a “universal” taxicab smart phone app. Conceptually the idea has merit, the closest cab gets assigned the trip, the customer gets great service and what’s not to like? Well, what exactly are taxicab companies for? During my years in the taxicab business the companies I worked for spent a lot of time and money distinguishing our company from the herd. Strict equipment standards, driver behavior, computer dispatching, professional operators all geared toward identifying our company as the one to choose for the best service. With a citywide app the need to even be affiliated with a company pretty much disappears. When the car arrives and doesn’t perform well, who is responsible? Is the city prepared to deal with the complaints that are normally handled by the companies in most jurisdictions? Will company cars be required to accept app dispatches? Some San Francisco drivers have wanted “centralized dispatch” for decades which is what this amounts to for smart phone users. What is the cost to the driver for the service? Who is going to keep the records? While cities rush headlong into helping their taxicab services survive there seems to be a lot of unanswered questions looming. While the logic of centralized GPS dispatching of taxicab is absolutely unmistakable there are probably some considerations that must be addressed. For instance, what do you do when you find out that you have twice as many cabs as you really need?
Apparently Uber has the same problems with driver identification as taxicab companies. Reports out of Chicago are that the driver accused of sexual assault was driving under his wife’s account since he wouldn’t have been eligible. It’s fairly common to find a night driver, that is unregistered or has had his/her contract cancelled, driving under a friend’s license number. Unfortunately, for Uber, there will undoubtedly be a civil case following the criminal case. Unfortunately, for their renegade driver, you owe a higher degree of care to a passenger in a vehicle for hire and especially an impaired customer. Their lame excuse that the passenger should check the license of the driver won’t do much for them in court.
The “taxi of tomorrow” lives. Apparently NYPD’s favorite mayor is surging ahead with Bloomberg era standardized taxi idea. Reports are NYC is going ahead with the program because they’d have to pay 100 million to the manufacturer of the vehicle if they canceled the program. Oops. Sometimes your rhetoric gets swallowed by reality. While a candidate, de Blasio courted cash donations from the taxicab industry stating his opposition to the program, but now that he is actually in office he has to deal with the reality of previous commitments. Considering the drop in revenue from medallion sales and police citations 100 mil could look insurmountable. One has to wonder how much more sterling leadership even a city the size of New York can take. Maybe he should just fire all of those racist cops and have the good citizens call a crackhead when they have a problem.
According to Zendrive, a San Francisco company that measures such things, “ride share” drivers are safer than taxicab drivers. Really? While I can see that there are some tangible measurements that could give one that indication, I’m here to tell you that there are others that refute said claim. What criteria are we using? Reportedly taxicab drivers were reported speeding 32% of the time while “peer to peer” drivers only 21%. Is that all? You should be in the car when the taxicab driver is on the way to a trip, I’m sure that number would go considerably higher. Another stat was how many times the driver touched their phone. Touched it how? Well, that wasn’t stated. Look, if you can’t eat a sandwich, smoke a cigarette, talk to the passenger, and answer the radio when called all simultaneously, you don’t have any business driving a cab. Let’s talk about miles driven versus collisions reported. A taxicab driver can routinely drive 300 miles a day, in town, 7 days a week, speeding and get no tickets or have any collisions for years on end. Now, I don’t doubt the technology of the Zendrive boys, just their conclusions. If your time is money, as directly as taxicab driver’s time is, you tend to hedge the speed limit. Does that make a slower driver better? I don’t know, let’s ask the guy behind you.
While New York City is squabbling over this taxi or that, what could potentially be the real taxicab of tomorrow? Google’s self driving car. Yes, Johnny Cab is fast approaching. I guess the real question, since it doesn’t actually have a driver, is: will it have to be regulated? Not if you use the smart phone app to summon it.
An interesting article from the CATO institute discusses past and present attempts at deregulation of the taxicab industry. While the discussion of how much or little regulations ride sharing companies should have versus the taxicab industry rages, the article points up some of the differences between the then and now of deregulation. Most deregulation occurred long before smart phones and definitely long before “ride share” companies. Some would argue, like me, that regulation and limited entry in the taxi industry have set up the industry to be harpooned by a trendy new competitor. Regulatory practices have done this by protecting the taxi industry from competition and innovation along the way. The NYC TLC is in the process of establishing its own app for use by NYC Taxi and Car Service industry. This innovation and others could have been introduced earlier. Now we have a variation of the taxicab being declared something else. As such, it is not required to comply with those past regulations deemed so critical to the taxicab industry just two years ago. You can review the article at http://www.cato.org/blog/future-taxi-deregulation-will-not-look-familiar, if you are so inclined.
—dmc
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