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5 ways the taxi industry can compete with Uber

‘Tis the season to take a cab—or an Uber.


Chris Osterndorf

Internet Culture

After its recent $2 billion haul, Uber is now valued at $62 billion. That means that, in case there was any question about it, Uber is officially decimating the taxi industry.

Not that the taxi industry is going to take it lying down.

In a move to regain some of the revenue lost to ridesharing, New York taxi owners recently filed a lawsuit against New York City and the Taxi and Limousine Commission (TLC), singling out the ride-sharing app specifically. It’s a justified complaint, since Uber rides went up in Manhattan by 3.82 million between April and June of this year, while cab pickups plummeted by 3.83 million; technically, New York’s taxi industry is failing faster than Uber is succeeding.

This isn’t the first time Uber has been dragged into similar lawsuits, nor is this the first time it’s faced one in New York. One notable part of the plaintiffs’ approach in this instance, though, has been to point out the way New York and the TLC have subjected cab drivers to strict regulatory standards, which Uber does not have to abide by.

But if the New York taxi industry really wants to save itself, it would do well to focus less on the unfairness of regulatory disparities and more on making said disparities disappear. Right now, Uber’s main advantage is its lack of regulatory scrutiny. Were the taxi industry to follow the company’s lead in several key areas, it might actually have a chance to compete with Uber.

Here are five ways to make that happen.

1. Maintain safety regulations

Regulation has always been a hot topic in the taxi industry. Paul Stephen Dempsey of McGill University’s Faculty of Law in Montreal wrote an exhaustive paper on the subject back in 1996. The industry went through a period of deregulation in the 1970s and ‘80s—to disastrous results. Prices went up for passengers and paychecks went down for drivers. In the end, this led Dempsey to conclude that at least some regulation is essential.

It’s hard to imagine that Dempsey could have foreseen the rise of Uber. Nevertheless, it’s also hard to deny there is one area where regulation is absolutely essential for the taxi and ridesharing industries: safety.

Police don’t keep records of taxi-specific incidents, so there is no way of knowing for sure whether taking a taxi is definitively safer than taking an Uber. Uber has seen a rather alarming number of incidents occur in its cars since the company’s inception, but that’s not to say that the taxi industry hasn’t seen its fair share of ugly incidents, too. In the last year, passengers in Seattle; Washington, D.C.; Portland; and Fort Lauderdale have all been assaulted in taxis. And in 2012, a wave of similar assaults in D.C. prompted a call for the implementation of a panic button in all cabs (something Washington, D.C. taxis and Uber have both yet to follow through on, after promising they would take the initiative).

Uber has seen a rather alarming number of incidents occur in their cars since the company’s inception, but that’s not to say that the taxi industry hasn’t seen its fair share of ugly incidents too. 

There are other reasons that taking a taxi might make someone feel unsafe. In late November, NBC weatherman Al Roker filed a complaint alleging that a NYC cab ignored him and his son, presumably because of their skin color. But where taxis do often claim some measure of superior safety over ridesharing is in background checks. Uber insists it performs the strictest of background checks possible, but that’s not necessarily true. The most notable difference between Uber’s standards and the standards of the taxi industry involve fingerprinting, which Uber does not do, and which tends to be a more comprehensive way of looking into someone’s past.

Los Angeles and San Francisco district attorneys are now suing Uber, in large part because their background checks don’t include fingerprinting. And riding a wave of safety issues, Austin voted last week for Uber to be held to stricter safety regulations, too.

“All of them should undergo the most rigorous background checks possible,” says Dave Sutton, official spokesperson for ridesharing watchdog group Who’s Driving You?. Pushing for cities to hold Uber and Lyft drivers to the same standards which they hold cabbies to, Sutton urges, “It’s about recognizing that just because someone drives 10 hours a month, it doesn’t make them (passengers) any less vulnerable.”

But what about all the other regulations taxis have to adhere to, and Ubers don’t? For one thing, the insurance requirements for Uber drivers is far less strict. While this is in some ways a safety concern as well, the best approach would be to lower insurance rates for everyone, while still making sure drivers and passengers are adequately covered.

2. Become more flexible with fares

“Uber’s contract drivers don’t face as stringent vehicle inspections, their drivers aren’t required to obtain a chauffeur licenses, and they can adjust their fares based on demand,” USA Today’s Aamer Madhani writes.

This fare-adjustment aspect is by far the most crucial difference here. Uber’s practice of “surge pricing” has become notorious, but Uber and Lyft can also run special promotions that let customers ride for as much as half off. Taxis don’t have that option. Take New York, for example. “In New York City, it costs $3 to start the meter and an extra $0.50 is added for every one-fifth of a mile or 60 seconds that the vehicle is sitting in traffic,” notes the Daily Dot’s Aaron Sankin. “Surcharges are also tacked on for late-night rides or during rush hour. These rates are set by the city’s Taxi & Limousine Commission (TLC), which reviews them every other year.”

That means that while Uber may be more or less expensive depending on when you use it, taxis are always going to be subject to the same, often very expensive standards which the city sets. Uber doesn’t automatically make you fork over $3 as soon as you step in the car, and you’re not expected to tip your driver at the end. For many New Yorkers, Uber is probably a more consistent alternative to what often feel like arbitrary surcharges that come with taking a taxi.  

3. Loosen the grip of medallions

The other factor that is truly holding the taxi industry back, in New York City and everywhere else, is the use of medallions. Medallions are permits issued by the government which grant the owner the right to operate a taxi. Historically, medallions have been one of the safest investments possible. Always increasing in value, they were assets which you could sell off before retirement or pass down to your family. Even within the past few years, several New York taxi medallions sold for around $1 million.

But for the first time ever, medallions are no longer a sure thing. Their value is down 40 percent in New York, thanks to the rise of Uber, whose drivers are not required to own them. Less people are buying medallions, and less people are selling them. On top of which, new regulations are limiting how much medallion owners can lease them to cabbies anyway. They’ve started to become artifacts of a time passed, rather than valuable commodities.

For the first time ever, medallions are no longer a sure thing. 

In another city where Uber is causing major trouble for cab drivers, Jack Newsham, of the Boston Globe, talked to various experts about how to solve the taxi industry’s medallion problem. One possible solution: Cities step up and start buying the permits back. Newsham notes, “Adrian Moore, the vice president of policy at the libertarian Reason Foundation, said a medallion buyback could be seen as a sort of middle ground on a spectrum that runs from cracking down on ride-hailing apps and completely deregulating the car-for-hire business.”

But regardless of what the the industry does about medallions, it needs  to start advocating that the stranglehold on them be released now.

4. Increase the use of ‘boro taxis’

New York’s “boro taxis,” or green cabs, are unique. But as Newsham points out, their success may hold a potential solution for the industry nationwide. Boro taxis were created to go to the outer boroughs, where medallion taxis were not licensed to operate. Today, they’re not allowed to pick up fares in parts of Manhattan and at the airport, but everywhere else, they’re allowed.

Permits for boro taxis are cheaper than medallions, and they have largely operated in neighborhood-centric fashion. To use the same model on a nationwide scale, cabs would become more localized and wouldn’t have to worry about obtaining expensive medallions from the city.  

5. Increase pay for everyone and create a more equal playing field

There isn’t anything stopping the taxi industry from going digital. Uber has tried to partner with New York City taxis to give them access to its app. Meanwhile, other taxi-hailing apps continue to pop up all the time. If there isn’t a universal hailing app soon, there will at least be taxi apps that are certified by city. Silicon Valley is not happy about it, but New York’s Taxi and Limousine Commission is reviewing a proposal that would form an agency to supervise the creation of a smartphone app for its taxi industry right now.

Uber’s victory over the taxi industry was not technological, it was regulatory. 

And yet, the more you look at the issue, the more it becomes clear that technology has nothing to do with it. Uber’s victory over the taxi industry was not technological, it was regulatory. And until New York and other cities start to lift some of the regulations which made that victory possible, the taxi industry is going to suffer.

“Local governments need to understand that consumers view ride-sharing services like Uber as close substitutes to taxis,” states the Harvard Business Review’s Rafi Mohammed. “Regulators are doing its residents an injustice by regulating taxi prices (consumers would benefit from a taxi vs. Uber price war)—and in the process unwittingly fueling Uber’s growth and enriching its stockholders.”

The key is to create an equal playing field. Both cabbies and Uber employees have lobbied for better pay in the past. But until the same standards apply to everybody, someone is always going to come out on the bottom. Even organizations who have traditionally stressed the importance of regulation seem aware that a change must come. “What you should find is the same rules for each service in a city,” Sutton told the Daily Dot. “Yes, it stands to reason that certain things will be loosened, while others will be taken as serious.”

Sutton and Who’s Driving You? are correct in that safety should always be taken seriously. But it seems unlikely that Uber will lobby for more regulations on its business, which means the taxi industry and everyone who speaks on their behalf must start to argue for less on theirs. Getting rid of medallions, flat fees, and other surcharges will be a jarring change in the beginning but can only help the industry in the long run. Uber isn’t going away, and if taxis are ever to compete with it, policymakers must realize that this is impossible until everyone is regulated equally.

It’s too late for Uber to play by the same rules as the taxi industry. But there’s still time for the taxi industry to steal a page from Uber’s playbook. 

Chris Osterndorf is a freelance journalist whose work has appeared on Mic, Salon, xoJane, the Week, and more. When he’s not writing, he enjoys making movies with friends. He lives in Los Angeles.

Photo via Henning 48/Wikipedia (CC BY-SA 3.0)

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