The C Is for Crank

Don't Kill Ridesharing Innovators to Protect Taxi Industry

The city council is poised to adopt new rules that could put ridesharing companies out of business. Here's why they shouldn't.

By Erica C. Barnett December 18, 2013

The C Is for Crank

The Seattle City Council is poised to adopt new rules regulating ridesharing companies that would restrict companies like Lyft and UberX to 100 cars each, and their drivers to 16 hours a week. Lyft CEO John Zimmer insists that the new restrictions would put his company, which he says already has "several times" the 100-driver restriction, out of business. (Uber also issued a statement condemning the proposal). 

Fundamentally, the case for restricting the number of cars and the number of hours drivers can operate boils down to three arguments: First, taxis are necessary because they, unlike ridesharing services, serve people with disabilities and people who only have cash. (Although they aren't required to provide any wheelchair-accesssible taxis, cab companies obviously recognize the demand for accessibility: A lottery for 15 new wheelchair-accessible taxi licenses in 2009, which brought the total number of wheelchair-accessible cabs in King County up to 30, got more than 700 responses.)

Second, the taxi industry needs protection, because ridesharing companies threaten their current business model. And third, it's unfair for ridesharing companies to operate without any regulation whatsoever when cab drivers are subject to onerous restrictions, including a limit on the number of cab licenses in the city, insurance minimums, and inspection and other safety requirements. 

The first argument is obviously legitimate: Wheelchair users and people without credit cards have a right to mobility, too; it isni't likely that part-time ridesharing drivers will retrofit their cars to accomodate wheelchair users in the way that taxi cab companies with full-time fleets have.

The second argument, however, is simply specious. Outdated business models are the reason disruptive technologies come into being, and the taxi industry is no exception. Simply put, taxi companies offer an inferior service at a similar price to companies like Lyft and UberX, and have been unwilling to adopt basic, 21st century innovations like online reservations and real-time arrival info. Instead, taxi customers must call a dispatcher, wait on hold, and then wait some more ("10 to 15 minutes" is a typical estimate, but its accuracy depends on whether there's actually a cab nearby and whether the dispatched cab shows up or decides to pick up another fare) before the cab arrives.

According to a recent city survey, nearly half of respondents ranked taxi response times as "very poor," "poor," or "neutral." In contrast, nearly 95 percent of ridesharing clients ranked drivers' response times as "very good" or "good." Overall, the study concluded, "For an industry catering to the general public, these responses signify an inability of the service provider to attract and maintain their institutional market."

In contrast, here's how it works with ridesharing services: Using a smartphone app, you book a nearby car. Once you've booked, you can track the real-time location of your driver. At the end of your ride, the company takes the payment (set in advance) from a pre-filed debit or credit card. No tips, cash, or awkward in-car credit transaction (or haggling over whether a driver will accept a credit card).

People like ridesharing because it's convenient, because it's usually cheaper than taking a cab, and because they're fed up with lousy taxi service. (Not one person who has testified at the many council meetings on this issue so far has claimed about the quality or safety of ridesharing services. The same cannot be said of cab companies.) So why is the city trying to put them out of business?

The charitable interpretation is that city officials simply don't understand how ridesharing companies work. (Council member Bruce Harrell, who wants to limit not just the number of cars but the total number of ridesharing services in the city, for example, has suggested that his personal definition of "taxis" includes not just companies like UberX and Lyft but car-sharing firms like Car2Go, which are driven by individual members. That suggests a fundamental misunderstanding of the difference between taxis (which pick up fares and take calls for service), ridesharing cars (whose drivers respond to requests via smartphone), and car-sharing services (a network of cars that users drive themselves).

The less charitable interpretation is that the council is caving to pressure from powerful unionized cab company interests, who show up in force at every taxi committee meeting and even blocked traffic in front of City Hall to protest ridesharing companies earlier this year. 

In either case, it would be a mistake for the city council to kill a thriving, innovative new business model to protect an outmoded industry that has yet to adapt to basic modern technology like smartphones. 

As for the final objection to the current state of the ridesharing market: Obviously, ridesharing companies need to be regulated in some way to protect the safety of customers and drivers (those regulations might include car inspections, license and insurance requirements, and criminal background checks). Once those requirements are met, however, it seems reasonable for the city to step back and let the market function. (California is a good model for how the city might impose reasonable regulations on ridesharing companies without running them out of the city). 

That might force change in the taxi industry—like giving customers the ability to know when a cab is actually coming, or letting users book their trips by smartphone. As far as I'm concerned, that would be progress. But the city council seems determined to preserve our current, antiquated system—and stifle any innovators who suggest there might be a better way. 


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