Misunderstanding Uber, Taxi regulation and what we might call the "Overground Economy"

Most of DC's taxi companies haven't been at the forefront of technology adoption and many offer spotty service.

Arlington's Red Top Cab has been far ahead of DC companies in terms of reliable service and use of web-based reservation systems.

And of course, there are the general problems of lack of taxi availability outside of the core of the city.

Which is why if you live outside of the core--taxi service is pretty reliable in the core, street hailing generally works, etc.--if you have to get to the airport, you probably call Red Top, rather than a DC company, because of bad experiences in the past.

So bad-unreliable service on the part of DC taxi companies has created a hole in the market for new services.  (The DC Council has stepped in and passed legislation requiring a variety of improvements and if not improvements, changes, such as requiring all cars to be painted in a common livery scheme.)

 2.  The Post has an editorial, "One too many cabs for DC's Taxi Commission," about the DC Taxi Commission and Uber, and says that the Commission is worthless.  That may be, but the issues are more nuanced than most anybody is capable of "unpacking."

The reason that you regulate taxi services is to protect the common interest, to ensure that companies treat all customers equally, to ensure that the vehicles are operated and maintained properly ("Cabby Had Violations Before Crash in Midtown" from the New York Times), etc.

Like most regulatory functions of government, regulation of transportation services developed in response to bad practices and behaviors on the part of companies providing the services.  A whole area of law developed around these services being deemed "common carriers," providing services to all.

Regulation and the regulatory process is not supposed to be some kind of socialism attempt to control private industry.  It protects the public from transgressions and failures, and to ensure equal treatment of all potential customers.  (Granted, the regulatory process can and is often gamed, and government isn't known for pushing innovation through regulatory processes.)

There are a number of components to providing taxi service:

- having a vehicle if you are an individual or a fleet of vehicles if you are operating a branded taxi service
- getting tested and licensed
- offering taxi dispatch services (calling by whatever means, phone/web/mobile)
- versus "bumping the curb" and relying on street hails
- providing high quality customer service
- providing augmented service (e.g., accepting credit cards, having information screens, video screens, etc., in the cab).

Some of DC's taxi companies are dispatched based, others are not.

Uber, relying on mobile commerce taxi dispatch services, argues that it is a "social economy" or "collaborative consumption" type offering, but it isn't.  It's just a taxi dispatch service.

Using the verve of mobile commerce, it argues it should be regulated differently from taxi services that involve owning vehicles, that somehow using a phone app instead of a phone call to hail a cab means that it should be treated outside of the traditional regulatory system that has developed to oversee taxi service.

There is no compelling argument for why this should be the case. 

3.  The regulatory system should provide:

 for taxi operators
- a testing regime for drivers
- an application and monitoring service over the companies and individuals licensed to offer taxi services
- a system of inspection for vehicles and general operations

for customers
- a system to handle and rectify customer complaints

in general
- a set of customer service standards and metrics
- a benchmarking-research function to ensure that DC taxi services are best-in-class (cf. "Pr. George's cabbies complain about pick-ups at Gaylord National," Post, about how National Harbor is offering its own taxi service because they claim that PG County taxis are substandard)
- a system for ensuring vehicle and service quality (inspections, inspectors, including operation at all times of day and days of the week)
- a system for being able to innovate and offer new services (also see the recent blog entry "Testing changes to zoning with demonstration projects").

On such criteria, it's fair to say that DC's taxi regulation function is flawed.  The function should be subsumed within DC's Department of Transportation.  As I have commented before ("DC and taxis: need for a comprehensive plan"), DC's Transportation Element in the Comprehensive Plan doesn't even mention taxis once.

4.  There should be nothing to prevent the unbundling of taxi dispatch services from the ownership of a taxi service company brand.  Uber could be organized in that manner. But still regulated.

5.  I have been thinking about various mobile applications designed to facilitate ride sharing from individuals instead of using "taxis" or the use of vehicles owned by individuals rather than by car rental or car sharing corporations (either for profit or nonprofit).

I was at some conference some time in the last year, and Robin Chase, founder of Zipcar, discussed the first type of service (her company is called BuzzCar).  Her idea is that this is a way for people to make money from an asset they own that is not being used.  It is a form of collaborative consumption.  But it's not likely to have a massive effect on the market, because most people are more comfortable conducting such transactions through more traditional corporate entities.

Image: Greg Gilbert / The Seattle Times.  Sylvester Bush drives for Lyft, a ride-sharing service that launched in Seattle in April. His vehicle carries a pink mustache, just as vehicles of other Lyft drivers do. 

In other cities, there are the "Moustache Cars," offered by a competitor to BuzzCar, where people actually drive the cars, and do it to make some money on the side.  The service is called Lyft, and it operates in Seattle.  We didn't ride it.

As we were leaving the city, the Seattle Weekly had a cover story on the topic, "The New Fight for Seattle's Fares" (also see "Ride-share cars: illegal, and all over Seattle" from the Seattle Times).

While reading it, I thought of both Robin Chase's speech and seeing the cars, and thinking--but with one big exception--about how it puts into the open what previously might have functioned as part of the underground economy in cities like New York and New Jersey's "dollar vans" ("The (Illegal) Private Bus System That Works," Atlantic Cities; "Ending the Jitney Menace," Newark Star-Ledger) and in low income communities where it is common in areas with poor taxi service for people in a neighborhood to "sell rides" and to operate sort of like taxis.

You could call it a conversion of the taxi element of the Underground Economy to what we might call the Overground Economy, which is taxable.

6.  But there is a big but... it won't effect that part of the market because these vehicles aren't operating in the low income areas that suffer from inadequate public transit and taxi service ("Thompson slams Weiner cab stance," Queens Chronicle; "Court Upholds Mayor Bloomberg's Outer Borough Taxi Plan," Wall Street Journal).   Instead, these "ride sharing" services are operating in high income areas.

And because the motivations for these car owners operating as a sideline using slack resources, they will drive whether or not there is "enough demand" for taxi services.  This is great for consumers probably because it is a constant downward pressure on rates.

(This is a similar side of the problem in DC posed by the fact that immigrants, who often have reduced job opportunities, seek out taxi jobs because there are reduced barriers to entry, which ends up increasing supply of taxis beyond what might normally be equilibrium.  This has negative impact on service.)

But in terms of making taxi operation profitable for individual "hacks" it's not so good, as the SW article discusses.  If you can't make a living at driving a taxi, the quality of the service is likely to decline, just as it has in so many other areas of the economy, as wage growth has been negative.

7.  And Uber, Lyft, and other mobile commerce dispatch services are using a kind of neoliberal commentary about "collaborative consumption" or the "social economy" to obfuscate what is really happening and what is at stake.

Which is a different issue from regulatory authorities and the ability of these entities to support and encourage innovation and service quality, while at the same time protecting the public interest, and working to ensure that the "transportation system" works well overall.