On Tuesday night I flew into New York and took a cab downtown. The cab’s meter wasn’t working, or so the driver said, and we agreed on a fixed price to my hotel. I know what a ride costs and wasn’t going to overpay. And I negotiated a discount for cash.
But the cab driver — who was going to get paid the same amount regardless of the route — decided the best thing was to take surface streets despite no traffic at almost 10pm, not wanting to pay tolls. He also wanted to finish the trip as quickly as possible and pushed the envelope on every red light we approached. The cab couldn’t have had much of a suspension system, I was so thrown around that by the time I made my hotel I was nauseous.
Cabs can be tough to get in New York at certain times and in some places, there are roughly the same number of taxis there as there were in the 1930s. The government won’t allow more; those would compete against incumbent operators and you have virtual regulatory capture by the industry such that the Taxi and Limoousine commission’s main purpose seems to be protecting the incomes of the companies which own taxi medallions.
Over the summer I wrote about “Why Taxis Suck and What You Can Do About It”
Remember that with fixed prices, cabs can’t charge for better quality. In New York it’s been illegal to pre-arrange a taxi cab, so you get what you get, whatever car pulls up, no matter what shape it’s in (and the condition then gets regulated).
In many places public transit is a much better option, but with luggage that can be daunting, with connections and in a new city it can be as well. Some places the waits are interminable, like DC’s metro with changes of trains and during off hours or on a weekend.
Car services can provide better quality, usually at a much higher price, but have historically been quite inconvenient due to the need to pre-arrange — you don’t always know when you’ll turn up or where you’ll need the pickup.
Enter Uber: a mobile app that helps passengers and car services find each other. They’re cheaper than the usual pre-arrangement, because they use the downtime that cars would otherwise be sitting and not earning anything, letting those cars find passengers who want a ride on the spot.
On average much of the time a car service called via Uber will cost 50% more than hailing a cab, but it shows up when you want it and avoids the vagaries of can you get a cab? Which late in the evening and in certain parts of town in many cities can be probabalistic at best. It’s a couple of taps on your phone, car shows up, you’re charged based on time and distance and there’s no transaction at the end — they just charge your credit card on file.
If you’re going to sign up for Uber, use my referral link and we each get $10 with your first ride. If you already use Uber, feel free to post your own referral link in the comments and a reader may choose to use yours instead.
When Uber tried to bring their mobile app innovations to the New York taxi market, they were chased off by regulators who apparently have their own trade association that was banding together to fight innovation from encroaching on their turf.
In New York pre-arrangement of a cab is illegal, which protects the black car market (the government has declared that only limo services can be pre-arranged, they lobby for the restriction as it means more business for them).
And the city has a monopoly contract for the processing of all credit cards, every cab in the city must use the same system that can then be awarded to cronies of the Taxi and Limousine Commission. The regulators don’t want to give up their ability to award monopoly payment processing for all taxi trips in Manhattan.
Uber’s app ran afoul of both of these, they charged through their own system and they necessarily pre-arranged taxi trips.
Regulators have also made the argument that they can’t vouch for the safety of Uber’s ‘unregulated car service’ but that makes no sense since Uber doesn’t operate their own vehicles, they simply work with already licensed and regulated vehicles to help them more efficiently find passengers (a big boost to their incomes).
The uproar after chasing out Uber’s attempt to allow pre-arrangement of taxis via app was so great that New York’s Taxi and Limousine Commission has relented, passing new regulations that would both allow for taxi apps and preserve its power.
They’ve passed a temporary one-year measure, with several restrictions:
- Any app must call a cab with a single tap (my current Uber app takes two taps — one to identify my location and a second to confirm that I want to call a cab to that location).
- They can’t allow drivers to accept requests from more than half a mile a way if they’re in midtown or more than 1.5 miles away in other boroughs or upper Manhattan.
- Apps have to process payments through the credit card monopoly awarded by the Commission, and not through their own system.
Customers also aren’t allowed to pay more for pre-arrangement or to effectively get priority over passengers hailing a cab who wouldn’t be paying more.
There was vicious opposition to the new rules, even with their restrictions (and it seems crazy that the Commission would be regulating the design of the app by requiring one tap rather than two!). That came from current black car operators:
But the most bitter opposition on Thursday was specific to New York, where the city’s prohibition on the use of radios and phone dispatch centers by yellow cabs in the 1980s led to the growth of an extensive livery and black car industry. Those companies have aggressively lobbied the TLC not to permit apps that they feel would break down the existing ban on “prearrangement” of rides between yellow cab drivers and customers, saying that to do so could severely threaten their business.
That argument held sway among some TLC commissioners, who said they feared the impact on jobs of allowing the apps to be used.
Technology breaks up and threatens existing orders, improves service to consumers and efficiency of business, it also disrupts existing business models. Regulators often protect those entrenched interests, but in the face of public opposition it’s difficult to do so. Here New York’s taxi regulators have tried to thread the needle through a middle approach — allow technology, but carve out a space for continued control over the market, which limited protections for at least some though not all of their cronies — to borrow a phrase, standing athwart history and pleading for it to stop or at least slow down…
(HT: Samir and also Colleen)