TNC/Taxi Key Industry Dimensions for Policy Makers

Reality Check

TNC and Taxi Industry Overview of Key Dimensions

For Policy Makers

Industry experts, economists, cost-accountants, academics, and transportation officials that have studied the Taxi and now TNC industry deem an understanding of the following integral when developing policy:

1) At a driver level, the Taxi industry is easy to enter, yet at the firm and public policy level difficult to operate- benefiting from localized policy customization to meet the needs and travails unique to each city.

2) The reality that at a national or international level the entrance of new TNCs is unlikely as Uber, Lyft and others have benefited from market cap gross overvaluations, dominate most markets they are in, yet do not have a clear path to profitability and have left a path of demolition within the Taxi industry and are benefit from “economic rent” and “economic rent seeking behavior ”which is one entity seeks to increase their own wealth without creating any sustainable benefit or wealth to society. It is the drivers and not the TNCs that afford the low income and the poor to partake.

3) Its segmentation by types of fares and passengers,

4) The cost structure and economies of scale therein by segment type

5) Taxi demand variability by day and time and the dynamic relationship between supply and demand of passengers and drivers and the pitfalls of excess drivers

6) The role Taxis/TNCs play and are desired to play in Public Transportation

7) The minimum sustainable livable wage for local drivers and typical margins for TNCS and local Taxi firms and Owner Operators

8) The appropriate jurisdiction level for type of regulation and an acknowledgement that macro level policy decisions may be problematic in reality for and at various local entities,

9) The ability to distinguish new technologies, new ideas and new business practices ideas that are universally good and beneficial for the industry and ecosystem as a whole and those that simply shift functions from one entity to another,

10) A realization that there are no universal right answers for every local area but there are wrong answers that damage the propensity for a just and viable industry and ecosystem.

Taxi Service at the fare level is predominantly very local and occasionally regional. It was never national nor international at the fare level- it would be unusual to take a Taxi from Los Angeles to New York and impossible to take a Taxi from New York to London and yet the Taxi experience as it is a component of tourism for most predominant destinations was fairly straight forward, easy to figure out, safe, and orderly in part due to involvement of local government. 

Like plumbing, where issues and regulations/codes/standards are local, most Taxi regulations were historically and are local too. This makes/made sense as Taxi’s are a service business with little economies of scale and requiring great attention to detail by the entire ecosystem to assure the viability of the industry/service for all- a range of fare types, customers and constituents.

Uber’s inception idea arose out of one of its founders having a late night/early morning on the town in Paris and unable to hail a cab. Arguably not a problem worth turning an industry on its head over. Paris has a very safe and convenient metro system and according to The Office of Tourism de Paris, “The metro service starts every day – including public holidays – around 6am and ends around 12:45am (Sunday to Thursday) or 1:45am (Friday and Saturday). The metro's frequency varies according to the times and the days: at peak times, the metro runs every 2 minutes.” Many late night partiers secure transportation with their hotel prior to going out, perhaps as simply as getting a phone number for a Taxi company from the concierge or front desk. Not every large city is like New York City with pedestrian traffic 24-7 and hailing taxis operating at all hours,  nor does every city need to be.

Borrowing directly from a 2016 German Federal Ministry for Economic Cooperation and Development report, “Taxis as a Part of Public Transport published by GIZ- Deutsche Gesselschaft for International Zusmmenarbel (GIZ) GmbH and SUTP-Sustainable Urban Transport Project:

Taxis are an important feature of urban mobility, but they may pose a challenge in many cities due to the following:

• Safety issues (related to vehicle quality and driver behaviour);

• Quality issues (low quality of vehicles and service, inability of customers to assess quality);

• Competition with public transport (city space is limited); 

• Quantity issues (oversupply or undersupply);

• Social issues (long working hours and low, irregular wages);

• Illicit behaviour (competition for passengers, criminal activities);

• Overpricing (weak negotiating position of customers).

These issues can be found in many cities. The obvious solution is to impose regulations. Typically, these regulations include:

• Licensing;

• Restrictions on the number of vehicles allowed and on the type of vehicle;

• Requirements on drivers to have certain proof of qualification, and so on.

The exact content of these regulations varies from city to city. However, regulatory measures must be carefully designed, assessed and, if necessary, corrected in order to achieve the challenges they are meant to overcome. Comprehensive experience with different regulations has been gathered and lessons can be learned thereof.

Taxis provide a publicly available service and are therefore part of public transport. However, the lack of regular schedules, routes and set stations — all features characteristic of public transport — gives it a semi-private character. Fixed public transport services cannot support all travel demand. Hence, full area and time coverage is dependent on taxis, which operate 24/7 and from point to point. They are a vital link in public transport systems functioning in accordance with public demand. Therefore, they are a useful supplement to conventional public transport. In some areas, taxis are even the only form of public transport available. 

Taxis are part of the public transport system. Most transport is for the convenience of travellers wanting to get from point A to point B, and taking a taxi is one of several possible ways of doing this. Taxis should be part of the transport solution in a city, not a problem.

Taxis serve a demand that is present in almost all cities in one form or another. The taxi industry can trace its roots to antiquity. Still, there is no universally accepted answer to the question on how to best regulate the industry. The best advice is to start with the regulatory objectives. Just because there may not be one right answer it does not mean that there are no wrong answers.

Studies have shown that Taxi demand has common patterns that are fairly consistent from city to city. As this is known and trackable, it suggests that Uber’s “dynamic pricing” may capitalize on known times of high demand by customers and not necessary a deprivation of drivers- and certain drivers may benefit more from these “surges” than others- i.e. not many people take a Taxi to Cub or Target in the wee hours of the night on weekends.

References

Aarhaug, Jorgen (Institute of Transport Economics Norwegian Centre for Transport Research),  (2016) “Taxis as a Part of Public Transport-Sustainable Urban Transport Technical Document #16”