More than 30 years ago, when I was just out of college, one of my first jobs was driving a cab in Arlington, Virginia. It wasn’t a bad job, compared to being covered with honey and staked to an anthill.
What’s remarkable about the taxi industry is how little it’s changed in all the time since then. Even in the distant ’70s, we drivers thought we were overcharged for cab rental, didn’t get enough benefits from the companies, were forced to drive subpar vehicles (my regular cab, number 52, had a foot-sized hole in the floorboard under the brake) and were generally treated badly.In those days, the cab rental was half of the meter total. I was robbed once halfway through my morning shift. The thief did not distinguish between my half of the money and the company’s. I had to work until 2 a.m. to replace the company’s half. I did a 16 hour shift for free.
These are the kinds of issues that Colorado’s HB 1114 tries to deal with, by deregulating some aspects of the cab business. The bill was reported out of the House Transportation and Energy Committee by a 10-2 vote Thursday. The primary thrust of the legislation, which is supported by drivers, is to make it easier to start your own cab company — whether you want one cab, or a fleet. Other reforms include a criminal background check, and a fund to provide “nonemergency transportation” for the poor.
John Zakhem, the lawyer who is spearheading the legislation for the drivers, said yesterday, “We are not attempting deregulation. We are attempting demonopolization.”
But to provide both decent service for consumers and a decent living for the drivers, it may be that the legislation does not go far enough toward deregulation. There have been a few studies of cab deregulation in other cities. In general, they conclude that, like many cab companies, this limited step doesn’t perform as advertised.
A 1993 Price Waterhouse study, for instance, found that overall in cities that deregulated much as the Colorado legislation would, the supply of taxicabs increased, fares increased, service quality declined and there were more trip refusals, lower vehicle quality, and aggressive solicitation of customers.
John Boroski, an economist with the Portland, Oregon-based consulting firm ECONorthwest, wrote another, more optimistic study, about cab deregulation in Portland. Of the issues in Denver, Boroski said, “It sounds like the typical problems you see in a highly regulated market. But Denver may not be ready for a really robust deregulated taxi market.
“I don’t think there are incremental steps you can take,” he said. “What I observed is that when you do it, you need to do it completely and very thoughtfully. You need to think it through.”
Boroski adds that most of the serious deregulation schemes are killed by resistance from many sides. “There’s a lot of entrenched interest,” he said. “The companies have a lot of clout and they have killed off the competition. The drivers don’t know which way to go. The consumers are disorganized. There’s no ‘Citizens for a Better Taxi Service’ lobby out there.”
Deregulation has to encourage price and service quality competition. One of the chief complaints about taxi service in Denver and elsewhere is the drivers’ reluctance to take short-distance fares. I can sympathize. In Arlington all those years ago, we’d sit in line at the Crystal City Marriott cab stand to pick up fares. The wait was often a half hour or more. Far too often, the client wanted to go National Airport. You could heave a stout lobbyist from the Crystal City Marriott to National Airport. It was about a 90 cent fare. Some drivers — not me, of course — either refused the fare, or at least delayed departure until they got more than one rider.
“In a regulated market,” Boroski said, “the drivers and the companies have limited incentive to serve the short trips.” He says if companies are truly deregulated, competing on price and quality of service, they have more reason to provide quality short fare service.
On the other hand, again harkening back to the 1970s, a trip to Dulles Airport was the holy grail of an Arlington cab driver. The fare was $25, the tip was usually good. You might total $40. There were even cab driver legends of round trip fares to Dulles and back.
But first-in, first-out cab stands, like those at most airports, including DIA, eliminate price competition. If the passenger has to take the first cab in line, she isn’t allowed to comparison shop.
A 1996 study by the Buckeye Institute looked at cab deregulation proposals in Ohio. It found that in cities where market mechanisms determined prices, rather than regulation, rates were more competitive. “Fares for a one mile trip averaged $2.59 in market-determined rate cities, $2.85 in maximum rate cities, and $3.10 in ordinance determined rate cities,” the report said. But the sample size was small because only two cities had market-determined cab fares.
Boroski says that customers at airports ought to be able to pick a cab much like they pick a rental car. “When a passenger comes off the plane, there are several rental car booths. You might choose one for price, or another for service, or another because the line is shorter. You could do a similar thing with taxis, making the taxi function more like any other business. Separate them, make sure their prices are clearly posted. I don’t think any cities actually operate that way. They don’t really give customers a chance of picking and choosing among them.”
Things that should continue to be regulated under any scheme include health and safety and vehicle inspections.