The taxi drivers in Washington, D.C. fought the ride-hailing services for three years to delegitimize the business model, but they did not win. They now changed the tactic to make sure the way regulations apply to Uber and Lyft is similar to the cabs, so the competition is fair.
About 6,500 registered taxi drivers in D.C. have lost revenue every year, after the ride-hailing services started operating in the city. The number of the ride-hailing drivers in the metropolitan area has reached over 170,000. According to the data sets published on the Department of For Hire Vehicles website, taxis collected total fares of $216 million in the 2016 fiscal year, which is about $13 million less than the previous year. As of the first six months of the 2017 fiscal year, in comparison to the first six months of 2016 fiscal year, taxis have already collected $15 million less in total fares.
There is a clear decline in the revenues of taxis, as the ride-hailing companies’ total share of the pie increases.
The questions is, “what have they done wrong?”
The success of the ride-hailing services in the city pushed cab drivers to come together for the first time and they formed the Washington D.C. Taxi Operators Association in 2013. In October of 2013, drivers came together to protest the way the city allowed the ride-hailing businesses operate. This reaction was perceived as strike by the public which eventually backfired on taxis. The cars blocked Pennsylvania Avenue, and there were not many cabs for rides. The District’s residents said if there wasn’t an available taxi, the ride-hailing services were still there.
The general manager at the Yellow Cab Company of D.C., Roy Spooner said although the foundation of the taxicab association was a positive step, the path it followed was not appropriate.
“We overreacted,” he said. “We started screaming and yelling at everybody.”
As the battles against the ride-hailing companies failed to produce positive results, taxi drivers realized they are fighting a ghost they cannot even catch.
The taxicab association’s lawyer, Jeremy Peter Green said it became clear that a new approach was needed.
“It’s just a much more attainable goal to get the city to loosen its regulations on the taxi drivers than to make it harder for Uber [and Lyft] to operate,” he said.
Background
When Uber launched the UberTAXI and UberBLACK services in the District in late 2011, it was not a threat to the taxi industry. UberTAXI was a dispatching service for taxi drivers, providing additional business. UberBLACK was competing for a different segment of the transportation industry.
It wasn’t until the summer of 2013 that it became clear ride-hailing might be a real threat as Uber launched its cheapest service, UberX, and Lyft started in the city. Uber launched this service under limousine registration to operate legally. The city government initially passed legislation redefining a limousine, thus temporarily pushing the ride-hailing services out of business.
But, Uber fought that legislation claiming it targeted the company directly. In response, the city unanimously passed “Public Vehicle-For-Hire Innovation Amendment Act” before the end of the year, clearing the path for ride-hailing apps to legally operate vehicles carrying passengers without being commercially registered.
With that, Uber and Lyft became the main competitor to the taxi industry, while also picking up customers who didn’t use taxis for transportation before. The cheaper service and convenience of a mobile app led to the success for the digital dispatching services, while causing business loss for the taxi industry which heavily relied on street hailing.
After the ride-hailing services became the main competitor, the taxi operators’ decision to fight them directly did not really work. Spooner of Yellow Cab Company, said that the industry didn’t have a real competitor before ride-hailing emerged. So, the industry failed to initiate a good strategy. The goal was delegitimizing Uber and Lyft, and not having a competitor at all.
Taxi drivers now accept the legitimacy of these services. They will not fight to push those services out of the city. But, they think the city is more tolerant to the ride-hailing companies than the taxis, and it is not providing a fair competition space.
Eartha Clark, a decades long taxi driver expressed her frustration on how the rules applied differently on both sides.
“You are saying, you have competition, and compete,” she said. “Well, how can you compete? [Uber] doesn't have any of the regulations we all have.”
A taxi driver can be fined up to $1,000 at one stop because of the commercial regulations. Uber and Lyft drivers are treated as ordinary vehicles. Mr. Green, the union’s lawyer stated that the rules do not apply the same way to taxis and ride-hailing services.
“If they believe they are being scrutinized the way taxi drivers know they are being scrutinized, I think Uber will have a lot fewer drivers,” Green said.
One of the most significant issues that taxi drivers point to is that taxis stand out more than any of the ride-hailing vehicles, with their color scheme and signs. A ride-hailing driver only has to post a small sign. The city does not even collect statistics on the citations for the ride-hailing drivers. But, the taxi drivers claim they are frequently targeted by the police and the hack inspectors because they are more visible and easier to catch.
Despite all these battles, neither the regulations, nor the way it applies to either side has any effect on a rider’s choice. At the end of the day, none of this is a rider’s problem.
Angela Peper, while visiting the city for a conference in April said as a non-resident what she needs is some type of familiarity of the city.
“We use Uber wherever we go, and the biggest reason why is with the app, we get to pick where we are on the map,” she said.
District resident Luis Quirarte agrees that the mobile application is one of the biggest advantages of the ride-hailing services.
“They need an app,” he said about the cabs.
Many riders say the way ride-hailing got into their lives was via a discount.
Sam Rosen, who was visiting the town on a business trip said, “If I receive a promo code that says ‘a taxi will be 50 percent off for my first ride, yes, I will take it.”
Although some of the taxi companies have their own smartphone apps, they are not universal. The other issue is that having the app still does not provide the same kind of freedom ride-hailing services have, to the cab companies.
The Yellow Cab Company of D.C. is one of those companies that has the dispatching app. The company’s general manager Spooner says, if he was allowed to use the app just like any other ride-hailing app, reducing all the regulatory and financial burdens, he could operate unmarked vehicles exactly the same way ride-hailing does. But, he cannot, because the app is owned by a taxi company. It only can be used under a regulated framework.
“Free me up,” he said. “So, I can do this.”
Taxis and ride-hailing drivers provide the same service; taking a person from a place to another place. The difference is how they are regulated by the city they operate in. In the District, any ride-hailing driver can pick up and drop off passengers using their phone, with no additional insurance cost, no FBI background check, no credit card machines installed or no distinguishing signs required.
Compared to public transportation, riding in a taxi has never been a cheap option. Until 2008, District taxis had used a zone system to calculate its fares for decades. That system would make fares unpredictable since the price would change depending on a number of factors, such as the location, time of the day, number of the riders, and size of the luggage. The only person who could determine the price was the driver.
When the city government decided to change the system in 2008, drivers opposed it. The opposition arose from the cost of installing a new meter, and the fact that rides would become cheaper because of the standardized meter system.
The city government put the new regulations in place in response to the complaints from the customers that the prices could be manipulated by the drivers. It aimed to make the fares more transparent, and customer friendly.
But, the rules did not stop there. While ride-hailing operations were growing as a threat to the taxi industry, new regulations forced taxi drivers to accept credit card payments, have a dome light, and change the taxi color scheme.
Ernest Chrappah, DFHV director said all these regulations helped taxis stay in business although most operators’ initial reaction was negative. He thinks a competitive environment helps build better options for everyone.
“It is great for competition to have minimal set of rules that address basic safety, and consumer protection,” he said. “Some of the taxi companies are now embracing competition.”
Yet, he agrees that not all the regulations help the taxi industry.
“The city must also revisit some of the laws on the books,” he said.
Taxis have always been regulated, and it will continue to be so. The failure to win against ride-hailing pushed the taxis to find a new target: regulations and the regulators. They hope to survive the tough competition in this era by reducing the burden of regulations on taxis while loading some of those regulations on Uber and Lyft.
“It’s better for the public that we are competing,” said Yellow Cab’s Spooner. “You make me better.”
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