Greater Greater Washington

Graham converts to deregulation over 8-hour hearing

Sometimes legislative hearings are just theater, but sometimes they actually educate elected officials about complex issues. Monday's hearing on Uber and other innovative taxi service models achieved the latter, especially for Ward 1 Councilmember Jim Graham.


Photo by joyride1x1 on Flickr.

Graham started out the 8-plus-hour hearing lamenting an "uneven playing field" between Uber, which can charge any prices and doesn't have to use Taxicab Commission-mandated technology, and standard taxis, where regulation both limits their income and increases their costs.

At the start, Graham sounded like he wanted to impose taxi-style rules on Uber. By the end, he had come to a different realization: the solution could be to let current taxis enjoy the same freedoms Uber does today.

The question that councilmembers and regulators will have to grapple with now is how exactly to let existing taxis compete with Uber. Will existing companies have to buy whole new fleets of black cars, or can they upgrade their existing vehicles?

At the start of the hearing, Graham noted that these regulations have come about because residents want higher quality. He sparred with Uber CEO Travis Kalanick, arguing that Uber sets prices instead of drivers (Kalanick disagreed, saying it was the product of a negotiation, and if drivers didn't like the prices, Uber wouldn't have any drivers) or that the money will go to Los Angeles because that's where Uber is based (Kalanick emphasized that most of the money goes to the drivers).

By the end of the hearing, though, Graham's tune had changed. He didn't stop believing that there was an uneven playing field, and he's rightthere is. But after a lot of very happy Uber drivers testified at the hearing, he concluded that letting more companies play on the Uber side of the field is the best approach.

It is. Many of the burdensome regulations are there to push higher quality, but Uber proved that higher quality can come from competition instead, at least when customers can voluntarily choose which taxi company to patronize.

How would that work? The Taxi Commission wants to create a new "S class" license for "sedans," or black cars, which drivers can get and then operate under an Uber-style model. Meanwhile, there will still be standard taxis you can hail on the street. Furthermore, apps like Taxi Magic (working in DC today) and Hailo (which plans to come to DC soon) let riders request a standard taxi using an app.

What's the difference between a sedan and a taxi?

Councilmember Mary Cheh (ward 3), who chaired the hearing, focused on a key question. You have Hailo to request a regular taxi, and Uber to request a "premium" car, but what's the difference, really? How could one set of cars have to operate under one set of taxi-style regulations, and the other under Uber-style, when both sets of cars respond to riders who request them through smartphone apps:

I suggested one option: Let all cabs run in Uber mode when picking up app-based hails. DC could deregulate rates even for dispatch calls like Hailo. Apps that let you request a taxi could also know what rates various cab companies charge; they would have to publish their rates in some standard format. A rider could pick a cab based on a combination of which one's closest, what their rates are, how many stars it got, and your prior experience with that company.

That could be somewhat complicated, however. Existing taxi apps don't work this way, and the Hailo CEO wasn't really into that approach. For one thing, Hailo doesn't know your destination in advance, so it couldn't easily estimate your fare under different pricing schemes.

Right now, Uber doesn't know the destination either, but Kalanick said they're working on adding that. Doing so would help riders a lot. Councilmember Muriel Bowser (ward 4) said she tried taking Uber downtown from her home, but "surge pricing" was in effect. It only told her that everything would cost 1.5 times as much, but not what that would mean for her total bill.

Taxicab Commissioner Ron Linton suggested a simpler difference between sedans and cabs. If you have an account with the company and it has your credit card on file, and when you request a trip it gives you the full fare in advance, then it can be a sedan trip; if not, it's a taxi trip.

Under this system, Yellow Cab could conceivably create Yellow Cab Premium, sign up some customers with accounts, get their credit cards, let them text message to reserve a car, and charge whatever rate they want. If their quality is good, people will probably use their service.

Can the same vehicle be a sedan and a taxi?

But are sedans and taxis two totally separate sets of vehicles? The current regulations require that all sedans be painted black, while all taxis will soon have to be a standard color. (Linton said that the commission will create and release 3 options for color and livery to get public comment, but he doesn't yet know what those options will be.)

This means that the hypothetical Yellow Cab Premium would have to buy a whole new fleet of different cars. Shouldn't we allow existing taxi fleets to compete with Uber? It would be great if Yellow Cab had an incentive to announce one day that they are going to spruce up the interiors of many of their cars, and anyone who signs up for Yellow Cab Premium will only ride in one of the top-condition cars with drivers who get good customer service ratings. Basically, the value proposition is, pay a little more, be guaranteed of getting one of DC's best taxi drivers and none of the worst.

This has value for all riders. Not only would there be higher-quality black cabs with higher-quality drivers, but pressure for existing drivers to offer good service and maintain their cars well. If that happens, even people who hail cabs on the street would benefit. On the other hand, if only completely separate fleets can make more money, there could be a trend toward the best drivers leaving the classic taxi market. There would then be fewer, and worse, cars available for street hails.

If companies can use existing cabs as sedans, then what is the difference between Hailo's app and Yellow Cab Premium's? If you request a car on Hailo, the driver makes a little less money just because Hailo doesn't know your destination? Maybe that will just lead Hailo to add Yellow Cab Premium as an option on their app. That gets us back to my original suggestion after all.

Regulations will get better

Linton agreed at the hearing that some of the proposed regulations will change. For example, he seems to have agreed with my argument that the requirement to have a local place of business, with "office furniture" and a receptionist during business hours, is silly. Instead, he said, they will just require the company to have a registered agent, so that official documents, court summons, and so on can be served to them. That's a common requirement for any company and totally reasonable.

Cheh asked if some more information about fuel efficiency could go on the Taxicab Commission's website, and Linton replied that they are only allowed limited web space. Cheh replied, "Well, that's not very persuasive." A few funny Twitter jokes about the Internet running out of room aside, this isn't the first time we've heard of limits OCTO, which runs the DC government websites, places on agencies, perhaps not with the best results.

The Taxicab Commission will revise their regulations, and it seems likely that they will end up at a place which doesn't unnecessarily burden Uber. Uber might have to start telling riders the fare ahead of time, which isn't unreasonable or that difficult, and they will have to ensure that a DC-to-DC trip uses a DC-licensed vehicle instead of a Virginia one, which also isn't unreasonable.

But they'll be able to keep operating, and most of all, other companies including existing drivers will be able to compete with Uber on the same terms. That would be the best outcome for riders.

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David Alpert is the founder and editor-in-chief of Greater Greater Washington. He worked as a Product Manager for Google for six years and has lived in the Boston, San Francisco, and New York metro areas in addition to Washington, DC. He now lives with his wife and daughter in Dupont Circle. 

Comments

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Sounds like it will become harder to hail a cab on the street.

by charlie on Sep 27, 2012 10:27 am • linkreport

What a mess.

by Jasper on Sep 27, 2012 10:39 am • linkreport

The council members should all remember that regulations should exist to benefit the consumer. If the regulations don't benefit the consumer or even actively harm them then that regulation is unnecessary. If the regulations just serve to protect taxi driver's bottom line that's rent seeking.

by drumz on Sep 27, 2012 10:42 am • linkreport

How is Graham in any way still involved in taxi regulation here when a member of his staff has been found guilty of bribery in connection with the taxi industry?

by ontarioroader on Sep 27, 2012 11:01 am • linkreport

A couple issues:
1. If apps require you to provide a destination (or even if they offer it), doesn't that lead to the same problem as cab drivers rolling up with doors locked and demanding to know where you want to go before letting you in? This is illegal and should remain illegal - won't knowing your destination just lead to cabs ignoring certain requests?

2. If you allow any old cab to charge a higher rate by picking up app trips, won't that make it harder to hail a cab the traditional way? Uber works because the company offers a premium service at a large premium price and therefore has a big incentive to have clean cars, polite drivers, etc. If you allow TaxiMagic or Hailo to offer rates at a 20% premium (rather than the 100% markup of an Uber ride), that probably covers the convenience of the app for a lot of people AND means that drivers may choose to wait longer for an app fare rather than pick someone up off the street, especially during peak cab hours.

Taxis are part of our public transportation network and that's why we regulate them. We have made good strides in making the fare system more simple, and in getting the drivers to agree to smart meters, credit card payments, and GPS. Seems to me too much attention is being paid by the Council and the DCTC to Uber - do they really compete with regular cabs or are they something completely different?

by MLD on Sep 27, 2012 11:06 am • linkreport

It seems to me that in the app (which I have never used) could provide a way to bid.

Person enters in app where s/he is, and where s/he wants to go. The app could very easily calculate the fare. Available drivers that see the fare could then accept the business, or not. If nobody answers in some set time, the price increases.

Since Uber already adjusts the fare based on demand, why not?

by goldfish on Sep 27, 2012 11:18 am • linkreport

@MLD; that is basically what happens in Arlington. Excellent on-call service from local companies, but much harder to hail a cab in the street (less of them waiting around)

"It is. Many of the burdensome regulations are there to push higher quality, but Uber proved that higher quality can come from competition instead, at least when customers can voluntarily choose with taxi company to patronize."

I'm assuming that is "which", not with.

Higher quality from competition? Again, I think not. Going back to telecom, one of the reasons (and it is complex) AT&T agreed to give away the cell phone to the RBOC is engineers assumed nobody would want the piss-poor sound quality of cell phone. (And they are -- compared the landline standards of the 1960s, cell phones are a joke on voice quality)

But, as it turned out there are different levels of quality --- people valued mobility more than call quality. That is the problem with putting regulations into stone.

We've focued so much attention on car quality (color, credit card, etc) and maybe people just want convience. Or lack of pick-ups, which is fine too.

Really, the best thing is to allow Arlington companies to pick up DC residents. Rather like the freedoms of the air treaties.

by charlie on Sep 27, 2012 11:31 am • linkreport

@charlie

Does that excellent on-call service extend to actually phone calls? Because with DC cabs that option might as well not exist. The problem I have is expanding cab service for people with smartphones at the expense of everyone else.

by MLD on Sep 27, 2012 11:50 am • linkreport

Fixed the which-with thing, thanks.

by David Alpert on Sep 27, 2012 11:51 am • linkreport

@MLD; yes. Phones. They also have an app, although I've never used it.

Does anyone have any data on HOW cabs in DC are actually used. My sense is there a lot of competiing uses which are somewhat exclusive. Not to awaken the Layman, but a better sense of what "21st century cab service" is going to be is helpful.

by charlie on Sep 27, 2012 12:04 pm • linkreport

One thing that totally sucks about this environment as laid out in your post is that so-to-speak reliable service is only made available to people who hail taxis with apps and agree to pay higher prices.

The whole point about public accommodations in transit is to make services available to all at a commonly agreed to price, not to separate off tiers of service.

The biggest problem with DC taxis is that if you "call" for service, they can't guarantee that a taxi will come pick you up generally, or at the time you request specifically.

If you live in the core, where is replete with taxis (people better at economics can explain why this is so, but it happens to be about demand, capacity utilization, profitmaking potential, etc.) this doesn't matter so much. E.g., even at 5am you can probably get a cab in Dupont Circle.

In much of the rest of the city this isn't the case.

This is why out-of-city taxi companies like Red Top succeed in getting DC customers to call them for Arlington destinations, especially the Airport, especially during the times when the subway system doesn't operate.

People wouldn't do that if they could rely on a DC taxi company to be reliable. E.g., I started doing it only after having a major problem getting a taxi at early hours to go to an airport.

Similarly, if we really need a cab in our area, it's easier to just go to Fort Totten Metro, where there is a taxi stand, than to expect a radio dispatched cab to actually come.

What is it about the current system, business model, etc., that prevents such a differentiation in terms of high quality customer service by one or more companies, without having to make it a car service?

WRT Charlie's point, yes, it would help A LOT if there were a transpo plan, and a taxi/car service element within it, being research infused on what the market is going to be like going forward, what other cities are doing in terms of ensuring that problems with under-serviced areas are addressed:

e.g., the new taxis for the outer boroughs in NYC, shared taxi-jitney services in cities like Montreal or even the post Rob Goodspeed did years ago about Johannesburg, http://goodspeedupdate.com/2007/2122

As far as Uber goes, I don't really care. I am too cheap to be willing to pay high prices for a car service. It seems like a waste of money to me and in any case, likely is only to serve a small portion of the market, maybe less than 10%, but yes, research on this would be really important.

What continues to bug the s*** out of me about DC Council is how a-planning and a-research it is. As someone said to me last night, "someone talks to a Councilmember at a cocktail party and all of a sudden they are writing and submitting legislation..."

As he said, "it must be really terrible to work as a planner in the city when planning is totally ignored."

... um, yep.

by Richard Layman on Sep 27, 2012 12:54 pm • linkreport

if only completely separate fleets can make more money, there could be a trend toward the best drivers leaving the classic taxi market. There would then be fewer, and worse, cars available for street hails

kind of a non-sequitur here, but when I read this, I couldn't help but thinking about the parallels between DCPS and charter schools.

by Geoffrey Hatchard on Sep 27, 2012 1:43 pm • linkreport

As Uber and its kin start to navigate the regulatory oceans, the discussion's shifted toward how these services fit into the existing cab and livery car environment.

I'm still struck, though, that these network-based services have created a fundamental change in the way that people can get rides. Perhaps current structures can bend to contain them, or even crush them, but I think it's more likely that the cab environment of 2022 is going to be nothing like today's.

Think, for instance, of intermodal shipping containers. The first containerization experiments started in the 30s. Few shippers used them til about 1970, and then, in a few years, they reshaped the entire maritime industry.

The benefits of the container are clear: it's cut back on cargo-handling time and port labor costs. Goods are protected from the weather and from the grotesquely high rates of theft that plagued the docks. Nothing much changed, though, until rate structures, regulations, and labor agreements adapted to the technological pressures of containerization. Cargo handling remained the same for decade, and then the avalanche happened.

Now, the world of the shipping container wasn't a terribly pleasant one, if you were a dockworker now out of a job, or a resident of a factory town whose plants have moved overseas. Perhaps this reality wasn't inevitable. Still, the debates we're having right now sound like those desperate measures by longshoreman's unions, trying to stave off mechanization and attempting to force outmoded working rules.

by David R. on Sep 28, 2012 9:29 am • linkreport

David R. -- how is an app based cab service any different from a radio dispatched one?

The real issue is that the radio dispatched system _in DC_ isn't reliable, which has created a "hole in the market" opportunity for another service to fill.

Although Uber adds higher quality vehicles and higher prices to the mix, and wants to include variable pricing. (Note that traditional taxicab regulations require that a certain number of vehicles be made available at all times to prevent variable pricing, as part of the general "public accommodations" requirements for "common carriers").

OTOH, top law and lobby firms have always used car services in DC to ferry their people around. Uber is a car service for the masses I guess.

Anyway, I don't see how Uber is comparable to the impact of containerization. Or at least, I have a humble request that you explain to me in a way that I can understand why it's so amazing.

Containerization I understand. They eliminated (for the most part) break bulk shipping, significantly reducing the number of people needed to get cargo onto and off ships. Speeding up the process of goods movement. Plus the containers eliminated the need for separate vehicles (well, not the cab, but the trailer) at the port to transfer the goods to their final destination. Plus you could fit a lot more cargo onto ships when it was nicely organized into containers, making shipping cheaper.

With Uber vs. cabs, you still have a vehicle, a driver, and the cab is used for a single rider/group trip.

by Richard Layman on Sep 28, 2012 9:46 am • linkreport

@RichardLayman; clearly, the answer is planners need to have more cocktail parties!

Off the top of my head , some sort of app for the slug lines might work to speed them up a bit as well.

Uber only works in cities where the is excess capacity for livery cars.

by charlie on Sep 28, 2012 9:53 am • linkreport

It's different in the way that online shopping is different from the venerable mail-order catalog: customers can get much more information, especially comparative information, with little friction. It's also easier for new entrants - with apps, there's no need for a radio base.

Compare the experience of buying an airline ticket in 1985, when only travel agents had access to fares, with what we have today, now that aggregators and search engines let anyone compare fares. I don't know that today's commercial aviation is an improvement, but it's certainly different, especially if you were a travel agent.

Uber's just a start, aiming for the high end. These tools could make it easier to combine rides.

by David R. on Sep 28, 2012 10:01 am • linkreport

More concretely:

With radio dispatch, the driver needs a dispatch base and affiliation with a company. Prospective passengers know nothing about the driver who's been sent, and they're in no position to compare rates, not without working the phones. The dispatcher could help set up shared rides, if regulations allow, but that kind of gymnastics seems to be something that even the airport shuttles can't manage to do efficiently.

Add an app - not necessarily Uber, but apps as they might soon be - now there's a mechanism that lets any driver subscribe and pick up rides. Passengers can rate drivers; passengers can compare fare offers between drivers, and across services. Now there are software and communications tools that make it easier to plan shared rides, and some of that authority moves to the passenger rather than the dispatcher.

by David R. on Sep 28, 2012 10:12 am • linkreport

I have little hope for the future of "shared ride" taxis, given that I can't ever seem to get anyone to voluntarily share a taxi late at night at Union Station or National Airport.

by MLD on Sep 28, 2012 10:22 am • linkreport

making something information rich isn't a scalar change necessarily. Nothing (other than lack of innovative and creative spirits) prevents a DC-based cab service from transforming what they do, converting radio dispatch into mobile app dispatch seems easier and cheaper anyway. E.g., when I reserve a Red Top cab for a trip to National Airport, I don't talk to anyone, I just do it online.

MLD -- in the old days with the zone system, shared rides were legal, although the first rider could technically refuse to allow it. So at Union Station, you would do group rides. I don't remember what happened at National Airport.

David R -- I think those are definite service improvements, not necessarily transformative on the scale of containers, partly because ultimately, the market for taxi service is pretty minimal in the great scheme of things. But the point of common carrier service isn't necessarily to have variable rates, but to ensure that the market operates successfully.

As charlie says, the only reason that Uber makes any sense is that existing livery car drivers have excess capacity. It's fine to use it, sure, but it's likely to have marginal impact.

MLD -- the thing I meant about taxi collectif (Montreal) and jitneys is that they are likely to work better servicing the city outside of the car, when in normal circumstances, it's less profitable to provide taxi service there, because there is overall less demand. (For obvious reasons, taxis "collect" in the areas where their services are most likely to be used.)

Uber is a service focused on high margin trips generated in the core and won't address the problem of service access in the outer parts of the city.

by Richard Layman on Sep 28, 2012 11:09 am • linkreport

s***, I wrote "servicing the city outside of the car" and I meant "core" not "car."

by Richard Layman on Sep 28, 2012 4:10 pm • linkreport

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