Posts about Taxi Commission
You'll be able to use credit cards in DC taxis by March 30. Instead of one single credit card machine in all cabs, drivers will get the freedom to choose their own technology. But they'll still have to install an in-car display screen that regulators will choose; is that necessary?
The DC Taxicab Commission (DCTC) went through a long bidding process to pick a single piece of technology to go in every taxi. This would take credit cards, show GPS information and ads (whose revenue the taxis would get a cut of), report taxi locations back to the DCTC, and more.
Verifone's bid won, and DCTC started requiring taxis to install Verifone's devices. But a challenge by rivals blocked the process, and on Friday the DCTC partly threw in the towel. Instead of forcing every cab to use Verifone's device, they are instead going to just require that every taxi accept credit cards in some way; the specific technology is up to the driver.
Ron Linton told the Post's Mike DeBonis that their approach changed because the marketplace changed:
"A year ago, when we came up with the 'smart meter' concept, it was a way to get credit cards and the other kind of technological things we wanted in the cabs quickly," he said. "We couldn't say, 'Do this,' because where would the drivers go? What would they get? Since then, there are six, seven, eight companies coming in here offering credit card services. .. They also are offering electronic reservations, which we want."If the DCTC picks a single piece of technology, everyone's stuck with that choice, whether they made the best call or a bad one, and even if technology evolves.
In that case, doesn't this same logic apply to other features as well? DeBonis writes that Linton plans a new procurement for the system that will have "an interactive screen, GPS navigation and 'panic buttons' to hail authorities." Why should DCTC pick a single piece of technology to do this? Most of this is nice to have, but really not that central to a taxi rider's experience.
One argument for a centralized technology choice, which Councilmember Mary Cheh made when passing the original bill which mandated these credit card, GPS, interactive screen, and panic button systems (and a standard color scheme for taxis), is that taxi drivers are often not the most cutting-edge when it comes to technology. Plus, since most people pick taxis based on whichever one shows up rather than choosing a company ahead of time, there isn't really much incentive today for a taxi to install a better but more expensive system. It probably won't draw more riders.
Therefore, that thinking goes, drivers will just install cheaper systems that could work poorly or break down a lot, and DCTC would spend a lot of effort monitoring and inspecting them, when it could just pick one system and ensure a baseline of quality.
But this also closes the door to innovation and opportunities for different vendors to compete. Any contract will likely run for a number of years, during which the manufacturer will have little reason to add features or make the devices better.
DCTC could just mandate outcomes rather than means, as it's doing with the credit card readers. Drivers could just pick any screen vendor, so long as its display meets certain requirements, like showing the rider the current location and sending GPS data back to DCTC. Drivers can keep the advertising revenue as an incentive to install a screen.
On the other hand, this could mean an incentive for drivers to pick a screen that gives them the most money (maybe by being most intrusive with its ads) rather than being most useful for the rider.
What do you think is better
Late yesterday afternoon, the DC Taxicab Commission (DCTC) announced that taxis could charge an extra $1 per passenger when Nats playoff games are in town. Confusion and outrage ensued, and within 2 hours, Mayor Gray rejected the plan, and the commission has rescinded it.
Ironically, this move has a lot in common with Uber's "surge pricing," which proposed regulations from the Taxicab Commission would forbid. It would apply from 2 hours before games start until 4 am the following morning.
The Taxi Commission posted a short notice last Thursday about the surcharge, but with few other details. It did not notify the media at the time.
The PR snafu, short notice, and poor timing sank the proposal, but had the commission handled the rollout better and avoided the firestorm, would this charge have worked?
What did the commission want to accomplish? Linton said in the news release,
We expect multiple riders to be using taxi services. The additional fare provides a fair compensation to drivers. It will also offer an incentive to deal with the increased congestion around the ballpark that could otherwise depress service, as well as assure service in other parts of the city.At first blush, these reasons seem nonsensical and contradictory. The commission wants to encourage drivers to operate around the ballpark, so they have a surcharge to create an incentive for drivers to head to the ballpark. But then, they want drivers to not all cluster around the ballpark, so they have a surcharge for drivers to go elsewhere. Don't these just cancel each other out?
Commenters online seem to feel the same way. On the City Paper post, commenter "One City!" wrote, "I love this city so much. Whenever you think we've reached the height of absurdity, the DCTC is there to show you we still have room to grow." RedLineHero said on the Washington Post site, "What the H-E-double-hockey-stick kind of harebrained idea is that? a surcharge during the playoffs? You have GOT to be kidding me. Good on Mayor Gray for shooting that down."
Uber "surge pricing" gets more drivers on the road
This surcharge is actually a lot like popular car service Uber's "surge pricing." If demand gets high, Uber increases its fares, first to 1¼ normal, then 1½, and so on. Anyone who books a car gets a notification about the higher pricing before the car is dispatched. All of the extra money goes to the drivers.
At the recent hearing, Uber CEO Travis Kalanick defended the practice. He said that the primary reason is to increase supply. They don't want riders unable to book their cars. At busy times, by raising the price and giving drivers the money, he said, it encourages more of their drivers to get out on the road and serve customers.
By that logic, the surcharge makes some sense. Many drivers work at different times of day. A bonus for working at this likely busy time could actually encourage drivers to switch their schedules around if they can, and be available during games. Some could go to Nats Park and serve fares there, but since the surge price applies all around the city, it will also encourage drivers to serve other neighborhoods.
DCTC's explanations don't hold water
If this was the DCTC's thinking, they certainly didn't make it clear. Will Sommer at the City Paper wrote, "Taxi Cab Commission spokesman Neville Waters says the extra charge has two functions: ensuring that the city's cab drivers don't just swarm Nationals Park, and making trips more profitable for drivers who are stuck in stadium traffic." He quoted Waters saying that without the surcharge, drivers would only drive to the ballpark and nowhere else.
These reasons don't match the policy. If DCTC is worried drivers will only drive to the ballpark, why would a surcharge that applies in all neighborhoods have any effect? It doesn't make trips around the ballpark more or less appealing compared to others.
As for the second argument, compensating drivers for traffic is why the rates include both time and distance. The playoff games probably won't cause traffic jams any worse than other events in DC, and the commission doesn't authorize surcharges every time there's a motorcade. If the DCTC believes that large traffic jams cause drivers to unfairly lose money, then they should raise the per-minute idling rate instead of using surcharges.
However, if the DCTC actually just wants to get more cabs on the road, this surcharge isn't a bad way to do that. It would just help a lot for them to actually articulate the economic reasons.
Wakehead commented at the Post, "How about they have more taxis work for the Nats games? Or is the target service model 'lines and surcharges'?" A rational answer to this could be, "Actually, the surcharge does get more taxis to work the games; it's lines OR surcharges, not lines AND surcharges, and we chose surcharges over lines."
We don't know what was going on inside the Taxi Commission's heads, but they are behaving as though they have some vague and general sense of the economic levers they have at their disposal, but aren't able to actually discuss it in clear terms.
The same dynamic played out at the recent taxi hearing, when people like Kalanick seemed to be speaking one economics-based language, and Linton and members of the DC Council a different law-based language. Ultimately, they agreed with one another, but it took hours (and some taxi drivers who didn't speak in economics) to break through the language barrier.
DCTC might actually want to consider trying a surcharge at a future event, like the Inauguration, but explaining it better. Trying a surcharge could also help them gauge how much supply it adds; Uber is able to monitor their supply and demand in real time and adjust prices accordingly, but the Taxicab Commission can't do that.
If the commission does come to recognize that it's using demand-based pricing, perhaps that will also make it less hostile to practices like Uber's "surge pricing" and other innovative pricing arrangements from mobile apps and sedan services.
Update: Uber DC manager Rachel Holt wrote in with some helpful information from their surge experience:
From what Uber has seen, during big games demand during the game is usually extremely low. Most people in DC are watching the games
The DC Taxi Commission (DCTC) has proposed new regulations for "sedan" services, rides you pre-arrange instead of just hopping in a cab driving down the street. Uber, a popular service that uses sedans, says the new rules will make their business impossible in DC, but DCTC Chairman Ron Linton says Uber is misreading the regulations.
In a letter to elected officials, Uber continues its aggressive rhetorical stance against regulators. Uber CEO Travis Kalanick writes:
These rules are not designed to promote safety, nor improve quality of service. They are intended to shut Uber and similar technology companies down. ... The rules, which the DCTC has published and coordinated to present at Mary Cheh's hearing on Monday, are a blatant attempt to shut small sedan companies down and therefore Uber's business. Our position is that any additional DCTC rule-making around sedans must be severely restricted.
Linton vehemently disputed that the commission is trying to attack Uber's business model. "I think [Kalanick]'s figured out that by being a bad boy he gets more attention, more publicity and more customers," Linton said. "We not only don't want to shut them down, we're trying to create a condition in which he and competitors" can compete. "We don't want to limit the competition, we want to have an open field."
The emotional intensity certainly has worked well for Uber thus far. A heated email about Mary Cheh's proposed regulations stirred thousands of residents to write the Council, even if the actual facts still remain in dispute at best. Maybe this is indeed a good lobbying strategy for startups in regulated fields: Build a great service that might be in the gray area of the law, accumulate a lot of happy customers, object loudly when lawmakers or regulators take unfavorable action, and channel customer energy to get better regulations.
As with the the last few rounds of the Uber battles, the folks from the government argue Uber is reading the laws wrong. Uber's letter alleges, for instance, that one of the provisions limits all trips to start and end within DC, but a closer look (§1405.1) shows that it also exempts trips that comply with the reciprocal agreements DC has with surrounding jurisdictions.
This provision changes nothing in the law, Linton said, except requiring the dispatch company, like Uber, to ensure that it's dispatching a vehicle allowed to make that trip. If it stays within DC, it has to be a DC-licensed sedan, but someone going to Virginia could use a DC or Virginia sedan.
Companies need a minumum of 20 vehicles
§1401.5 of the rules says that any "sedan company or association" must have 20 or more vehicles. In a telephone interview, Kalanick said that such a rule would "shut down pretty much everyone we partner with." Uber's sedan drivers are individual operators who own a single sedan, or in a few cases, a handful of cars.
But Linton said Uber "needs to have some lawyers read the regulations who know how to read regulations." He explained that this rule doesn't apply to individual operators, who aren't part of a "sedan company or association." Linton did say that such an operator wouldn't be allowed to have 2 or 3 vehicles under this rule, which has long applied in DC to all "public vehicle for hire" companies. "We don't accept anything between 1 and 19," Linton said.
Why is this? Linton said "it's historic," and added that changing it would make the commission's workload too great. They have 116 taxi companies now, and don't want 2-300. Workload is also a reason they have not been authorizing new sedan operators for some time, one reason Uber drivers' cars are registered outside DC.
It seems that this rule should change. But the commission's workload is not a good enough reason to refuse business licenses to anyone. Our economy usually does not, and never should, operate on a principle that you can't engage in smaller-scale economic activity because the government is too busy to review it. Some reasonable approval process may be appropriate, but if the regulatory agency is too busy to handle approvals, they ought to either get more budget or authorize more applications without such detailed review.
Sedan drivers will need a handheld printer
The rules also require each taxi to contain a "handheld device," with the capability to to print a receipt, send a receipt electronically, and/or audibly read out the fare. It also has to track vehicles using GPS and upload that information to DCTC.
Kalanick said it would be prohibitive for Uber to create a compliant device. Given that that their current system of using an app or text messaging is working well for its users, he asked, "what problem are they trying to solve?"
Linton said the problem is to ensure that drivers don't scam customers. He noted that drivers already have devices like these that they are using today. When the trip is done, the drivers have to hit "complete." They could hold it in front of the passenger to show they've hit complete, but it would be easier, Linton said, to just have the device print out a receipt.
Is that technically difficult or expensive? Linton said, "I understand it's no big deal to be able to have a printing device on them." What if Uber's devices are functioning well without these requirements? Linton said that Uber will surely claim that, but they have gotten a few complaints, it's the commission's job to ensure that riders get charged fairly.
Kalanick, though, worries that every time Uber wanted to add a new feature, they would have to change the physical devices and get the commission's approval. That would hinder innovation, he said.
Dispatch services need to have a place of business in DC
Another potentially problematic rule is §1403.1:
Each person operating a sedan company or association in the District of Columbia and each person operating a sedan vehicle reservation service operation in the District of Columbia or offering reservation services to any sedan vehicle licensed in the District of Columbia, whether by central dispatch, mobile phone or other electronic device communication or other form of digital dispatch shall maintain a bona fide administrative office in the District of Columbia.Uber has a place of business in DC, so this wouldn't affect them, but why should DC require this for reservation services? Linton said that every company that does business in DC needs a business license, and this is no different.
What about an Internet e-commerce company that ships goods here? If I buy something from them, they don't need to be a DC-licensed business, even though I am doing business with them. A taxi dispatch service seems more analogous to that.
Taxi Magic is in Alexandria. Do they need a DC office just to have an app that lets you reserve DC Yellow Cabs? Linton said, "That is good enough, they are in Alexandria, we don't fuss with them about that. We're talking about companies that are located in San Francisco, Boston, or New Orleans. We can't reach them."
However, the regulations don't explicitly exempt Alexandria businesses. Having DCTC just not enforce the rule against some companies is not a good approach. And why is the ability to "reach them" the issue? DCTC could set up rules for such services that work with DC-licensed sedans whether or not they have an office in DC.
Debate will continue Monday
Councilmember Mary Cheh (ward 3) is holding an oversight hearing on sedan services Monday. I'll be participating, and plan to repeat the points I've made before. There's a role for regulations, but we should err on the side of less prescriptive ones, rather than more.
Uber is bringing more choice to District travelers. Whether or not you use their service or not, we want to foster more options rather than fewer. We want to enable other companies to create taxi dispatch services. Linton wants that too, but making it succeed requires making the barriers to entry as low as possible, and sometimes the regulations get in the way.
Do these? Linton said that he's talked to the heads of several other current or aspiring taxi dispatch companies, and they don't have a problem with the regulations. Taxi Magic Director of Marketing and Communications Matt Carrington said, "Our platform is reforming the taxi industry through technology (as opposed to disrupting it)."
Kalanick agrees that regulators have certain legitimate goals, listing "safety, accessibility, and transparency." Rules which ensure that cabs are safe make sense, as are ones that guarantee that services won't discriminate against people in certain parts of the District.
If regulations don't directly advance those ends, or if they put up barriers to Uber or new services, DC should steer clear. But some regulations will serve an important goal, and then it will do a disservice to District riders if Uber rallies its customers to oppose them without all the facts.
DC taxi fares will soon rise, but many surcharges which annoy riders will go away. A pending bill would also bring more modern technology to DC taxis to improve customer service. Riders overwhelmingly support many reforms, though they only like fare increases if service also improves. Drivers are skeptical that such changes are unnecessarily expensive.
Today, the DC Taxicab Commission approved a set of fare changes that increase the per-mile charge by 14% and the waiting charge by 67%. However, the per-passenger fee, the fees for large bags and small animals, the $1 fuel surcharge are all going away.
These aren't the only changes that may come for DC taxis. Councilmember Mary Cheh introduced legislation in December to require credit card readers with printable receipts, security alert buttons, and GPS tracking devices in every cab. It would also require taxi companies to adopt a uniform citywide color scheme, purchase additional fuel-efficient vehicles, and provide drivers with customer service training.
The commission plans to fund these initiatives with a surcharge of 50¢ per trip. Ron Linton, chairman of the commission, sees the new surcharge as a critical element of the proposed bill. "The creation of the Consumer Service Fund insures that funds obtained through a passenger-paid surcharge will be used to improve the quality of services for passengers," said Linton.
Other items in the bill would allow the taxicab commission to upgrade the fleet, carry out more inspections, provide incentives for drivers to purchase fuel-efficient cabs, and expand taxi service to all areas of the city. The commission also plans to add more robust tracking systems to monitor overall taxicab performance.
Survey showed public support for reforms
Cheh's office conducted an online survey about the provisions of the bill and taxi service in general. Responses by more than 4,000 metro area taxi riders showed that only 22% of respondents thought that the quality of taxi service in the District was good or excellent. 69% said it is worse than other major cities. The proposed taxi reform legislation and the requirement to accept credit cards found overwhelming support with 94% and 93% positive responses respectively.
In the survey, a majority of respondents supported higher taxi fares only if the quality of service improved. Belinda Li, a Chicago-based management consultant, testified at the hearing on Cheh's bill that the additional costs to hail a cab would put a burden on riders and potentially drive people away from riding taxicabs.
The hospitality industry supports the reforms as well. According to industry data, the District hosts over 17 million visitors a year, generating roughly $6 billion in expenditures in the city. An improved taxi service would allow visitors to get to their hotels and other destinations safely and efficiently.
"This is something we have been working on for quite some time," said Solomon Keene, President of the DC Hotel Association. "DC is a world class city so we want to make sure that we provide a world class taxi service."
Drivers less enthusiastic
Though the public supports the reforms, taxi companies have expressed opposition to the bill, citing cost concerns. The industry generally opposed the change from a zoning system four years ago to a meter system, and sees this new proposal as further undermining their ability to make a living.
At a public hearing earlier this year, drivers testified that they felt the effects of the bill on the industry were not fully taken into account before the bill was drafted. They questioned how the fund will be managed and whether drivers will be compensated adequately for expenses incurred to retrofit their vehicles. It is also unclear how soon the reforms can be implemented, since funding from the surcharge won't be available right away.
Other proposals may also affect taxi service in the District. In addition to Cheh's bill, Council chairman Kwame Brown introduced a bill to require that 10% of all cabs be wheelchair-accessible within 4 years.
Long-term questions remain
Beyond the short-term issues of fare increases and who bears the costs of implementing the reforms, there are unaddressed long-term concerns about the management of the industry. When Tommy Wells chaired the council committee with oversight over taxis, he expressed interest in making more major structural changes, possibly abolishing the taxicab commission and moving responsibility into DDOT and/or DCRA. However, Cheh has not pursued this approach.
In addition, the Council also considered and dropped the concept of a medallion system. Taxicab systems in major cities like New York and Chicago restrict the number of licenses issued and allow for licenses to be transferred between owners. In an open system like the District's it is relatively easy to operate a taxicab. As a result, independent operators saturate the market, making it easier for people on the street to get cabs, but driving down earnings for each driver.
In testimony at the public hearing, Belinda Li said that the District has one of the highest taxicab per-capita ratios in the country (12 per 1,000 residents), compared to Chicago (2.6 per 1,000 residents) and New York (1.6 per 1,000 residents). "The proposed bill," Li said, "does not restrict new cab drivers and does nothing to address the current oversupply issue." Not all residents may agree with Li about whether there is an "oversupply" today.
By choosing to put off addressing these fundamental challenges, the council will likely be forced to revisit taxi reform in the not-too-distant future. Until then, the reforms in the current bill will modernize the taxi fleet and make for a more pleasant cab ride in the nation's capital. Riders will be paying more, but should find that fewer surcharges make the final price less confusing as well.
Do we regulate taxi rates in order to make the experience a better one for the public? Or do we do it to keep taxi drivers from having to face competition and pressure to improve their service?
The controversy around Uber, a service which lets people reserve for-hire sedans via a smartphone app, has brought this question to the forefront, even though the issue itself goes far beyond Uber alone.
On its face, the Uber debate revolves around a set of questions that seem simple enough: Is Uber breaking laws, or not? Are the individual drivers? But the underlying question is different and far more complex: Should the law permit what Uber is doing, or shouldn't it?
A TechCrunch article argues that Uber's business model is legal, while in DCist, Ben Freed defends the sting in which Taxicab Commission chairman Ron Linton personally got involved in hiring and then punishing a driver.
Freed disagrees with the analogy in my Post editorial that taxis complaining about Uber is like Safeway complaining about upscale cupcake shops. Freed writes,
Not quite. Cupcakes, however widespread they've become, are not a regulated utility. Taxis are. ...But this is exactly crux of the issue. Why are taxis a regulated utility while bakeries aren't? Why is electricity a regulated utility but backyard propane tank sales are not? Why are tap water fees regulated but not the bottled water prices we pay in the supermarket?
Linton, though, said he's responding to complaints he's heard from cabbies who say Uber's eating into their business and from customers who feel they've been overcharged. The sting was necessary reconnaissance, he said.
To say that taxis are different from cupcakes because taxis are regulated and cupcakes are not begs the question (in the grammatically correct sense).
It's not uncommon for one business to complain that another is "eating into their business." Whole Foods is eating into Giant's business. But Giant doesn't go to the DC Supermarket Regulatory Commission and ask them to take action to stop Whole Foods. Amazon has taken a lot of business away from brick and mortar retailers, which is too bad for our neighborhood corridors, but we don't respond by banning Amazon (though it would be fair to insist that both pay the same amount of sales tax).
But, many are saying, the difference is that Uber, or more specifically its drivers, may be breaking existing rules, while Whole Foods and Amazon are not. In some regards, this may present an important distinction, but from a public policy standpoint, it is somewhat irrelevant.
We can ask 2 questions: What are the rules now, and what should they be? Regulations can be beneficial or they can be harmful. There are many rules we don't have which ought to exist, and many that do exist which should be repealed.
If Uber is doing something which is not permitted to regular taxis, we can either stop Uber from doing that thing, or we can allow regular taxis to partake in the same behavior. As I said in my Post editorial, I've never used Uber, don't plan to, and don't care that much about Uber specifically as a company. But if they are competing unfairly against taxis, then let's let taxis compete against Uber rather than shutting down the competition.
When deciding which approach take, the Taxicab Commission should bear in mind one and only one principle: What's good for customers? The degree to which Uber is "eating into the business" of existing taxis is immaterial, and Linton should not be making decisions on that basis.
A common criticism of many regulatory agencies is "regulatory capture," shorthand for the way that an agency becomes more sympathetic to the needs of the industry it regulates than the interests of consumers. This happens because regulators tend to get to know their counterparts at regulated companies well, to see issues from the companies' point of view, and also look to those companies for future jobs.
The starkest example of regulatory capture is the Minerals Mining Service, which was supposed to be regulating deep-water oil drilling but instead ended up just speeding approvals and overlooking dangerous practices, ultimately with disastrous consequences.
Taxi drivers' main gripe against Leon Swain's leadership at the Taxicab Commission was that he didn't do enough to protect drivers' interests. They are suing Mayor Gray and Ron Linton as well, for not giving them more of a voice on the board. In short, drivers want DCTC to be more captured by its industry. However, that would absolutely not benefit customers.
That said, Linton's proposal for taxi rates does seem customer-centric. He wants to raise rates, but eliminate many of the confusing surcharges that annoy riders and make it easier for drivers to cheat customers. When the government has to set taxi rates, as it does for street hails, those rates should be high enough to ensure that driving a taxi brings in a decent living, not because it's a jobs program, but because having a lot of taxis is good for people who want a taxi. In turn, this also benefits drivers, a prime example of how public interest and the interest of drivers needn't always be in opposition to one another.
The debate over whether Uber is breaking a law right now is an interesting one, and it's fine for DCist and others to discuss it. But let's not lose sight of the longer-term question, as well. What are the right taxi regulations? How much do we need to regulate to advance the public interest, and which regulations are just protecting a small group of people from needed competition?
DC Taxicab Commission Chairman Ron Linton thinks Uber, a new service that lets people reserve luxury-sedan rides from their smartphones, is illegal. If he's right, then something is wrong with the law, not with Uber. ...
[Uber] deserves a chance to succeed, and so does anyone else who thinks they can build a business by safely making transportation better. This is a metropolitan area with many different transportation needs, and though there are many modes available, we can use more options.
Taxi drivers, who provide transportation at lower fare rates than Uber, complained that Uber is providing taxi-like service but not being regulated like taxis. This is analogous to Safeway complaining that some new cupcake shops are offering cupcakes at higher prices, and potentially higher quality, than Safeway's bakeries do.
Continue reading in my latest op-ed in the Washington Post.
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